The competition among ETF issuers to find a new way to squeeze the most income out of stock portfolios expanded again on Tuesday, with a new fund from Pacer that aims to deliver amplified dividends. The firm launched the Pacer Metaurus Nasdaq-100 Dividend Multiplier 600 ETF (QSIX) , a sister fund to the US Large Cap Dividend Multiplier 400 ETF (QDPL) that has grown to more than $500 million in assets since its launch in 2021. The funds target distributions equal to six times the dividend payouts on the Nasdaq-100 Index and four times the S & P 500 dividend, respectively.
Income strategies have become a huge area of growth for ETF issuers in recent years, with covered call funds arguably the most popular niche. Global X covered call ETFs on the S & P 500 ( XYLD ) and Nasdaq-100 ( QYLD ) now have more than $10 billion in combined assets, according to FactSet. And JPMorgan's Premium Income ETFs — JEPI and JEPQ , which employ a variation of the covered call strategy — have more than $50 billion combined.
A potential negative of covered call funds is that they put a hard cap on the upside of a portfolio for the portion that is "covered" by the call option. The idea behind the Pacer funds is that the funds will capture more of that upside during market rallies, according to Sean O'Hara, president at Pacer ETF Distributors. The QDPL, for example, currently has about 89% of its exposure to the stocks in the S & P 500, with the rest used to trade dividend futures to find more inco.
