Impact of Enhanced Strategy
Enhanced Income Generation
Enhanced ETF generates a higher level of income than the underlying ETF
Risk-return profile matches market growth opportunity
For every $1 invested in the ETF Modest Leverage is applied by borrowing around $0.25 and adding it to the principal.
Because of the leverage, the Enhanced ETF generates a higher level of income than its underlying ETF.
Growth Prospects are also enhanced by leverage while overall risk-return profile is raised.
Learn More About Enhanced Equity Income ETFs
Harvest enhanced equity income ETFs are built to deliver an enhanced income yield and equity market exposure from an existing Harvest equity income ETF.
They do so by investing directly in an existing equity income ETF and applying a modest amount of leverage to that investment – borrowing money from a lender and investing that money in an ETF. The leverage is maintained at a level around 25% and delivers a higher monthly income distribution as well as greater exposure to market movements than an equity income ETF that uses no leverage.
The leverage applied to these ETFs effectively amplifies an ETFs performance, to both the upside and the downside. This raises their risk rating somewhat, but it also raises their income yield and return potential. These ETFs can serve investors with a higher risk tolerance who want to increase their passive monthly cashflow.
The leverage enhancement is applied to ETFs that already generate their monthly cash distributions with an active covered call strategy. This strategy generates a reasonable and sustainable distribution on these existing ETFs, as well as the ability to offset and monetize market volatility in the short-term. By combining covered call strategies with leverage, Harvest enhanced equity income ETFs can deliver a higher monthly distribution, a higher annualized yield, and more market-like performance.
Harvest enhanced equity income ETFs take established, income-paying, ETFs and enhance their market exposure and income yields.
President & CEO
Enhanced Equity Income ETFs Q&A
Q1: Why did you launch this suite of Enhanced Equity Income ETFs?
Harvest has an established reputation for delivering cashflow from our equity income ETFs. We offer a robust suite of products that pay consistent distributions and have become very popular among investors. We see a need in the market for even higher yields and cashflows for investors.
The new enhanced equity income ETFs build on our foundation of equity income success to deliver higher annualized yields from established, income-paying ETFs.
Q2: What tools and strategies are at work in these ETFs?
The underlying ETFs held by these enhanced ETFs employ an active and flexible covered call strategy to generate income. This strategy can monetize market volatility and has been shown to generate consistent monthly cash distributions.
Harvest enhanced equity income ETFs add to this yield by including modest leverage at a rate of approximately 25%.
Put simply, this leverage means that for every $1 invested in an enhanced ETF, another 25 cents is borrowed and invested in the same ETF.
So for every $1 invested…. up to a $1.25 is allocated to the underlying ETF and then the income generated on the higher amount will be distributed to the unitholder.
Leverage increases the overall risk-return profile of the ETF, but it also enhances the market growth prospects for an investment.
It’s important to note that the approximate 25% level of leverage is modest and some of its additional risks should be offset by the underlying covered call option strategy which can monetize short-term volatility.
Q3: Who are these ETFs for?
These ETFs offer a higher yield and market growth prospects than our equity income ETFs, but they also come with a higher risk-return profile. Each investor has their own unique goals and needs, as well as their own unique risk tolerance. We think these enhanced ETFs may appeal to investors with a higher risk tolerance and investors who want or need a higher income yield.
Q4: What are some of the long-term performance tailwinds behind the individual ETFs?
Each enhanced ETF focuses on a large-cap portfolio of business leaders from a range of different growth industries. HHLE accesses the stable demand and innovation-driven growth prospects of the healthcare industry. HTAE captures leaders in the tech sector, which has become essential to how we live our lives and conduct business. HBFE brings a portfolio of global brands with long histories of resilience and market growth. HUTE captures global utilities providers and their established reputation for stability. HLFE accesses leading Canadian companies with dominant market shares and strong dividends.
Our enhanced equity income ETFs have unique growth tailwinds but share an investment focus on leading companies and the delivery of monthly cashflow.
Explore Harvest ETFs’ Suite of Enhanced Equity Income ETFs
Initial Target Yield
The Large-cap US healthcare companies held in this portfolio combine technological innovation with powerful, non-cyclical demand tailwinds. We all need healthcare, and we all need healthcare companies to innovate.
HHLE is designed to enhance the monthly income and growth opportunities delivered by the Harvest Healthcare Leaders Income ETF (HHL:TSX) through the addition of modest leverage.
Initial Target Yield
This ETF’s portfolio is selected from among the world’s most valuable. These brands have a special place in our economy and in our lives. They have long track records of resilience through market cycles, and near-universal status as high-quality investments.
HBFE enhances the monthly income and growth opportunities provided by the Harvest Brand Leaders Plus Income ETF (HBF:TSX) through the addition of modest leverage.
Initial Target Yield
The tech sector has shaped our lives and driven market growth. As the world becomes digitized, tech companies have been among the most successful. This ETF holds a portfolio of leaders in this sector, large-cap tech companies with quality balance sheets and robust track records.
HTAE enhances the monthly income and growth opportunities delivered by the Harvest Tech Achievers Growth & Income ETF (HTA:TSX) through the addition of modest leverage.
Initial Target Yield
The utilities sector is a relatively low-volatility defensive play with a steady income component for income-oriented investors with lower risk tolerances. The portfolio of diversified utilities providers held by this ETF all have extensive scale, predictable income streams, significant barriers to entry, and near-monopolies in their markets.
HUTE enhances the monthly income and growth opportunities provided by the Harvest Equal Weight Global Utilities Income ETF (HUTL:TSX) through the addition of modest leverage.
Initial Target Yield
The Canadian market is characterized by its leading large-cap companies. In industries like banking, telecommunications, energy, and utilities, a few key players have considerable market shares, substantial financial reserves, and long histories of dividend payment. This ETF holds a portfolio of 30 leading Canadian companies that meet strict dividend criteria.
HLFE enhances the monthly income and growth opportunities delivered by the Harvest Canadian Equity Income Leaders ETF (HLIF:TSX) through the addition of modest leverage.
Current Yield (as at September 30, 2022)
The Harvest Diversified Monthly Income ETF is built to deliver the consistent monthly income and diverse growth opportunities that Harvest is known for.
This ETF is an equal weight basket of 6 of Harvest’s equity income ETFs, a multi-sector portfolio capturing a large and diverse set of high-quality companies.
Existing yields are combined with a covered call option and modest leverage to generate enhanced income.
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