Markets continue to notch weekly losses as volatility continues, driven by concerns around rising interest rates and persistent inflation.
The jobs report, while appearing to be stabilizing, still came in hotter than expected by economists, and will be yet another underlining support for continued Fed tightening in the coming months. The Fed has indicated that it will likely be increasing interest rates by 0.50% at both its June and July meetings, followed by a month break in August as there is no meeting.
Investor concerns shortly after the release of the jobs report saw markets all fall to close the week of June 3, 2022, in a loss after a brief rally.
“Good news is bad news… It reminds us that the Fed is still the swing factor, at least in investor emotion,” Mark Hackett, Nationwide’s chief of investment research, told CNBC.
As losses and volatility continue in markets, advisors and investors are seeking income options in a variety of areas. The Nationwide suite of ETFs offers investors the potential to seek income with a measure of downside protection across a variety of exposures, depending on the strategy desired in the current market environment. All the funds use similar strategies, offering the same potential for income generation within different indexes while seeking to protect a measure of the downside.
All four of the funds utilize an options collar in seeking to generate monthly income; a collar strategy is a strategy that entails holding shares of underlying security while simultaneously buying protective put options as well as writing calls for the same security. A put option gives its owner the right but not the obligation to sell the underlying asset at a specific price on a specific day. In contrast, a call option gives its owner the right but not the obligation to buy the asset instead.
The options collar is intended to reduce each fund’s volatility and provide a measure of downside protection while generating income from both premiums from the options collar and dividends from the equity holdings within the fund.
For advisors seeking equity exposure through the S&P 500, the actively managed Nationwide S&P 500 Risk-Managed Income ETF (NSPI) is an option that seeks current income with a measure of downside protection. NSPI follows a rules-based options trading strategy that seeks to generate high current income every month and invests in stocks included in the S&P 500 Index. The S&P 500 Index consists of approximately 500 leading U.S.-listed companies representing approximately 80% of the U.S. equity market capitalization.
For advisors seeking equity exposure through the technology-tilted Nasdaq-100, the actively managed Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI) is an option that seeks current income while offering some downside protection. NUSI follows a rules-based options trading strategy that seeks to generate high current income every month and invests in stocks included in the Nasdaq-100 Index. The Nasdaq-100 Index consists of 100 of the largest non-finance securities that trade on the Nasdaq exchange and is a rules-based, market capitalization-weighted index.
Advisors seeking exposure with an industrial tilt may want to consider the Nationwide Dow Jones Risk-Managed Income ETF (NDJI), an actively managed fund that seeks current income while offering a measure of downside protection. NDJI invests in a portfolio of securities included in the Dow Jones Industrial Average; the Dow Jones is weighted by price and comprises 30 well-established U.S. companies, referred to as blue-chip companies.
For advisors considering small cap exposure, the Nationwide Russell 2000 Risk-Managed Income ETF (NTKI) is an actively managed fund that seeks current income while offering some downside protection. NTKI invests in a portfolio of securities included in the Russell 2000 Index. The Russell 2000 tracks approximately 2,000 U.S. small-cap companies.
All four funds carry an expense ratio of 0.68%.
For more news, information, and strategy, visit our Retirement Income Channel.
This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV, and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying index.
The NUSI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NUSI/index.html
The NSPI Prospectus may be accessed at: http://nationwidefunds.onlineprospectus.net/nationwidefunds/NSPI/index.php
The NDJI Prospectus may be accessed at: http://nationwidefunds.onlineprospectus.net/nationwidefunds/NDJI/index.php
The NTKI Prospectus may be accessed at: http://nationwidefunds.onlineprospectus.net/nationwidefunds/NTKI/index.php
Call 1-800-617-0004 to request a summary prospectus and/or a prospectus, or download prospectuses at etf.nationwidefinancial.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.
KEY RISKS: The Nationwide Risk-Managed Income ETFs are subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Funds are subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets). The Funds may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Funds employ a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Funds’ investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties.
The Funds expect to invest a portion of their assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Funds may not be invested fully in the securities of the index or may hold securities not included in the index. The Funds frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Funds and greater tax liabilities for shareholders. The Funds may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Funds may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Funds intend to invest in a variety of securities and instruments, the Funds will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
Nasdaq-100® Index: A rules-based, market capitalization-weighted index of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The Index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.
Nasdaq® and the Nasdaq-100® are registered trademarks of Nasdaq, Inc. (which, with its affiliates, is referred to as the “”Corporations””) and are licensed for use by Nationwide Fund Advisors. The Nationwide Nasdaq-100® Risk-Managed Income ETF (“NUSI”) has not been passed on by the Corporations as to their legality or suitability. NUSI is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT.
S&P 500® Index: An unmanaged, market capitalization-weighted index of 500 stocks of leading large-cap U.S. companies in leading industries; gives a broad look at the U.S. equities market and those companies’ stock price performance.
The S&P 500® index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Nationwide Fund Advisors. Standard & Poor’s®, S&P®, and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Fund Advisors. The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.
Market index performance is provided by a third-party source Nationwide Fund Advisors deems to be reliable (Morningstar or MSCI). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.
Dow Jones Industrial Average®: A price-weighted index composed of 30 “blue-chip” U.S. stocks. The index covers all industries except transportation and utilities, respectively.
The Dow Jones Industrial Average® is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Nationwide Fund Advisors. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones®, Dow Jones Industrial Average®, DJIA® and The Dow® are registered trademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Fund Advisors. The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Dow Jones Industrial Average®.
Market index performance is provided by a third-party source Nationwide Fund Advisors deems to be reliable (Morningstar or MSCI). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.
Russell 2000® Index: An unmanaged index that seeks to measure the performance of the small-cap segment of the U.S. equity universe.
FTSE Russell (“Russell”) is the Index Provider for the Russell 2000® Index (“Russell 2000®” or the “Index”). Russell is not affiliated with the Fund, Nationwide Fund Advisors, the Distributor nor any of their respective affiliates. Nationwide Fund Advisors has entered into a license agreement with Russell to use the Russell 2000®.
The Fund has been developed solely by Nationwide Fund Advisors. The Fund is not in any way connected to nor sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell 2000® vest in the relevant LSE Group company which owns the Index. “Russell®” is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Fund. The LSE Group makes no claim, prediction, warranty nor representation either as to the results to be obtained from the Fund or the suitability of the Index for the purpose to which it is being put by Nationwide Fund Advisors.
Market index performance is provided by a third-party source Nationwide Fund Advisors deems to be reliable (Morningstar or MSCI). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.
Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliated with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs.
Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2022 Nationwide.
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