LIFE is a healthcare ETF that invests in 20 global large-cap healthcare companies and uses an enhanced covered call strategy on up to 33% of the portfolio. This allows the ETF to pay a 9.1% annualized distribution yield. The fund has a 0.45% MER, and an AUM of $268.2M. Its top holdings include ISRG, LLY, MDT, and others.
XLV invests in the US large-cap healthcare companies in the S&P 500, and is much more liquid than LIFE, with an AUM of $40.3B, an MER of 0.1%, and a distribution yield of 1.6%. The ETF holds UNH, JNJ, LLY, ABBV, PFE, and others.
The strategy of owning both would allow an investor to maintain exposure to the healthcare sector, while earning a yield in a sideways or downtrending market, however, in an uptreding market, an investor will see lower capital appreciation but a mix of some capital appreciation and some incoming cashflow.
We like this strategy for an investor that is seeking some income as well as upside potential in a bull market, but largely for an investor that is OK with volatility and some downside risk, we would prefer more exposure to XLV, as the capital appreciation can outweigh the returns from a covered call strategy.