For investors seeking to choose the ideal income strategy, an active approach can be highly valuable.
With an active portfolio management team, income-seeking funds can make more opportunistic plays to capitalize on market trends. Active strategies also come with the added benefit of higher potential risk mitigation.
As a good example, check out the Parametric Equity Premium Income ETF (PAPI ). The fund mixes a dynamic combination of income-generating equities and a robust call-writing strategy.
The first half of PAPI’s portfolio plan focuses on selecting a group of stocks that offer high dividends. Parametric selects companies for inclusion based on risk metrics as well as potential yield.
Income for the fund is then bolstered by Parametric’s call-selling strategy. The fund writes call options with laddered expiration dates to generate a more consistent income spread. Through the use of options, PAPI also has more access to upside participation within the equity space.
2 Ways to Mitigate Risk While Chasing Yield
PAPI’s two-pronged approach highlights the distinct benefits of active management. With Parametric’s active portfolio team, PAPI can mitigate risk while chasing yield on two different fronts.
While many active ETFs are balanced out with high costs, PAPI offers a competitively low price. Currently, the fund has a net expense ratio of 0.29%, lower than many of its peers in the field.
PAPI’s portfolio strategy is currently seeing a robust influx of fund flows. As of Sept. 5, 2024, PAPI has seen more than $12 million in net flows over the last month.
Investors interested in Parametric’s investment philosophy can learn more at the VettaFi Q4 Equity Symposium. Participating in the Symposium is Alex Zweber, CFA, CAIA, managing director and portfolio manager at Parametric Portfolio Associates.
To register for the VettaFi Q4 Equity Symposium, click here
For more news, information, and analysis, visit The ETF Yield Channel.
