On Wednesday, Invesco expanded its growing library of active ETFs with the launch of three new strategies. The Invesco MSCI EAFE Income Advantage ETF (EFAA ) and the Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA ) released on the New York Stock Exchange, while the Invesco QQQ Income Advantage ETF (QQA ) has released on the Nasdaq.
Each fund aims to provide exposure to an index, paired with income generation and downside protection. For all three funds, Invesco is waiving their expense fees from now through December 31, 2024.
QQA aims to offer investors access to the Nasdaq-100, with similar performance results. Meanwhile, RSPA’s portfolio is curated to track the performance of the S&P 500 Equal Weight Index. Lastly, EFAA looks to provide exposure to the MSCI EAFE Index.
In order to provide exposure to their respective indices, each fund utilizes an option-based income strategy. This involves using equity-linked notes that have exposure to either the index itself or another ETF that is tracking the index. To provide more liquidity and downside protection, each fund may also hold assets in cash or cash equivalents.
“We’re laddering the option overlay on a near-daily basis, so that the portfolio is constantly adapting to market conditions,” added John Burrello, Senior Portfolio Manager for the Invesco Income Advantage Suite. “And more tangibly in the context of upside capture, that means that we’re moving the upside potential market participation each day.
A New Take
RSPA and QQA are applying established Invesco strategies that have been utilized in funds such as the Invesco S&P 500® Equal Weight ETF (RSP ) and the Invesco QQQ Trust Series I (QQQ ). However, the new option funds provide investors with a means to access these strategies while building monthly income.
By utilizing a options strategies to mitigate downsides, these funds can help investors stay connected to Invesco’s investment philosophy with additional de-risking benefits. Even with increased security, the funds can offer consistent yield and beta laddered to current market conditions.
“We’re seeing growing demand for equity income alternative ETFs in 2024. In addition to strong flows for established products, advisors are seeking to learn more about new ones and how they can provide income and mitigate risk,” added Todd Rosenbluth, Head of Research at VettaFi. “It’s exciting to see Invesco expand their lineup.”
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