ULTY owns individual stocks and sells options against the individual stocks. So it is not a fund of funds, it owns volatile stocks and sells calls with nominally fat premiums.
How good should anyone feel about ULTY maintaining that $6 price level? One a total return basis it has ripped higher since the April low, it's up 47%. That huge total return gain has allowed the price only return to move almost perfectly sideways. As you can see, since inception ULTY is down 68% on a price only basis.
How good should anyone feel about ULTY maintaining that $6 price level? One a total return basis it has ripped higher since the April low, it's up 47%. That huge total return gain has allowed the price only return to move almost perfectly sideways. As you can see, since inception ULTY is down 68% on a price only basis.
The fund is working, it's doing what it should. Something that yields 86%, as the ULTY website showed early on Saturday, is not going to be able to keep up with that dividend for very long. They will go down a lot on a price basis and then reverse split. None of this is problematic when this dynamic is properly understood.
Some sort of personal scenario where someone needs "yield" but wants a meaningful growth component from plain vanilla equities, some sort of small allocation to a crazy high yielder can fit the bill. If never rebalanced, then something like a 5% weighting will eventually go to almost zero. After 17 months (since ULTY's inception), the price only return of 95% S&P 500, 5% ULTY has been 19% cumulative/13% compounded which more that offsets the 70% erosion of ULTY.
I put yield in quotes because often, some portion of the YieldMax distributions are characterized as return of capital. The negative of that is they're just giving you back you're own money, the positive is that it can be more tax efficient than if it was characterized as a dividend.
I've not done this, am unlikely to do it but I do think there is some merit. There is no realistic scenario though that, in this case, ULTY is going to maintain its current price for 60 weeks.
Barron's is reporting that Vanguard is going to partner with Wellington and Blackstone on an interval fund. Interval funds can go in several different directions with loans and real estate being common. Per the prospectus, the Vanguard fund would invest in "public equities investments in the range of 40% to 60% of the Fund’s net assets, (ii) public fixed income investments in the range of 15% to 30% of the Fund’s net assets, and (iii) private markets investments in the range of 25% to 40% of the Fund’s net assets."
We've talked a little about the Cliffwater funds which seem too good to be true. Some of the others mentioned in Barron's seem to be a mixed bag.
I asked Copilot for some other interval funds. It kicked out quite a few symbols, there were some mistakes in the list and not all the symbols are recognized by Portfoliovisualizer but here are some of them.
The knocks on interval funds include being expensive which the Vanguard fund is expected to be less so and the gated redemptions. I can't defend those two but this space feels like one that an advisor should be able to talk about and have a little understanding. Just as 20 years ago, ETFs were clearly going to continue to develop, so too will interval funds.
Arguably though, you can get most of the Cliffwater effect from catastrophe bond funds which do not use the interval wrapper.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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