Volatility persists in the second half of the year as advisors and investors digest the news of the second consecutive quarter of economic retraction alongside reports of a strong labor market. Markets have reflected the uncertainty about inflation and where the economy is headed, with pivots happening within both equity and bond allocations.
For some of the largest growth companies, it’s been a particularly challenging year as valuations have dropped, sometimes precipitously, with sharp drawdowns causing outflows in many cases. As of the end of the second quarter (June 30, 2022), the Nasdaq-100 Index® — an index that tracks the top 100 non-financial securities that trade on the Nasdaq exchange — had a total return of -29.23% for the year. The Russell 2000 Index®, which tracks approximately 2,000 U.S. small-cap companies, had a total return of -23.43% over the same period, while the S&P 500 Index®, which tracks the top 500 U.S.-listed companies by market capitalization, had a total return of -19.96%.
The Dow Jones Industrial Average, an index comprised of 30 U.S. blue-chip companies, or companies that are well established and have exhibited steady, sustainable growth over an extended period of time, was down just 13.97% as of June 30 and year-to-date remains the top performing index of the four major indexes.
Blue-chip companies are some of the largest and can be costlier to invest in, but it’s their steady growth and proven ability to perform and offer consistent returns to investors that make them particularly appealing in a market where much remains uncertain.
The Nationwide Dow Jones Risk-Managed Income ETF (NDJI) is an actively managed fund that offers exposure to the Dow Jones Industrial Average, a price-weighted index of blue-chip companies. In addition to tracking a more solidly performing index over the first half of 2022 and continuing into the second half, NDJI also has a distribution yield of 7.01% as of June 30, 2022. (Click this link to see the fact sheet with standardized performance and 30-day SEC yield.)
The Fund utilizes an options collar in seeking to generate monthly income; a collar strategy is a strategy that entails holding shares of an underlying security while simultaneously buying protective put options as well as writing calls for the same security. A put option gives its owner the right but not the obligation to sell the underlying asset at a specific price on a particular day. In contrast, a call option gives its owner the right but not the obligation to buy the asset instead.
The options collar is intended to reduce the Fund’s volatility and provide a measure of downside protection.
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This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV, and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying index.
The NDJI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NDJI/index.php
Call 1-800-617-0004 to request a summary prospectus and/or a prospectus, or download prospectuses at etf.nationwidefinancial.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.
The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value and return will vary, and you may have a gain or a loss when you sell your shares. Returns for periods less than one year are not annualized. Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. To obtain the most recent month-end performance, go to etf.nationwidefinancial.com or call 1-877-893-1830.
Click this link for the funds’ Standardized performance and 30-day SEC yield.
KEY RISKS: The Nationwide Dow Jones® Risk-Managed Income ETF (“Risk-Managed Income ETF”) is subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Risk-Managed Income ETF is subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets).
The Risk-Managed Income ETF may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Risk-Managed Income ETF employs a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Risk-Managed Income ETFs’ investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties. The Risk-Managed Income ETF expects to invest a portion of their assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the index or may hold securities not included in the index.
The Risk-Managed Income ETF frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Risk-Managed Income ETF and greater tax liabilities for shareholders. The Risk-Managed Income ETF may concentrate on specific sectors or industries, subjecting them to greater volatility than that of other ETFs. The Risk-Managed Income ETF may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Funds’ value and total return. Although the Risk-Managed Income ETF intends to invest in a variety of securities and instruments, the Risk-Managed Income ETFs will be considered non-diversified.
Additional risks include: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the index or may hold securities not included in the index. The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
Dow Jones Industrial Average®: A price-weighted index composed of 30 “blue-chip” U.S. stocks. The index covers all industries except transportation and utilities, respectively.
The Dow Jones Industrial Average® is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Nationwide Fund Advisors. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones®, Dow Jones Industrial Average®, DJIA® and The Dow® are registered trademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Fund Advisors. The Nationwide Dow Jones® Risk-Managed Income ETF (“NDJI”) is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s), nor do they have any liability for any errors, omissions or interruptions of the Dow Jones Industrial Average®.
Nasdaq-100® Index: A rules-based, market capitalization-weighted index of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The Index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.
Nasdaq® and the Nasdaq-100® are registered trademarks of Nasdaq, Inc. (which, with its affiliates, is referred to as the “”Corporations””) and are licensed for use by Nationwide Fund Advisors. The Nationwide Nasdaq-100® Risk-Managed Income ETF (“NUSI”) has not been passed on by the Corporations as to their legality or suitability. NUSI is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT.
Russell 2000® Index: An unmanaged index that measures the performance of the small-capitalization segment of the U.S. equity universe.
FTSE Russell (“Russell”) is the Index Provider for the Russell 2000® Index (“Russell 2000®” or the “Index”). Russell is not affiliated with the Fund, Nationwide Fund Advisors, the Distributor nor any of their respective affiliates. Nationwide Fund Advisors has entered into a license agreement with Russell to use the Russell 2000®.
The Nationwide Russell 2000® Risk-Managed Income ETF (“NTKI”) has been developed solely by Nationwide Fund Advisors. NTKI is not in any way connected to nor sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell 2000® vest in the relevant LSE Group company which owns the Index. “Russell®” is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of reliance on or any error in the Index or (b) investment in or operation of NTKI. The LSE Group makes no claim, prediction, warranty nor representation either as to the results to be obtained from NTKI or the suitability of the Index for the purpose to which it is being put by Nationwide Fund Advisors.
S&P 500® Index: An unmanaged, market capitalization-weighted index of 500 stocks of leading large-cap U.S. companies in leading industries; gives a broad look at the U.S. equities market and those companies’ stock price performance.
The S&P 500® index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Nationwide Fund Advisors. Standard & Poor’s®, S&P®, and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Fund Advisors. The Nationwide S&P 500® Risk-Managed Income ETF (“NSPI”) is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.
Market index performance is provided by a third-party source Nationwide Funds Group deems to be reliable (Morningstar and U.S. Bank). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.
Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliated with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs.
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