Toronto-based Purpose Investments Inc. has launched a new product that is available either as an exchange-traded fund (ETF) or a mutual fund and is meant to provide long-term returns and substantially less risk than that provided by equities alone.
Purpose Premium Yield Fund uses cash-covered put and covered-call options strategies blended with fundamentally selected equities to generate income while mitigating risk, according to the firm’s announcement released on Tuesday.
“Investors continue to search for yield in today’s low interest rate environment. And in this search for higher yields, we find investors are reaching deeper and deeper into lower-grade fixed-income products, which come with significant credit and interest rate risks,” says Som Seif, president and CEO of Purpose Investments, through a statement.
“We’ve designed the Purpose Premium Yield Fund to provide investors with a great way to achieve higher levels of income, but without taking on credit or interest rate risk,” he adds.
Purpose Premium Yield Fund is a part of the firm’s corporate-class structure funds. It’s aiming to provide tax-efficient monthly distributions that equal 7% a year, which are expected to be characterized as capital gains and dividends. The management fee for the ETF version of the fund, which began trading on the Toronto Stock Exchange on Tuesday, and Series F of the mutual fund version is 0.6% while the mutual fund’s Series A shares have a management fee of 1.6%.