On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the NEOS Russell 2000 High Income ETF (IWMI) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF.
Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!
Yes, welcome to the ETF of the Week. That’s where we examine trending, newsworthy, unique, and intriguing exchange-traded funds with Todd Rosenbluth. He’s the Head of Research at VettaFi, and at VettaFi.com, they’ve developed a full suite of tools that you can dig into that will make you a better, smarter investor in exchange-traded funds.
Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The NEOS Russell 2000 High Income ETF. The ticker is IWMI.
Chuck Jaffe: IWMI, the NEOS Russell 2000 High Income ETF. And if that ticker or that name rings a bell, that’s because this was ETF of the Week back in 2024, and right after it came out, because it was kind of a new-fangled fund at that time. There’s been a bunch of others and sisters and what-have-you that have come out since. But why is this fund back as ETF of the Week now?
Todd Rosenbluth: So, a few reasons. One, you’re right; we talked about it when it first came out. It now has over $600 million in assets. NEOS has roughly $20 billion—billion with a “B”—$20 billion in assets under management. They’ve had a tremendous year in the past year. Small-caps are back in focus for many investors. Small-caps tend to do well after the Fed has started cutting interest rates; investors are gravitating to small-caps.
Small-caps do better than large caps in the month of January. But what’s interesting to me is IWM, which is the iShares Russell 2000 ETF—which does not have an options overlay to it, does not generate any income—has actually seen continued net outflows, whereas IWMI has seen inflows this year and, of course, in 2025.
So, investors are choosing the higher-income alternative to get exposure to small caps. Worth revisiting, in my opinion.
Chuck Jaffe: The consumer choosing the higher-income strategy is always something they’re going to do. I mean, I always go back to when we started seeing funds that were created that were, you know, absolute return funds, et cetera, and it’s like, who picks a one or a three when you can get a five or a seven?
Well, it’s the same sort of thing. Who buys the index when you can buy the index with the income on it?
But there are some folks who are concerned that the options overlay funds are maybe heading for trouble, et cetera. So one, can they handle this big influx of money? And two, have they performed to this point? Because again, we now have about a two-year track record on this fund, as you would have expected.
Todd Rosenbluth: A couple of things. One, I think this fund and NEOS can handle the flows that have been going in. NEOS has grown its team. Its grown its scale and its capabilities. And this is what they do—this being options income strategies. They do it in a tax-efficient way. They use index options. They’ve been doing this for a number of years with a number of individual strategies, coming out initially with large-cap versions as ETFs that we’ve talked about.
Small-caps don’t typically pay dividends. So the iShares Russell 2000 ETF, IWM, yields 1%, whereas IWMI, the NEOS product, is offering 14%. Now, typically in my old-school days—and maybe your old-school days—when you saw a yield that was climbing, that was a sign of potential risk, because the dividend could get cut for an individual stock or an ETF at a high dividend yield. I mean, it was investing in companies where the dividend could be cut. That’s not been the case.
NEOS has a track record for this ETF, has a track record for its broader suite of delivering income on a consistent basis. And what we find is this—actually using options income—can be downside-protecting. It isn’t the pure goal—it’s generating higher income—but it is providing some downside protection during times of volatility. There will be times of volatility for small-caps. I like that IWMI is offering that benefit of exposure.
Chuck Jaffe: We recently had on Money Life Cullen Roche from the Discipline Funds, and he’s not a big fan of these, but he’s not alone. I mean, I think the most pointed commentary I’ve seen was from Daniel Villalon, who is Cliff Asness’s partner at AQR.
And he was looking at that claim that you get downside protection, and he said that, yes, that’s what they provide in theory, but that—and he wasn’t speaking specific to any one fund—he was saying of the funds that go back as far as 2020— so there’s about 100 of those , if you look at something with an options overlay strategy—they didn’t actually provide much downside protection and they didn’t really outperform the benchmark if their benchmark was the S&P.
So, just out of curiosity, because there is some division over these—while I know you like the structure and I know you talk with the people—is there a point for you that it has to be a certain age or what-have-you to go: ‘There, now, I’m 100% convinced, that this is the way I want to play it’, or has it reached that already and you’re not worried about the criticisms? I’m curious because, like I said, this is an area that, even since you first talked about it, we’ve had more division on my show than we have on most areas in the ETF space.
