The information technology sector garnered significant media and investor attention in the first half of the year. However, small-cap ETFs proved to be an attractive buy for investors and pulled in outsized flows heading into the summer months.
At the onset of summer, between mid-May and mid-June, one-fifth of the top 10 ETFs by flows were small-cap ETFs, according to FactSet data. By actual assets moving into funds, however, small-cap ETFs accounted for 27% of net flows into the top 10 ETFs.
Recession risk still looms on the second-half horizon. Small caps remain closely watched and an increasingly invested space heading into summer. Though small caps historically take significant price hits at the onset of an economic downturn, they are typically the first asset class to recover. This rebound can happen even before economic recovery hits its stride, creating a positive opportunity for investors with existing exposure to small caps.
Why NTKI is Attractive Amongst Small-Cap ETFs
Advisors looking to harness the potential within small caps while seeking to generate monthly income would do well to consider the Nationwide Russell 2000® Risk-Managed Income ETF (NTKI). NTKI is an actively managed, income-seeking ETF. NTKI offers a portfolio of securities replicating the Russell 2000® Index. The Russell 2000® Index tracks approximately 2,000 U.S. small-cap companies. The Fund’s risk-managed strategy seeks to reduce volatility, generate high monthly income, and provide a measure of downside protection.
Investing in NTKI may take the guesswork out of timing small-cap exposure while providing a measure of potential downside protection should markets slide precipitously.
NTKI utilizes an options collar in seeking to generate monthly income. A collar strategy is a strategy that entails holding shares of an underlying security while simultaneously buying protective put options and 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 until the expiration of the put. 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, generate monthly income, and provide a measure of downside protection.
NTKI has an expense ratio of 0.68%.
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