TORONTO–(BUSINESS WIRE)–CI Global Asset Management(“CI GAM”) announces the launch of a new series of covered call investment funds, including an ETF focused on the utilities sector. CI Utilities Giants Covered Call ETF begins trading today on the Toronto Stock Exchange (“TSX”) under the tickers CUTL (Hedged Common Units) and CUTL.B (Unhedged Common Units).
CI GAM is also launching four mutual funds based on its existing lineup of covered call ETFs. The new funds, which will invest in securities of their respective underlying ETFs, are:
- CI Canadian Banks Covered Call Income Corporate Class
- CI Energy Giants Covered Call Fund
- CI Gold+ Giants Covered Call Fund
- CI Tech Giants Covered Call Fund.
“Our covered call funds offer investors new opportunities in challenging markets,” said Roy Ratnavel, Executive Vice-President and Head of Distribution for CI GAM. “They generate steady income and deliver a measure of downside protection while maintaining exposure to the upside potential of a portfolio of high-quality companies. With these new funds, we’re providing additional options to access this valuable, proven strategy.”
The funds are especially timely given that periods of increased market volatility tend to result in higher call option premiums, boosting the income generated by this strategy. “Covered call investors are getting paid for tolerating volatility,” Mr. Ratnavel said.
The benefits of CI GAM’s covered call funds include:
- Targeted exposure to the largest firms in key industry sectors.
- A tax-efficient income stream generated by writing covered calls.
- A degree of downside protection, as the premium income helps to offset any potential price declines in the portfolio.
- Participation in the capital appreciation of the portfolio holdings, as CI GAM’s covered call ETFs will write call options on approximately 25% of the portfolio, with approximately 75% remaining fully invested.
- The professional expertise of the CI GAM team, which has extensive experience in managing covered call option strategies.
A covered call option strategy is implemented by selling a call option contract while owning an equivalent number of the underlying securities. The option premiums provide additional income. However, when prices of the underlying investments are rising, the upside gains are limited because the buyers of the call options will exercise their right to purchase the underlying shares. For more information on the strategy, see this article.
CI Utilities Giants Covered Call ETF
The investment objective of CI Utilities Giants Covered Call ETF is to provide unitholders, through an actively managed portfolio, with (i) regular cash distributions, (ii) the opportunity for capital appreciation by investing on an equal-weight basis in a portfolio of equity securities of at least the 20 largest utility companies measured by market capitalization listed on a North American stock exchange, and (iii) lower overall volatility of returns on the portfolio than would be experienced by owning a portfolio of securities of such issuers directly. The issuers included in the portfolio, which are based on their market capitalization, may be adjusted based on the portfolio manager’s view on the liquidity of the issuers’ equity securities and their related call options.
It is intended that at least 90% of the value of the foreign exchange exposure attributable to Hedged Common Units (CUTL), if any, will be hedged back to the Canadian dollar.
The utilities sector offers several benefits for investors, including a reliable income stream and defensive characteristics that can add stability to a portfolio. A covered call strategy enhances the income potential of a portfolio of utilities firms.
Covered call mutual funds
- CI Canadian Banks Covered Call Income Corporate Class invests all or substantially all of its assets in CI Canadian Banks Covered Call Income Class ETF (TSX: CIC), which invests in a portfolio consisting of common shares of the six largest Canadian banks.
- CI Energy Giants Covered Call Fund invests all or substantially all of its assets in Hedged Common Units of CI Energy Giants Covered Call ETF (TSX: NXF), which invests in an equally weighted portfolio of equity securities of at least the 15 largest energy companies measured by market capitalization listed on a North American stock exchange.
- CI Gold+ Giants Covered Call Fund invests all or substantially all of its assets in Hedged Common Units of CI Gold+ Giants Covered Call ETF (TSX: CGXF), which invests in a portfolio of equity securities of at least the 15 largest gold and precious metals companies measured by market capitalization listed on a North American stock exchange.
- CI Tech Giants Covered Call Fund invests all or substantially all of its assets in Hedged Common Units of CI Tech Giants Covered Call ETF (TSX: TXF), which invests in a portfolio of equity securities of at least the 25 largest technology companies measured by market capitalization listed on a North American stock exchange.
CI GAM is Canada’s fifth-largest ETF provider, with $16.0 billion in assets under management in more than 125 ETFs (as at December 31, 2022). CI GAM’s ETF lineup is highly diversified and includes beta, smart beta, actively managed, liquid alternatives, digital assets, covered calls and thematic mandates.
ETF series termination
CI GAM will terminate the ETF C$ Series of CI Global Bond Currency Neutral Fund (TSX: CGBN) on or about April 3, 2023 (the “Termination Date”). CI GAM will request the TSX to delist units of CGBN from the TSX on or about March 31, 2023 (the “Delisting Date”), with all ETF C$ Series units of CGBN still held by investors being subject to a mandatory redemption as of the Termination Date. Until such date, the ETF C$ Series units of CGBN will continue to be listed on the TSX and unitholders of such series will be able to sell their units through the facilities of the TSX until the Delisting Date.
As soon as practicable following the Termination Date, any remaining unitholders of the ETF C$ Series of the fund as of the Termination Date will receive the net proceeds from the liquidation of the series’ assets, less all liabilities and obligations attributable to such series, on a pro-rata basis. CI GAM will issue an additional press release on or about the Termination Date confirming final details of the termination.
About CI Global Asset Management
CI Global Asset Management is one of Canada’s largest investment management companies. It offers a wide range of investment products and services and is on the Web at www.ci.com. CI Global Asset Management is a subsidiary of CI Financial Corp. (TSX: CIX), an integrated global asset and wealth management company with approximately $375.8 billion in assets as of December 31, 2022.
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in mutual funds and exchange-traded funds (ETFs). Please read the prospectus before investing. Important information about mutual funds and ETFs is contained in their respective prospectus. Mutual funds and ETFs are not guaranteed; their values change frequently, and past performance may not be repeated. You will usually pay brokerage fees to your dealer if you purchase or sell units of an ETF on recognized Canadian exchanges. If the units are purchased or sold on these Canadian exchanges, investors may pay more than the current net asset value when buying units of the ETF and may receive less than the current net asset value when selling them.
The CI Exchange-Traded Funds (ETFs) are managed by CI Global Asset Management, a wholly owned subsidiary of CI Financial Corp. (TSX: CIX). CI Global Asset Management is a registered business name of CI Investments Inc.
This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase funds managed by CI Global Asset Management and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Global Asset Management believes to be reasonable assumptions, CI Global Asset Management cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
©CI Investments Inc. 2023. All rights reserved.
Vice-President, Corporate Communications
CI Global Asset Management