BUYW targets hedged equity strategies, Lydon said. The fund attempts to have lower volatility while also generating growth over time. Additionally, the fund targets a 6% annual yield on top of all that. BUYW does all this by using covered call option strategies overlaying a portfolio of ETFs.
“This is not a beetle Volkswagen Beetle, this is definitely a Ferrari,” Lydon said. “It’s got a lot of gears to it, it’s got a lot of different pieces and strategies.”
The fund’s advisor is Main Management, which is one of the best ETF strategist firms out there, according to Lydon. “The strategist firms, as you know, historically worked with their own clients. [They also] have their own portfolios and some of their own ETFs that they offer to other advisors,” he added.
BUYW has only been available to investors in an ETF wrapper for less than a year; however, the fund was created via a mutual fund to ETF conversion. This means the fund has over $200 million in assets under management and a long track record for investors to parse.
Lydon said BUYW is a solution for investors who have been getting away from the traditional 60/40 portfolios in search of lower volatility and higher yields.
“Here’s, I think, the solution for those people who through all this time find themselves today with a chunk of dry powder,” Lydon said. “They’ve got money that’s on the sidelines, but they’re concerned about how to put that back to work. This is an opportunity to get reinvested.”
Many advisors predict bond yield are going to be lower a year from now, making BUYW’s 6% yield even more valuable.
“Frankly, the trend following on this is going to be somewhat boring because there’s so little volatility — it’s above its uptrend,” Lydon said. “Again, if you tagged on the performance that you had when it was a mutual fund, I would say [BUYW] could be a core holding from 5-10% of the portfolio. And you could take some of your equity and some of your fixed income allocation in here and probably be just fine.”
Lydon urged investors to do their research because the fund is fairly complicated and charges a premium (131 basis points) for its unique exposure.
“It’s somewhat expensive compared to other ETFs,” Lydon added. “But the big question is, do you get what you pay for? I think in hindsight, you absolutely do. The big question will be what does it bring into the future?”