A targeted approach to fixed income with HNDL
Markets continue to be choppy as they are pushed higher by increasingly bullish news about the seriousness of Omicron, then come down again as the labor market continues to tighten and exert more inflationary pressures. important to the economy. It can be difficult to find fixed income opportunities, but Strategy Shares offers a unique and focused ETF that aims to provide a distribution of 7% per annum.
Advisors and investors looking for fixed income securities with a target annualized payout rate distributed monthly should consider the Nasdaq 7HANDL Index ETF (HNDL) Equity Strategy. The fund is the first of its kind within the ETF space to seek the yield performance and price of the Nasdaq 7HANDL Index.
The underlying index is broadly diversified and split evenly between fixed income and equity ETFs which represent 50% and a âDorsey Wright Explore Portfolioâ which represents the remaining 50%.
The first half of the fund is subdivided into an allocation of 70% to US bond ETFs (the core fixed income sleeve) and 30% to large cap US stocks (the core equity sleeve). The main fixed income round is made up of an equal weighting of the three US aggregate bond ETFs that have the lowest expense ratios after waivers. The core stocks round is further split, with half containing the three US large-cap ETFs that have the lowest expense ratios after waiver and weights them equally; the other half is made up of the largest ETF that tracks the Nasdaq-100 index.
The second half of the fund, known as the Explore Portfolio portion, is made up of asset allocations specific to U.S. equities, mixed, fixed income, and alternative, or other categories that are used to providing high income levels. This part of the fund uses a â100% optimized, rules-based, proprietary, momentum-driven allocation methodologyâ according to the prospectus. It is made up of 12 different categories, with a single ETF each representing which is typically the largest ETF within that asset class.
Image source: strategic actions as of September 30, 2021
The index seeks to provide stability within its net asset value and offers leverage equivalent to 23% of the portfolio, but the fund itself will be subject to market movements and conditions. To achieve leveraged returns, HNDL purchases a total return swap on an equity-only version of the index, known as the Nasdaq HANDL Base Index. This index is made up of ETFs only and has no leverage itself.
The fund is unique in its approach in that within an index of 19 ETFs, more than 20,000 individual securities are represented in the underlying holdings.
HNDL has a monthly distribution policy on the shares of the fund which is equivalent to an annualized payment of 7.0% of the net asset value per share of the fund. Part or all of the distribution may be a return of capital of the original investment, and the distributions may be changed at any time.
HNDL carries a contractually agreed expense ratio of 0.80% which ends August 31, 2022.
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