Ratcheting geopolitical tensions and the impending U.S. presidential election heighten risk concerns heading into November. For investors looking to optimize their equity exposures with risk-adjusted returns, the income-seeking Natixis Gateway Quality Income ETF (GQI ) is worth consideration.
While earnings season remains underway, cautious optimism grows for equity performance in the fourth quarter. That said, markets remain highly sensitive to economic data and the Fed, creating the potential for volatility should any cards fail to fall in the direction of market predictions. Given elevated equity valuations, investors continue to closely monitor earnings results for signals of resilience or weakening.
Quality Equity Exposure with Diversified Income Generation
Investors looking to gain risk-adjusted exposure to equities or harness volatility for income would do well to consider GQI. The fund constructs an equity portfolio with a long-term growth outlook and a focus on the quality factor. It then combines the equity holdings with a call-writing strategy to generate monthly income. By generating income through dividends and options, GQI offers a diversified income stream compared to bonds. In the event of market drawdowns, the income earned from the options overlay may provide a level of cushion for the fund.
The fund also offers notable yields. As of 10/25/24, GQI’s distribution yield was 8.35%. Distribution yield annualizes the most recent distribution and divides it by the most recent NAV. The fund’s current 30-day SEC yield is 9.21% over the same period.
The actively managed equity portfolio utilizes a quantitative approach to emphasize companies demonstrating strong earnings, cash flow generation, and high profitability. The strategy also considers updated company information and will rebalance accordingly to capture high-quality stocks and reduce exposure to lower-quality ones. This provides a dynamic approach to equity investing.
The equity exposures are then complemented by a laddered call option strategy on the S&P 500 Index. The options overlay half the portfolio. This allows the other half to participate in market upswings, balancing capital appreciation with income potential.
The fund provides risk-adjusted exposure to equities, making it a strong complement to existing equity allocations. Volatility mitigation also complements other minimum volatility strategies.
GQI works well within an income sleeve as an alternative to dividend-yield strategies. Because of its lack of interest rate risk, it also makes for a good addition to existing credit allocations. It is a solid diversifier for high-yield or other existing credit strategies within a portfolio.
Gateway Investment Advisers actively manage GQI. It’s fully transparent, with an expense ratio of 0.34%.
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