Goldman Sachs rolls out S&P 500, Nasdaq 100 buy-write ETFs

Oct 30th, 2023 | By | Category: Equities

Goldman Sachs Asset Management has launched two new active ETFs in the US providing exposure to the S&P 500 and Nasdaq 100 while seeking enhanced income and lower volatility through option writing overlays.

Goldman Sachs rolls out S&P 500, Nasdaq 100 buy-write ETFs

Goldman Sachs has unveiled two buy-write strategies based on mainstream US equity indices.

The Goldman Sachs S&P 500 Core Premium Income ETF (GPIX US) and Goldman Sachs Nasdaq 100 Core Premium Income ETF (GPIQ US) have been listed on Nasdaq.

Each ETF fully replicates its underlying index while dynamically writing call options on that index. The overwrite level (the notional value of call options compared to the market value of the equity portfolio) is revised each month and is expected to range between 25% and 75%.

The premiums from the call options provide investors with regular monthly income; however, the call options also limit the funds’ ability to fully participate in potential increases in the value of the equity portfolios. Goldman anticipates these funds will capture approximately 60% of the gains of their underlying indices, on average, over the long term.

The so-called ‘buy-write’ strategy has seen burgeoning interest lately due to its conservative risk-return profile, a characteristic increasingly sought by investors amidst fluctuating interest rates and geopolitical tensions. JP Morgan’s Equity Premium Income ETF (JEPI US), a similar options-writing ETF, has grown to $28.8 billion in assets since its launch in May 2020, doubling in size over the past year alone.

Several Wall Street institutions have also recently aimed to carve out a share from the sector with notable entrants just this month including the likes of the Parametric Equity Premium Income ETF (PAPI US), introduced by Morgan Stanley, and the Advantage Large Cap Income ETF (BALI US), which was rolled out by the world’s largest ETF issuer BlackRock.

Goldman is aggressively staking its claim. Not only do the ETFs benefit from the firm’s brand strength, as well as the brand recognition of the underlying indices, but the funds are also competitively priced at 0.29% each, six basis points cheaper than both JEPI and BALI and matching the cost of PAPI.

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