We've looked several times at the burgeoning autocallable product space. Generally, these are structured products tied to reference security that pay out very high yields like low to mid teens, not the crazy high "yields" of 40-50% from derivative income funds. Accessing them through an ETF is relatively new.
The Calamos fund (CAIE) is the first one we looked at.
Nothing has malfunctioned so that's good. What we're seeing first hand instead of theory from a marketing sheet or from AI is that there is a sensitivity to falling equity prices.
This next one references Nvidia.
ANV so far has been pretty smooth and you'd add back about 100 basis points in for the distributions paid out so far. However normal or not the market's volatility has been for the last month, ANV doesn't seem to be bothered by it.
Similar story with TLA which references Tesla.
The common stock has been a little less noisy over the last month, we can see a little downside sensitivity but again add 100 basis points back in for the distributions.
I'm still trying to wrap my head around the risks to this structure. They yield about 14% in a 4% world so there is risk. Taking risk you don't understand is something to avoid.
Our next follow up is the Cambria Endowment Style ETF (ENDW). The fund is almost a year old and started out as a 351 exchange. As the name implies, it is a multi asset strategy. I take from the word endowment that it seeks to be all-weather to some extent but fair enough if that is not correct.
The CAGR numbers are so high because ENDW launched one day after the Tariff Panic bottom but still, on a relative basis, ENDW has done well thus far. The ENDW fund page doesn't have pie chart info about the asset allocation.
Copilot did the math. ENDW runs with 30-50% leverage. The split between domestic and foreign equity is pretty close to evenly split. Let's play around with it a little to see how it might have worked longer term.
The results aren't much of a surprise.
It makes sense that the leveraged version outperformed the unleveraged version but with a little more volatility. The only difference to Portfolio 3 is swapping out the ten year treasury exposure which reiterates a point we made yesterday that sometimes what you avoid is just as important as what you include.
A final comment, I sent a note out to clients after the close on Tuesday noting the extent to which Tuesday's huge move looks like panic buying. I don't know whether stocks will drop tomorrow or the next day or not at all but I wanted to prepare clients for the possibility having seen these sorts of days happen many times before. Overnight futures are flat as I publish this post so maybe it won't give this gain back but I would be emotionally ready for that, repeated for emphasis, to avoid being caught off guard.
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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