Advisors often look to an equity income ETF during periods of uncertainty.
With widespread uncertainty around interest rates, elections and changing policy, and the possibility of a recession, the stability offered by equity income funds may look particularly attractive right now.
The Parametric Equity Premium Income ETF (PAPI ) is a compelling offering in the equity income ETF space. The fund, which is part of Morgan Stanley Investment Management’s ETF lineup, benefits from the firm’s strong history in offering actively managed strategies.
“Parametric brings extensive risk management expertise to ETF-minded advisors through PAPI,” said Todd Rosenbluth, Head of Research at VettaFi.
PAPI seeks to provide investors with consistent and sustainable monthly income while maintaining prospects for capital appreciation.
The fund combines a diversified, dividend-focused equity portfolio with selling call options on the SPDR S&P 500 ETF Trust (SPY ). The strategy is expected to generate additional yield in a tax-efficient manner.
PAPI delivers exposure to an actively managed portfolio of U.S. companies that have demonstrated high current income with a systematic call-writing program that seeks to generate additional yield.
Current holdings in PAPI include M.D.C. Holdings (MDC), Bnited Bankshares (UBSI), Paychex (PAYX), Watsco (WSO), and Juniper Networks (JNPR). According to ETF Database, 62% of PAPI by weight is invested in large-cap companies and 32% by weight is in midcap companies.
Another ETF to Consider
Another fund in the Parametric lineup to consider is the Parametric Hedged Equity ETF (PHEQ ).
The ETF combines a U.S. large-cap equity portfolio with an options overlay hedge to reduce volatility in the portfolio.
PHEQ, a hedged equity strategy, seeks to provide investors with capital appreciation while incorporating downside protection.
Both PAPI and PHEQ were launched in October 2023.
For more news, information, and analysis, visit The ETF Yield Channel.