There's An ETF For That?

YieldMax dialed it way down for its new US Stocks Target Double Distribution ETF (DDDD). Instead of yielding 50%, DDDD will target twice the distribution rate of the Schwab US Dividend Equity ETF (SCHD). SCHD yields about 3.5%. DDDD owns a slug of SCHD as well as quite a few of the individual stocks in SCHD. 

The fund will overlay option combos on SCHD as well as some of the holdings using call spreads, selling puts and a couple of other strategies occasionally. The boilerplate says the fund may return capital as part of its distributions. 

Copilot said that based on the current holdings, the dividends generated before any options are implemented should be 3.4-3.7%, in line with the fund. 

I'd be surprised if it had to return much capital to find the extra 3.5% yield. I suppose it might want to do that for some reason but I doubt it would have to. The extra drag then from the higher distribution versus SCHD would only be 87.5 basis points per calendar quarter. I can't imagine it would look like any of the crazy high yielders that move down and to the right on a price basis very swiftly only to then reverse split and then repeat the swift decline toward another reverse split.

We talk about using small allocations to the crazy high yielders in some sort of depletion or drawdown strategy. DDDD simply paying a little bit more should be plenty sustainable for anyone who would rather take yield out than sell from more of a total return approach. 

For all the talk about private equity/credit firms, it turns out there is a pretty narrow based ETF tracking the space. The Van Eck Alternative Asset Manager ETF (GPZ) only has about nine months under its belt but it appears to do a good job tracking the industry which lately means the price is down a lot.

That's not all the holding but it's most of them. Not captured in the screenshot is Blue Owl with a 3.28% weighting. There's no Goldman, Morgan Stanley or any of the other multiline financials that dominate funds like the following;

While I can't see ever wanting GPZ, there is probably useful information keeping tabs on it.

I'll close out with advice from Barron's about The Best Way To Trade A Volatile Stock Market which is that investors "should do as little as possible." Maybe put differently, do less. If you've been reading this blog for a while, hopefully you recognize the pattern of small tweaks when risk factors change, not necessarily as an emotional response. That's the objective anyway.

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.