NUSI Offered Noteworthy Volatility Reduction Last Year

Few indexes underperformed quite like the Nasdaq Composite in 2022, an Index composed primarily of the tech giants and home to the heaviest growth-oriented companies. Many of these companies, like Microsoft, Alphabet, Meta, and Amazon, have announced substantial layoffs to begin the year in historic cuts for the sector.

“None of these companies obviously are on the brink of disappearance, but I do think they are doing what they can to prepare what might be to come — expecting some of their customers to pull back in spending,” Carolina Milanesi, a consumer tech analyst for Creative Strategies, told NPR.

The tech industry has been a large driver of economic growth within the U.S. in the last decade and is likely to play an outsized role in its recovery. Having exposure to the space through a risk-management lens that seeks to reduce volatility can take the guesswork out of timing recovery while also potentially offering lower volatility than the underlying index.

As volatility continues, seeking income has become a more challenging task for advisors, particularly for retirement clients. A strategy for advisors looking for investment opportunities for their retirement clients is NUSI, which seeks current income while offering downside protection.

NUSI is an actively managed ETF that follows a rules-based options trading strategy that seeks to generate high current income every month and invests in stocks included in the Nasdaq-100® Index. The Nasdaq-100® Index consists of 100 of the largest non-finance securities that trade on the Nasdaq exchange and is a rules-based, market capitalization-weighted index.

The fund utilizes an options collar in seeking to generate monthly income; a collar strategy is a strategy that entails holding shares of underlying security while simultaneously buying protective put options as well as writing calls for the same security. A put option gives its owner the right but not the obligation to sell the underlying asset at a specific price on a specific day. In contrast, a call option gives its owner the right but not the obligation to buy the asset instead.

The options collar is intended to reduce the fund’s volatility and provide a measure of downside protection.

The Nasdaq-100® Index was an index that experienced pronounced volatility in 2022. For reference purposes, the Invesco QQQ Trust (QQQ), which seeks to track the Nasdaq-100, had a beta of 1.167 in 2022. Beta is a measurement of volatility compared to the broader market and an indicator of systematic risk. A beta of 1 is correlated to the market, where a measurement above indicates higher volatility, and measurements below one indicate reduced volatility.

In 2022, NUSI had a beta of just 0.609, significantly below its benchmark according to Y-charts data.

2023 looks to be another challenging year for equities and growth-oriented companies, and a fund like NUSI that seeks to offer downside protection while also generating monthly income within the high growth exposures that many advisors have come to appreciate in the last decade could be worth consideration.

The fund carries an expense ratio of 0.68%.

For more news, information, and analysis, visit the Retirement Income Channel.

This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.

ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV, and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying index.

Click here for Fund Details, including the top 10 holdings – https://nationwidefinancial.com/products/investments/etfs/fund-details/NUSI

The NUSI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NUSI/index.html

Call 800-617-0004 to request a summary prospectus and/or a prospectus, or download prospectuses at etf.nationwidefinancial.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.

KEY RISKS: The Fund is subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Fund is subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets). The Fund may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Fund employs a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Fund’s investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties.

The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the index or may hold securities not included in the index. The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.

Nasdaq-100® Index: A rules-based, market capitalization-weighted index of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The Index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.

Nasdaq® and the Nasdaq-100® are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Nationwide Fund Advisors. The Nationwide Nasdaq-100® Risk-Managed Income ETF (“NUSI”) has not been passed on by the Corporations as to their legality or suitability. NUSI is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT.

Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliated with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs.

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