Home etftrends.com Goldman Sachs New Covered Calls Offer Simplicity

Goldman Sachs New Covered Calls Offer Simplicity

Goldman Sachs Asset Management has seen strong net inflows in 2023 into its broad market equity ETFs and its income ETFs. Today, the firm expanded its exchange traded fund lineup to include two equity income ETFs.  

The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) and the Goldman Sachs MarketBeta U.S. Equity ETF (GSUS) have gathered nearly $2 billion of new money in 2023. Growing demand has helped push the firm’s ETF asset base to approximately $30 billion. The two new ETFs will offer a blend of capital appreciation potential with consistent income generation through options. 

Meet the New Goldman Sachs ETFs  

The Goldman Sachs S&P 500 Core Premium Income ETF (GPIX) seeks to maintain style, capitalization, and industry characteristics like its benchmark, the S&P 500 Index, while providing monthly income distributions at a relatively stable rate. 

The Goldman Sachs Nasdaq-100 Core Premium Income ETF (GPIQ) seeks to maintain style, capitalization, and industry characteristics like its benchmark, the Nasdaq-100 Index. It aims to provide monthly income distributions at a relatively stable rate.  

We think these new funds could benefit from the simplicity and brand recognition of their benchmarks. The low expense ratios of 0.29% will likely also appeal. Stock-selecting ETFs have gained traction this year. Many people have turned to ETFs believing that replicating an index is better than trying to beat it. To generate above-average income, both funds will employ a dynamic, options-overwrite strategy.  

Management will sell call options on a varying percentage of the market value of the equities. The percentage can change month to month. In the funds’ prospectus, Goldman Sachs says that under normal circumstances, it will sell 25%-75% of the value. This could provide GPIX and GPIQ shareholders with more upside potential than some of its fully hedged covered call peers. 

Many Advisors See the Stock Market as Range-Bound 

This week, VettaFi polled advisors during a virtual event about their views on the stock market. While 44% expect the stock market will be higher than now at the end of 2024, 29% expect it to be basically flat (within 1%-2% of where we were). The remainder of respondents expect next year to be a challenge and the market will finish lower. We believe covered call strategies offer a solution. The ETFs allow for some market upside, but the call options provide income and some downside protection. 

GPIX and GPIQ join a universe of options-based, income-generating ETFs that include more established products from Amplify, Global X, JPMorgan, and NEOS. In addition, last week, Morgan Stanley Investment Management launched an ETF under the Parametric brand. 

VettaFi Income Strategy Symposium Is Tomorrow, October 27 

Goldman Sachs Asset Management will be joining tomorrow’s VettaFi Income Strategy Symposium to talk about the environment for these new ETFs and how they can potentially support advisor objectives. John Jordan, an ETF specialist, and Sirion Skulpone, global head of client portfolio management for equity solutions, will be virtually appearing with my colleague Tom Lydon at 11:40 a.m. ET. Register to catch this session and others over the two-hour event on high yield bonds, municipal bonds, other equity income strategies, and more.   

For more news, information, and analysis, visit VettaFi | ETF Trends.

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