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  5. HDIV: Can I have your thoughts on this new ETF. [Hamilton Enhanced Multi-Sector Covered Call ETF]
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Q: Can I have your thoughts on this new ETF. Would you consider it a good buy, if not, what would be a comparable ETF?

Asked by Craig on September 14, 2021
5i Research Answer:

Hamilton Capital Partner's new covered call ETF HDIV has a target yield of 8.5%, which will be interesting to study and see how they achieve it over time. It paid its first distribution yesterday. HDIV will be using leverage to achieve the target yield. The fund would use a 25% leverage to achieve a 1.25x the performance of the benchmark, Solactive Multi-Sector Covered Call ETFs Index. HDIV will invest in an equal-weight portfolio of seven sector-covered call ETFs with a target diversified mix similar to that of the TSX60. Leveraged ETFs aren't new and we tend to like them for short-term bets and not long-term holds given the volatility in performance for leveraged ETFs. In this case, for example, a 10% appreciation in TSX60 would translate to a (theoretical)12.5% gain for HDIV, but the opposite also holds true as when the TSX60 declines by 10%, HDIV will likely fall more. Management expects HDIV to be a core holding despite the leverage due to its strong core holdings (TSX60), but of course this is also a marketing statement. A relatively low fee of 0.65% for a leveraged ETF might entice investors looking for regular income. It is garnering some assets, at $35M now. We would like to give this one some time. HCAL is a similar fund focused on banks.  Other leveraged funds are 2X or 3X and we would not endorse them.