Todd Rosenbluth: I think that there’s division about options-based ETFs in general. And I think — I don’t know about Cullen’s comments, but what we saw from the other commenter that you were talking about was more concerns about downside protection and buffer ETFs than they were about higher-income ETFs. So, I mentioned downside protection; this is a secondary or tertiary benefit of investing in IWMI is that using options to generate income could provide some level of downside protection.
But what you’re really getting is that income, that 14% yield. And so since the fund has been out there, I think it’s performed relatively well. I had in front of me just a one-year chart and it’s neck-and-neck with IWM in an up market, which is a good sign to me. It’s just generating returns in a different manner.
I’ve seen the NEOS team and examples of how their other options-based products and how they’re performing relative to other — so, NEOS’ options-based products and how they perform relative to peer options-based products that are trying to generate income. And they being the NEOS products have performed relatively well.
I don’t think it’s as easy a comparison, or an appropriate comparison, to compare just a non-hedged or non-options or non-income-generating strategy with the one that does offer it. It’s got two different objectives. If what you, as an investor or an advisor listening to this, are looking for income in a tax-efficient manner using ETFs and you want small-cap exposure, IWMI is a great example of a fund to consider.
Chuck Jaffe: Does this discussion we’re having also kind of make sure that, look, if you’re an investor and you’re going to look at this fund, really get into understanding how the options stuff works? And especially if you’re looking at options funds generally? I mean, you bring ideas to the table and you’re always saying “look and explore.”
But again, given the discussion that’s out there and that some of it’s the buffers, et cetera, if you’re going to dig into these newer products and you’re going to buy a sales pitch that says they’re new and improved, make sure you understand that you’re getting improvements that you trusted, right?
Todd Rosenbluth: Yes, completely. So, we’re talking about ideas here. We do this on a weekly basis. We rotate through different strategies and firms and investment styles. So I very much encourage listeners and watchers—if you’re watching a video of this—to do your homework, to do your due diligence. Visit the NEOS website.
In fact, they also have a podcast that they do on a monthly basis talking about their strategies. Hear from them directly. You might even want to reach out to them and see if you can have your questions answered; that perhaps is possible. So, I very much encourage people to learn what they can about these products before putting IWMI into a portfolio.
But what we found is that you can complement an existing strategy. If you have small-caps and you want income, this can complement that. If you don’t have small-caps because you think they’re too risky and you want income—and a 1% yield is not good enough for you—then this could be a good way of going. NEOS has the expertise.
Chuck Jaffe: I’ve talked to a number of people who say they’re expecting the broadening, they’re expecting a small-cap rally, et cetera. I mean, you could have picked a lot of different flavors of NEOS high income. You could have gone toward something that’s more towards the Q’s and everything else. Is there a bit of a call on small-caps in here for you—that you’re in agreement with the camp that says the small-cap rally that we’ve seen a little bit of is actually going to hold this time?
Todd Rosenbluth: So, I think so, and we shall see. But we’ve seen a rally. Small-caps historically do well when the Fed has cut and might continue to cut in the future. And investors are looking for small-cap strategies. I think IWMI is a good one to consider.
Chuck Jaffe: It’s IWMI, the NEOS Russell 2000 High Income ETF. The ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. We’ll see you again next week!
Todd Rosenbluth: Thanks a lot, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi. The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe. You can find my hour-long weekday podcast at MoneyLifeShow.com or by searching for it on your favorite podcast app.
And by the way, you know, Todd was talking about asking questions to ETF companies. You can ask them of Todd. Just send them to me: [email protected]. We’d love to get them.
Now, if you want to get more information on the ETFs we discuss or the ones in your portfolio, go to VettaFi.com, where they’ve got a full suite of tools that will help make you a better investor. They’re on X at @Vetta_Fi. Todd Rosenbluth, their head of research, my guest—he’s there too. He’s at @ToddRosenbluth.
The ETF of the Week is here for you every Thursday. Please, don’t miss an episode. Just sign up on your favorite podcast app to get this each week. And we’ll be back with another ETF for you to consider next week. Until then, happy investing, everybody!
Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
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