NEOS Investments continues to expand their income ETF suite this year, offering investors exposure to a range of core asset classes with enhanced income. The latest fund, the NEOS Gold High Income ETF (IAUI), seeks to combine physical gold exposure with elevated monthly income.
It’s been a great year for gold, as worries about declining U.S. exceptionalism, stability, and global trade rock markets. The precious metal reached an all time high of $3,500 per ounce in April before retreating. However, renewed trade tensions and weak jobs reports at the beginning of June sent gold prices climbing once more.
Gold appears favorably positioned heading into the second half of the year, as the dollar weakens and market volatility and uncertainty remain pronounced. Investors looking to the safe haven of gold in this year’s unpredictable market environment don’t want to miss NEOS’s newest ETF, the NEOS Gold High Income ETF (IAUI). The fund is actively managed and seeks to track the price of gold through two core mechanisms.
The first entails investing up to 25% of assets in physically backed gold ETPs. IAUI also tracks the price of gold through a synthetic options strategy that buys calls and sells puts on gold ETPs. The calls and puts are generally bought at the same strike price and same expiration. This creates upside participation through the calls, and downside participation through the puts. Collectively, the synthetic options strategy creates exposure to the price movements of the gold ETPs. The strategy uses regular as well as FLEX options to achieve its synthetic exposure.
NEOS Enhances Income Potential in Gold
In addition to the synthetic options strategy, the fund also sells covered calls to generate additional income. However, instead of covered calls on gold ETPs, the options use gold ETPs as their reference asset, as most of the portfolio’s gold ETP exposure is synthetic. The covered calls limit upside potential that is above the call strike prices. However, that upside cap is converted into income.
The portfolio managers use a proprietary, systematic, rules-based model when determining options positions. However, the PMs may actively manage the options before their expiration in order to mitigate losses or harness upside movement. The fund also holds government securities for the purpose of collateral.
IAUI is an expansion of the firm’s alternatives offerings that include the NEOS Bitcoin High Income ETF (BTCI) and the NEOS Real Estate High Income ETF (IYRI). NEOS also offers a suite of high income, tax-efficient equity and fixed income ETFs, as well as hedged equity offerings.
IAUA makes a notable addition to alternatives portfolios. It also complements existing gold exposures with its focus on high income. The fund carries an expense ratio of 0.78%.
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