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Hamilton Enhanced U.S. Covered Call ETF (HYLD)
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Hamilton Canadian Financials YIELD MAXIMIZER TM ETF (HMAX)
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Hamilton Technology YIELD MAXIMIZER TM ETF (QMAX)
Q: I'm impressed by the performance of the Hamilton Etfs, managing a crazy high 'dividend' and not really losing price. How will the Hamilton covered call ETFs (I've listed only a couple examples) do in a down market -- will they outperform or underperform the market ? I know they are new products; are these ETFs at risk of 'bait and switch' in terms of some unseen fees or reduced distributions?
5i Research Answer:
Covered call funds should outperform slightly in a downturn. The income generated by call options provides a bit more cushioning. However, don't get us wrong: these can still decline, perhaps a lot, but the decline should slightly less worse than straight equity ETFs. Now, some of Hamilton's funds use 25% leverage. These could quite possibly decline more because of the use of leverage. We would not expect more fees, but distributions will vary with the market and with options premiums. In addition, for taxes much of the distributions may be in the form of return of capital each year.