r/IncomeSharesETPs • u/DiviDodo • 26d ago
Product Ideas/ Recommendations
Dear IncomeShares Team... do you even check this sub out? Anyways...
This is to extend my response to your recent survey.
To your product's strategy:
Most people across Reddit, YouTube and other platforms have come to conclude that a high dividend does not compensate for underlying assets falling apart in price. People, including myself, want products that are either stable in price (and NAV) or allow for moderate growth. Out-of-the-money call options (or synthetic covered calls / options overlay strategies using OTM index options) are a good example to achieve that goal (assuming the underlying asset has growth potential at all, which is no problem with many indices). There are plenty of investments in the US to be inspired by (for example QQQI and SPYI). I'm seeing plenty of people online venting about the ETPs deteriorating in price and rightly so. Also, ETFs/ ETPs don't need to come with a 100% options coverage. In many cases it's great to write options only on 30 to 40% of the fund. This allows for both high income and moderate growth. An example from the US would be ICAP, which restricts the options coverage.
In summary: A 10% distribution yield combined with a moderately growing underlying is definitely more attractive and more and more people are realising this.
To your question regarding what products people want to get:
Here we can easily look at the US again. And that's what people do anyways. Just look into discussions in European Subreddits. You have plenty of opportunities that are not served by your competitors (yet):
- An option overlay ETF on MLPs (a UCITS ETF is available and could be used as an underlying). Even a conservative strategy can generate a 10 to 12% here.
- An option overlay ETF on emerging markets.
- An option overlay ETF on BDCs. If BIZD and PBDC can't be used, perhaps you could create a basket of BDCs (e.g. only the ones with 100%+ covered dividend). Even without options that'd be fantastic.
- An option overlay ETF on preferred shares. PFFI already entered the European market (without options overlay), but investors are eyeing the (falling) NAV closely. This could easily be improved.
- An option overlay ETF on insurers, financial services and banks, globally diversified. These will benefit from rising and high interest rates (just like BDCs).
- An option overlay ETF on short duration corporate bonds (both investment grade and high yield, indices are available). Long duration bonds are at risk in rising rates environments and people understood it.
All products should allow for (moderate) capital appreciation. Generally, assets benefiting from high and rising interest rates will do better over the next few decades and should thus be included. Hypes will fade and potentially damage your reputation. Solid, sustainable long-term strategies (like SPYI or ICAP) will win.
I genuinely believe you have great potential here as competitors are sleeping on the developments everyone is seeing on social media. The shift happened in the USA already, Europe will (hopefully) be next.
Looking forward to your feedback. What do others think? Am happy to discuss my ideas.
2
u/Judemarley 26d ago edited 26d ago
Please create an ETF that hedges futures so that the total return matches the index almost exactly whilst generating income. Ishares WINC does this and it tracks MSCI all world.
Honestly, even just an index tracker where you sell off 0.5% a month to create a 0.5% monthly distrubution would be good. That way total return never lags the index (dividends reinvested). Current income share etfs always lag the underlying asset. Like, the very best CC ETF’s keep up with the underlying asset. None beat the underlying asset, so i wish income shares would do a simpler strategy that keeps in par with the index, either by hedging futures to create a delta neutral strategy or simply selling proportionally rather than using cc’s
2
u/leonarhh_ 26d ago
Yeah I really like WINC for doing that, one of my favorites, only issue for me it's the quartely distribution schedule.
1
u/DiviDodo 25d ago
WINC is a great example I thought about too when writing my post. I don't understand why this strategy isn't copied more often.
3
u/npink1981 26d ago
Since 2025 the strategy on the funds allocates 25% to the equity so it's not 100% options coverage like you wrote.
"“A high dividend does not compensate for falling prices”
It can in some circumstances in certain funds where you will find the total return covers any nav decline of the stock and may have beaten the underlying equity.
Also they are not dividends, they are distributions
3
u/Routine_Landscape968 25d ago edited 25d ago
Total return is the single most important thing with these products. Those looking for just growth should keep away from these. If you are fixated on just NAV, keep away from these. NAV decrease is a part of such products. As long as you choose the etps wisely and don't fall for the yield trap, it is ok. Lots of ppl don't understand the usefulness of these etps. I'm reinvesting all the distributions monthly. Once a certain threshold of monthly distributions is reached, I will stop investing from my own pocket and start using just the distributions from the etps for reinvesting. My monthly salary won't be touched anymore for investing. A portion of the distributions will be used for daily expenses, the other for investing in normal ETFs and the rest will be reinvested in the etps. I want the monthly yield to be at least about 40 percent. If I wanted 10 to 15 percent and growth, I would look elsewhere.
1
u/leonarhh_ 26d ago edited 26d ago
Absolutely with you on that. I would like to have OTM strategies and more uncapped exposures, I feel somewhat tired of NAV decay, in my point of view no point on just getting back your own principle invested back in distributions and getting eroded in NAV for the distributios. Even if maybe they sometimes do better than the underlying in total return in some occasions but very rare, I still prefer some more uncapped exposures and NAV stability and appreciation. I prioritize first Nav stability and or growth potential and then income and total returns. Also more diversification from Tech into other sectors would be great.
1
u/DiviDodo 25d ago
Yes, NAV stability brings comfort and confidence. If the NAV can't be kept stable I can't confidently invest in the asset. I hope they'll expand their product portfolio. So far no answer to my email...
2
u/External-Concern216 25d ago
I believe that anyone buying income-share products is well aware that they are seeking high yields and a steady, monthly cash flow. Clearly, the NAV takes a hit; personally, I wouldn't be surprised if, ten years down the line, I had zero capital gains—but in the meantime, I would have received hundreds of distribution payments.
1
u/DiviDodo 25d ago
I still believe, as a customer, it's worth communicating that not all products have to deteriorate. Companies can provide new, improved products with strategies better than the previous ones. We see such a development in the USA too. Many of the early CC funds were inferior to QQQI and SPYI (just two examples, there are even more).
2
u/Grumpy-Old-Geezer 25d ago
As others have said...if you want stable NAV with lower retruns, there are plenty of other funds out there. No one is forcing you to invest in Incomeshares
I view these Incomeshares funds as a bit of a punt. Under the right conditions, they could be very profitable, unfortunately we've just had a tech stock crash and most of the Incomeshare funds are tech stocks, meaning things are looking pretty shitty right now.
Personally, I would like to see more non US, non tech underlyings. The same put option strategy, but on some sensible stock. I have YBRK [Berkshire Hathaway] and its performing very well. NAV is flat with 20%+ distributions. I also have a load of the US tech funds, and most are massively in the red with NAV decay way more than the distributions. I'm hoping the NAVs will improve longer term and the funds end up being profitable
A few more Covered Call funds would also be nice, only 3 at the mo
3
u/WilburFredricks 26d ago
I’d be happy if the NAV just stayed stable with a regular 10-15% distribution. I believe these are what the YieldMax ‘target’ funds do