In this insight, we provide an update on the performance of the Hamilton Enhanced Multi-Sector Covered Call ETF (HDIV) and the Hamilton Enhanced U.S. Covered Call ETF (HYLD). While the objective of each ETF is to generate “attractive monthly income”, we hope each ETF will pay higher monthly income while generating similar and highly correlated returns to the large benchmark indices of Canada (for HDIV) and the United States (for HYLD) – the S&P/TSX 60 and the S&P 500 (hedged to CAD).

Despite challenging markets in the last 14 months, we are very happy with the results. Since inception, the Hamilton Enhanced Multi-Sector Covered Call ETF (HDIV) has outperformed the iShares S&P/TSX 60 Index ETF (XIU) by a highly material ~8.6% (total return including dividends) and has a yield of 10.10% paid monthly[1]. Despite launching ahead of very challenging markets, the Hamilton Enhanced U.S. Covered Call ETF (HYLD) trails the Vanguard S&P 500 Index ETF (CAD-hedged) (VSP) by ~2.9% (total return including dividends) and has a yield of 13.77%, paid monthly[2]. Since our last update, on February 14th, HYLD has outperformed VSP by over 3%[3]. A 50/50 portfolio of HDIV/HYLD has produced a nearly identical return to a 50/50 portfolio of exposure to each countries’ benchmark indices with very high correlations[4].

The following three performance charts highlight total returns (including distributions) since inception: (i) HDIV versus XIU, (ii) HYLD versus VSP (which is also hedged to CAD), and (iii) a 50/50 portfolio of HDIV/HYLD versus a 50/50 portfolio of XIU/VSP.

Chart #1: Hamilton Enhanced Multi-Sector Covered Call ETF (HDIV) vs iShares S&P/TSX 60 Index ETF (XIU)

Chart #2: Hamilton Enhanced U.S. Covered Call ETF vs Vanguard S&P 500 Index ETF (CAD-hedged)

Chart #3: 50/50 Portfolio of HYLD/HDIV vs 50/50 Portfolio of VSP/XIU

We believe that the strong relative performance supports our view that holding HDIV and HYLD together is an attractive way to gain exposure to the large Canadian and U.S. benchmarks, while generating attractive monthly income. Further, we believe the sector mixes of the two benchmark indices are highly complementary.

The Hamilton Enhanced Multi-Sector Covered Call ETF (HDIV) is designed for investors seeking a higher yielding ETF focused on the Canadian equity markets. The Hamilton Enhanced U.S. Covered Call ETF (HYLD) is designed for investors seeking a higher yielding ETF focused on the U.S. equity markets. The current yields of HDIV and HYLD are 10.10% and 13.77%, respectively and paid monthly[5].

 

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A word on trading liquidity for ETFs …

Hamilton ETFs are highly liquid ETFs that can be purchased and sold easily. ETFs are as liquid as their underlying holdings and the underlying holdings trade millions of shares each day.

How does that work? When ETF investors are buying (or selling) in the market, they may transact with another ETF investor or a market maker for the ETF. At all times, even if daily volume appears low, there is a market maker – typically a large bank-owned investment dealer – willing to fill the other side of the ETF order (at the bid/ask spread).

Commissions, management fees and expenses all may be associated with an investment in the ETFs. The relevant prospectus contains important detailed information about each ETF. Please read the relevant prospectus before investing. The ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

Certain statements contained in this insight constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to a future outlook and anticipated distributions, events or results and may include statements regarding future financial performance. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “anticipate”, “believe”, “intend” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Hamilton ETFs undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law.

[1] As of April 6, 2023. Source: Hamilton ETFs, Bloomberg
[2] As of April 6, 2023. Source: Hamilton ETFs, Bloomberg
[3] As of April 6, 2023. Source: Hamilton ETFs, Bloomberg
[4] As of April 6, 2023. Source: Hamilton ETFs, Bloomberg
[5] As of April 6, 2023. Source: Hamilton ETFs, Bloomberg

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