Founded by Options-based ETF pioneers, NEOS ETFs are designed to offer tax-efficient monthly income while providing exposure to core portfolio building blocks
WESTPORT, Conn., August 30, 2022–(BUSINESS WIRE)–NEOS Investments (“NEOS”), a global asset manager led by a highly experienced team that previously built and grew numerous options-based ETFs currently in the market, is today launching its initial suite of next evolution income ETFs:
NEOS S&P 500 High Income ETF (SPYI);
NEOS Enhanced Income Aggregate Bond ETF (BNDI); and
NEOS Enhanced Income Cash Alternative ETF (CSHI).
All three ETFs are actively managed and designed to help investors and advisors navigate the challenges of the current market environment while also aiming to deliver opportunities for monthly income generation and tax efficiency.
NEOS Investments’ first equity solution, SPYI, aims to deliver an attractive monthly distribution. The Fund’s management team uses a strategy intended to replicate the S&P 500 Index then implements a data-driven option overlay strategy that utilizes a call spread approach as opposed to the more common covered call strategy that many passive funds utilize to generate high monthly income, tax efficiency, and the potential for upside equity participation in rising markets.
BNDI and CSHI both utilize a put spread approach which involves selling short puts and buying long puts, with the goal of generating option premium on an ongoing basis that can be distributed to shareholders as income without taking on outsized risk to do so.
BNDI is designed as an enhanced approach to the type of exposure offered by the U.S. Aggregate Bond Index, seeks to have less sensitivity to credit and duration risk via its integrated options strategy which aims to provide tax-efficient monthly income greater than what an investor would receive in bond interest alone.
CSHI is an innovative alternative to ultra short-term fixed income and cash positions in a portfolio. The Fund combines exposure to short-term (1-3 month) Treasury Bills with the actively managed put spread approach described above. CSHI seeks to provide an enhanced monthly income stream above what investors would receive from investing in T-Bills alone.
“Investors need and deserve an enhanced suite of options-based ETFs to help them build more resilient core equity and income portfolios,” said Garrett Paolella, Co-Founder and Managing Partner at NEOS. “Aiming to solve today’s increasingly complex portfolio construction challenges is something my colleagues and I are very excited to be doing with the rollout of these ETFs and we are thrilled to be able to start talking with investors, advisors and institutions about the role our solutions can play in all types of portfolios.”
NEOS was founded by a team of options industry pioneers who collectively bring decades of experience, both individually and as colleagues working together at a number of previous firms on some of the most successful options ETFs rollouts of the past decade+.
To learn more about NEOS Investments and its other product and service offerings, please visit: https://neosfunds.com/
NEOS ETFs aim to deliver the next evolution of investments strategies, where seeking income is the outcome. Built on decades of research and experience, NEOS ETFs aim to empower the investor with portfolio building blocks to provide high income, tax efficiency, and diversification through data-driven options-based ETFs. For more information, visit https://neosfunds.com/.
Investors should carefully consider the investment objectives, risks, charges and expenses of Exchange Traded Funds (ETFs) before investing. To obtain an ETF’s prospectus containing this and other important information, please call (866) 498-5677 or view/download a prospectus at https://neosfunds.com. Please read the prospectus carefully before you invest.
An investment in NEOS ETFs involve risk, including possible loss of principal. The equity securities purchased by the Funds may involve large price swings and potential for loss.
The use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Derivative prices are highly volatile and may fluctuate substantially during a short period of time. The use of leverage by the Fund, such as borrowing money to purchase securities or the use of options, will cause the Fund to incur additional expenses and magnify the Fund’s gains or losses. The earnings and prospects of small and medium sized companies are more volatile than larger companies and may experience higher failure rates than larger companies. Small and medium sized companies normally have a lower trading volume than larger companies, which may tend to make their market price fall more disproportionately than larger companies in response to selling pressures and may have limited markets, product lines, or financial resources and lack management experience. The funds are new with a limited operating history.
Additional risks specific to BNDI CSHI
Debt issuers and other counterparties may be unable or unwilling to make timely interest and/or principal payments when due or otherwise honor their obligations. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also adversely affect the value of the Fund’s investment in that issuer. The Fund’s income may decline when yields fall. This decline can occur because the Fund may subsequently invest in lower-yielding bonds as bonds in its portfolio mature, are near maturity or are called, bonds in the Fund otherwise needs to purchase additional bonds. Interest Rate Risk. The risk that fixed income securities will decline in value because of an increase in interest rates; a fund with a longer average portfolio duration will be more sensitive to changes than a fund with a shorter average portfolio duration.
Additional risks specific to BNDI
Securities that are rated below investment-grade (commonly referred to as “junk bonds,” which may include those bonds rated below “BBB-” by S&P Global Ratings and Fitch Ratings, Inc. (“Fitch”) or below “Baa3” by Moody’s Investors Service, Inc. (“Moody’s”)), or are unrated, may be deemed speculative, may involve greater levels of risk than higher-rated securities of similar maturity and may be more likely to default.
S&P 500 Index: The Standard and Poor’s 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on exchanges in the United States.
Bloomberg Barclays U.S. Aggregate Bond Index: The Bloomberg U.S. Aggregate Bond Index (the “Index”) is designed to measure the performance of the U.S. dollar denominated investment grade bond market, which includes investment grade (must be Baa3/BBB- or higher using the middle rating of Moody’s Investors Service, Inc., Standard & Poor’s Financial Services, LLC, and Fitch Inc.) government bonds, investment grade corporate bonds, mortgage pass through securities, commercial mortgage backed securities and other asset backed securities that are publicly for sale in the United States. The securities in the Index must have at least 1 year remaining to maturity and must have $300 million or more of outstanding face value. Asset backed securities must have a minimum deal size of $500 million and a minimum tranche size of $25 million. For commercial mortgage backed securities, the original aggregate transaction must have a minimum deal size of $500 million, and a minimum tranche size of $25 million; the aggregate outstanding transaction sizes must be at least $300 million to remain in the Index. In addition, the securities must be U.S. dollar denominated, fixed rate, non-convertible, and taxable. The Index is market capitalization weighted.
Covered Call: Call options are financial contracts that give the option buyer the right but not the obligation to buy a stock, bond, commodity, or other asset or instrument at a specified price within a specific time period. The term covered call refers to a financial transaction in which the investor selling call options owns an equivalent amount of the underlying security. To execute this, an investor who holds a long position in an asset then writes (sells) call options on that same asset to generate an income stream. The investor’s long position in the asset is the cover because it means the seller can deliver the shares if the buyer of the call option chooses to exercise.
Call Spread: A call spread is an option spread strategy that is created when equal number of call options are bought and sold simultaneously.
Put Spread: A put option (or “put”) is a contract giving the option buyer the right, but not the obligation, to sell—or sell short—a specified amount of an underlying security at a predetermined price within a specified time frame. A put spread is an option spread strategy that is created when equal number of put options are bought and sold simultaneously.
NEOS ETFs are distributed by Foreside Financial Services, LLC.
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Julia Stoll / Patrick Phalon
MacMillan Sullivan Communications