Q: What is your view on the return potential of ECHI etf …a multi stock covered call enhanced offering?
5i Research Answer:
ECHI invests in single stock ETF, using 25% leverage and covered calls. It is too new to really gauge performance. Fees are 0.29% after a period of no fees. Like other funds, it is trying to capture investor interest in high income. The leverage of course both ways. We do not have a problem with its set up, nor strategy. Much of the return will be return of capital or capital gains, which can be helpful in some tax situations. These types of funds will underperform in market rallies, and potentially underperform in a decline (because of the leverage). Thus, investors need to be highly income focused hereand understand the risks.