Market volatility continues as summer officially comes to a close in the U.S. and the August Institute for Supply Management (ISM) report came in higher than expected, reflecting a more robust economy, particularly in light of August’s surprisingly strong jobs report. The expectations have risen yet again for an aggressive Federal Reserve interest rate hike in September, sending bond yields surging again.
Image source: Nationwide’s Weekly Economic Review & Outlook
In a continued challenging environment for bonds as interest rates rise, many advisors and investors are seeking opportunities within equities, and the ETF suite from Nationwide provides monthly income opportunities within each of the major equity indexes in the U.S.
The ETF suite from Nationwide seeks high current income and to potentially reduce volatility while carrying a measure of downside protection. Each fund allows for a different type of equity exposure depending on the assets and strategy investors are looking for.
The *Nationwide Nasdaq-100® Risk-Managed Income ETF (NUSI)* 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.
NUSI was the first fund that utilized the collar strategy employed by Nationwide within the Nasdaq-100 and was actively managed by the fund’s subadvisor, Harvest Volatility Management. A collar strategy entails holding the shares of an underlying security while buying protective puts and writing covered calls for the securities.
A put allows, but does not, force the owner to sell the underlying security at an agreed-upon price by an agreed-upon day. At the same time, a call gives the owner the right to buy the security at an agreed-upon price by an agreed-upon day but does not obligate them to do so.
The options collar is intended to reduce the fund’s volatility and provide a measure of downside protection. It allows investors to seek monthly income within equities, which can be particularly appealing given the challenge that bonds have faced in a rising rate environment.
Since then, Nationwide has gone on to expand the income-seeking opportunities within the three other major equity indexes, providing investors with the ability to take positions in the areas that they believe might perform strongly in the coming months, whether that is through small-cap investment, blue-chip companies, or the broad U.S. equity market.
The *Nationwide S&P 500® Risk-Managed ETF (NSPI)* is an actively managed fund that invests in a portfolio of securities included in the S&P 500 Index. The S&P 500 Index is weighted by market capitalization and comprises approximately 500 of the top U.S.-listed companies that make up the majority of the U.S. equity market cap (80%).
The *Nationwide Dow Jones® Risk-Managed Income ETF (NDJI)* is an actively managed fund that invests in a portfolio of securities included in the Dow Jones Industrial Average. The Dow Jones is weighted by price and comprises 30 well-established U.S. companies, referred to as blue-chip companies.
The *Nationwide Russell 2000® Risk-Managed Income ETF (NTKI)* is an actively managed fund that invests in a portfolio of securities included in the Russell 2000 Index. The Russell 2000 tracks approximately 2,000 U.S. small-cap companies.
All of the funds utilize an options collar in seeking to generate monthly income and can be an opportunity for investors beyond just bonds.
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