HANetf Weekly World Equity Income UCITS ETF (WEEK, 751.85p)

Here is something structurally different.  Whilst we are fairly used to seeing quarterly dividends, and many active ETFs go a step further and pay monthly, WEEK offers its shareholders a weekly payout, which we cannot recall ever seeing before.  HANetf say this product is “the first in Europe that aims to pay income to investors on a weekly basis. It is built for investors who want growth through a globally diversified equity portfolio combined with income they can depend on. This is currently the only ETF in Europe for investors seeking frequent and consistent cash flow that pays out on a weekly schedule.”  The first payment date is scheduled to be 16th October.

 

Some may argue it is simply a novelty, but this idea of such frequent distributions may appeal to certain investors needing income, perhaps those in retirement, or those who share the views of John D Rockefeller, who was reputed to have said “do you know the only thing that gives me pleasure? It’s to see my dividends come in.”  Mr Rockefeller would have loved this concept.

 

We think this fund is worth a closer look.  It invests broadly across world equities to provide diversified exposure without the need to cast the net too widely.  The portfolio has 188 holdings, including some other funds to keep things manageable.  The largest holdings are in iShares Core Nikkei 225 ETF, NVIDIA, Apple, Microsoft, Amazon, Alphabet, Broadcom, Meta Platforms, and Micron Technology.  The US country weighting is 81%, with 7% in Japan, and less than 3% in any other country.  By sector, the largest weightings are to technology 37%, financials 13%, communications 10%, and healthcare 9%.

 

With that mix we think the returns from the portfolio should be fairly normal, and then there is the option overlay.  The managers will systematically sell covered calls and covered-call spreads on the stocks and equity indices to generate income. This does have the effect of limiting the upside potential – that’s the trade-off for the income generation. We don’t yet know quite what level of income will be achieved, so that is something to which we will need to return.  The ETF’s ongoing charges are 0.50%, which seem reasonable and say something about how far electronic automated systems have come. Not too long ago it would have been practically and administratively impossible (certainly in the era of postal services and cheques), as well as absurdly expensive to make weekly payments to investors.

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This article was one of eleven new issues covered in the October issue of Active ETF Newsletter.  For more details, click here.