Our panel of professionals will provide a historical perspective and outlooks on today’s markets and economy, including interest rates, inflationary pressures, and equity valuations.
In the upcoming webcast, Where to Look for Higher Income Now? Nationwide’s Perspective on Markets and the Economy, David Berson, Chief Economist, Nationwide; Mark Hackett, Chief of Investment Research, Nationwide; and Garrett Paolella, Portfolio Manager, Harvest Volatility Management, will look over key findings from a recent proprietary advisor Investment Income Survey, and they will also discuss income strategies with a focus on risk-adjusted returns, portfolio enhancement strategies, and client outcomes.
As investors look for ways to bolster income generation in a lower-for-longer yield environment, many have branched out to alternative income options like high-dividend stocks, real estate investment trusts, emerging market debt, high-yield bonds, fixed-rate preferred securities, and master limited partnerships. However, all of these asset categories are susceptible to various types of risk, which can negatively affect their performance.
Alternatively, the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) seeks to provide current income with an added downside protection.
“An income solution that targets high current income and seeks to provide investors with a measure of downside protection in falling markets and potential for upside participation in rising markets,” according to Nationwide.
NUSI follows a rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index, an index of the 100 largest non-financial stocks on the Nasdaq exchange. The ETF potentially may complement traditional equity and fixed income allocations or function as a possible hedge for investors.
The Nationwide Risk-Managed Income ETF establishes a collar strategy to generate monthly income. Collar strategies involve holding shares of the underlying stock while at the same time buying protective put options and 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 specified price and on a specified date. A call option gives its owner the right but not the obligation to buy that asset instead.
For NUSI, a near at-the-money (ATM) to out-of-the-money (OTM) Nasdaq-100 index call option is sold, with the intent of generating a premium. Using a portion of the premium received, a Nasdaq-100 index put option is purchased to hedge against potential losses in the underlying equity portfolio. Lastly, a managed distribution is paid to investors each month using a portion of the net credit generated by the collar. The remaining premium is then reinvested in the fund’s underlying stocks to allow for potential equity participation.
Financial advisors who are interested in learning more about the income strategy can register for the Monday, November 8 webcast here.
This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
Performance data quoted represents past performance; past performance does not guarantee future results. Index performance is not illustrative of fund performance. One cannot invest directly in an index. Please call 1-877-893-1830 for fund performance.
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.
NUSI Prospectus (hyperlink to: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NUSI/index.html)
Call 1-800-617-0004 to request a summary prospectus and/or a prospectus. You may also download the prospectus at the link above or by visiting etf.nationwide.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.
KEY RISKS: The Fund 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 Fund 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 Fund may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Fund 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 Fund’s investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties.
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.
Nasdaq-100 Index: An unmanaged, market capitalization-weighted index of equity securities issued by 100 of the largest non-financial companies, with certain rules capping the influence of the largest components. It is based on exchange, and it is not an index of U.S.-based companies. Market index performance is provided by a third-party source Nationwide Funds Group deems to be reliable (Morningstar). 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.
At The Money (ATM) – A situation where an option’s strike price is identical to the current market price of the underlying security. An ATM option has a delta of ±0.50, positive if it is a call, negative for a put. Both call and put options can be simultaneously ATM.
Out The Money (OTM) – An expression used to describe an option contract that only contains extrinsic value. These options will have a delta of less than 50.0. An OTM call option will have a strike price that is higher than the market price of the underlying asset.
Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliate with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs. MFM-4397AO; Q-20211029-0173
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