In a falling interest rate environment, now is an ideal time for advisors to add a diversified income source to portfolios.
The Neuberger Berman Option Strategy ETF (NBOS ) is an options-based strategy that seeks long-term, structured, risk-efficient returns with less volatility than broad equity markets. Additionally, the fund aims to provide a diversifying source of yield for investors.
The fund’s distribution rate is 8.3% as of Aug. 30, a compelling yield compared to option income category peers.
See more: Neuberger Berman Debuts Options Strategy ETF
Collateral income and active premium-capture drive returns for the Neuberger Berman ETF. Notably, the fund does this without significantly increasing credit or equity beta exposures.
Furthermore, NBOS owns short duration fixed income securities, focused on U.S. Treasuries, which provide interest income. The fund’s active premium capture seeks to generate returns through premium collection.
Investors Holding Cash or Ultra-Short Strategies Should Consider Adding a Diversified Income Source
While NBOS may add value to all portfolios, it might be a particularly good fit for investors sitting on cash or in ultra-short strategies.
The option strategy ETF is less sensitive to interest rates and volatility, making it a compelling offering for risk-averse investors or those preparing for heightened volatility heading into the rate-cutting cycle and presidential election.
Investors may currently be overexposed to cash. Notably, money market assets under management total $6.1 trillion, according to the Investment Company Institute, as of July 24. Investors have the opportunity to take cash off the sidelines and supplement with active premium capture.
Historically, investors in ultra-short strategies have tended to be slow in responding to rate cuts, potentially costing them extra total return. It’s important to remember that waiting until the Fed eases has not been the best time to consider ultra-short bonds. Instead, an option income strategy ETF like NBOS may be able to offer attractive yield and diversification with less volatility than equity markets.
For more news, information, and analysis, visit the Invest Beyond Cash Channel.
