One of the top-of-mind themes for advisors and investors in 2025 has been the resurgence of international equities. As of October 10, the widely followed MSCI EAFE Index was higher by 24.1% since the start of the year. That’s a significant advantage over the 12.4% returned by the S&P 500. Add to that, the benchmark ETF following the MSCI EAFE Index yields 2.75%. That’s more than double the dividend yield found on competing S&P 500 ETFs. That’s an obvious gap in favor of the international gauge. But 2.75% is by no means breathtaking. With the newly minted NEOS MSCI EAFE High Income ETF (NIHI), investors have a tool for boosting the income proposition on ex-U.S. developed market equities.
NIHI, which debuted last month, keeps with the NEOS tradition of simplicity with covered call ETFs. Some funds in this category are employing complex options strategies in the same of eye-catching yields. That subjects end users to net asset value (NAV) erosion in some cases. But NIHI simply sells calls on the iShares Core MSCI EAFE ETF (IEFA) — that’s it.
NIHI Addresses Covered Call ETF Concerns
Helped in part by the 2022 bond bear market, covered call ETFs have exploded in popularity in recent years. But investors’ affinity for these high-income products comes with the caveat that covered call funds aren’t free lunches.
“Covered call ETFs allow investors to earn income in the form of options contract premiums, in addition to any other dividends, and potentially reduce portfolio volatility,” according to SoFi. “One trade-off is that upside potential may be limited if call options are exercised — typically when the underlying security reaches the strike price — which could result in shares being called away from the fund.”
It can be said that there’s no such thing as perfection in investing. But NIHI comes with some advantages. This includes NEOS’ documented ability to manage the risks associated with call-writing while maintaining some upside participation for investors.
Harnessing some upside is obviously a top priority for investors, including the income-focused crowd. But many covered call funds dampen that proposition in the name of elevated yields and limited downside capture. NEOS has proven with its products that investors can have their income cake while eating some of it, too (upside participation). All that said, NIHI could still prove somewhat resilient if the MSCI EAFE Index retreats over the near term.
“It may be a good time to consider buying a covered call ETF when most of the securities held by the ETF are expected to trade sideways or go down slightly for some time. Some investors may find covered call ETFs appealing if they are comfortable trading off potential outsized gains during rallies for near-term income,” added SoFi.
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