On Tuesday, VistaShares expanded its ETF selection with the launch of the VistaShares Target 15 USA Quality Income ETF (QUSA).
QUSA’s objective is to offer income with a secondary goal of generating capital appreciation. The actively managed fund has a net expense ratio of 95 basis points.
QUSA employs a two-pronged approach to execute on its investment objectives. First, the fund invests in a portfolio of U.S. equity securities.
QUSA’s managers select equities for the portfolio with a focus on quality. To better identify high-quality companies, the fund employs a quantitative methodology. This methodology focuses on discerning an individual company’s relative stability and overall financial strength.
Through this fund’s methodology, eligible companies are screened based on a number of quality-focused factors. This includes a focus on high return on equity, along with low earnings volatility and debt-to-equity ratios.
Overall, the equity portfolio is expected to be constituted of roughly 20 to 50 securities. These investments will be updated quarterly, based on company data and macro conditions.
Advantages of Options
From there, QUSA uses an options portfolio as the fund’s primary source of yield. The fund writes options on some or all of the companies within its equity portfolio.
Since QUSA utilizes an options overlay, the fund may offer a different risk profile than a traditional equity strategy. This might also result in lower portfolio gains, but can be leveraged by the extremely attractive income that options can provide.
As the fund’s title implies, QUSA aims to have an annual target income of 15%. Should this strategy play out, the ETF can position itself as a compelling alternative to a fixed income strategy.
Additionally, QUSA will also likely be holding either cash or short-term U.S. Treasuries. Cash and U.S. Treasuries can serve a dual purpose of bolstering income while serving as collateral for options strategies.
“Advisors are increasingly turning to alternative income strategies via the ETF wrapper,” said Todd Rosenbluth, head of research at VettaFi. “It is great to see VistaShares expand their ETF lineup.”
Now available on U.S. markets, QUSA is the third ETF within the VistaShares lineup. One of the other VistaShares ETFs, the Vistashares Target 15 Berkshire Select Income ETF (OMAH), has over $120 million in assets under management.
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