United States Commodity Funds has launched a new actively managed ETF that aims to provide the long-term performance of gold while also delivering regular current income.
The ETF aims to deliver the long-term performance of gold while also providing current income through an opportunistic covered call strategy.
The USCF Gold Strategy Plus Income Fund (GLDX US) has been listed on NYSE Arca with an expense ratio of 0.45%.
The ETF is sub-advised by SummerHaven Investment Management, an alternative asset manager specializing in investing in commodity futures.
The fund obtains its exposure to gold primarily by investing in a mix of physical gold, gold warrants, and collateralized gold futures contracts. It may also hold other gold-related derivative instruments such as cash-settled options, forward contracts, and options on gold futures contracts.
Apart from the income received on collateral posted to the gold futures’ margin accounts, the ETF aims to generate additional income through an opportunistic covered call overlay.
A covered call is an options-based strategy that involves holding a long position in an asset (in this instance, gold) and selling or “writing” call options on that same asset to generate income from the options’ premium.
Historically, during bear markets, range-bound markets, and modest bull markets, this type of covered call strategy has typically outperformed its underlying asset. However, during strong bull markets, when the underlying asset rises well above its strike price, covered call strategies have tended to lag historically.
The fund may appeal to investors seeking to incorporate gold’s traditional portfolio benefits – diversification, inflation hedging, and volatility protection – while simultaneously boosting yield through an alternative income strategy.
John Love, President and CEO of USCF, said: “Physical gold is a portfolio staple that has long provided inflation protection, diversification, and stability in volatile markets. However, gold doesn’t earn income on its own. The ability to combine an income objective with exposure to the gold markets makes SummerHaven’s Gold Plus Income strategy a dynamic addition to our long-standing partnership.”
Kurt Nelson, President of SummerHaven Investment Management, added: “Covered call and ‘buy write’ strategies have been used by equity investors seeking to generate income for decades. We’re excited to collaborate with USCF and bring this innovative gold strategy to ETF investors. USCF has launched several market-leading commodity ETPs since 2006, and now gold is part of their diversified ETP platform. GLDX offers an inflation hedging strategy for investors seeking exposure to the gold markets along with income.”
The ETF does not require investors to deal with the cumbersome Schedule K-1 tax form.
USCF and SummerHaven collaborate on three other ETFs including two broad commodity strategies and one focused on copper. These are the $250 million United States Commodity Index Fund (USCI US), the $10m USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI US), and the $280m United States Copper Index Fund (CPER US).