Ryasik
When investing in the stock market, investors are always looking for innovative strategies that can bring them growth and income. Wall Street is always happy to provide them. to this end, Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF (NYSE:QDPL) is definitely different and an approach I’ve never encountered before.
QDPL is an exchange-traded fund (ETF) designed to track the total return performance of the Metaurus U.S. Large Cap Dividend Multiplier Index – Series 400. The fund achieves this goal by investing approximately 86% of its assets in the company’s underlying assets. S&P 500 (SP500), while the remaining percentage is used to purchase collateral for 4x dividend participation.This unique approach enables QDPL to provide investors with exposure to dividend cash flows S&P 500 Index, while also retaining most of the index’s stock price exposure.
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The fund launched on July 12, 2021 and has secured approximately $315 million in assets. After the management fee reduction effective February 1, 2024, QDPL’s total expense ratio is 0.60%. This expense ratio is significantly higher compared to the average equity ETF expense ratio of around 0.16%.
ETF holdings and industry composition
To better understand QDPL’s investment strategy, let’s take a closer look at its major holdings and industry composition. While QDPL invests primarily in the underlying assets of the S&P 500 Index, it also holds some holdings in dividend futures contracts. This combination allows the fund to provide investors with exposure to dividend cash flows and S&P 500 price appreciation/depreciation.
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Peer comparison
Two notable competitors to QDPL are the JPMorgan Equity Premium Income ETF (JEPI) and the Global X S&P 500 Covered Call ETF (XYLD). The two funds use different strategies to generate income and provide exposure to the S&P 500 Index.
JEPI focuses on selling covered calls on the S&P 500 to generate premium income, while XYLD also sells covered calls but focuses on global portfolios. These strategies are designed to increase income potential but may limit the upside potential of the underlying index.
From the perspective of total return, QDPL’s performance is better than JEPI and XYLD, and slightly worse than SPY. This isn’t surprising considering the fund focuses on the S&P during cycles of the S&P 500 rather than most other major market indicators.
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Pros and cons of investing in QDPL
As with any investment, there are advantages and disadvantages to consider when investing in QDPL.
Advantages of investing in QDPL
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Enhanced Dividend Exposure: QDPL provides investors with 4x exposure to the S&P 500’s dividend yield, making it an attractive option for those seeking higher cash flow.
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2. Moderate Equity Position: QDPL has a modestly reduced equity position compared to the S&P 500, which may appeal to investors looking for a more conservative approach.
3. Diversification: By investing in the underlying assets of the S&P 500 Index, QDPL provides investors with exposure to a broad range of companies in different industries, thereby delivering the benefits of diversification.
4. Historical Outperformance: QDPL has historically delivered on its promises, returning 85-90% of the S&P 500 and delivering a distribution yield of over 4x. This track record may appeal to investors looking for stable relative yields.
Disadvantages of investing in QDPL
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Volatility: While QDPL is designed to provide greater dividend exposure, it is important to note that dividend futures can be affected by volatility and market movements. Such fluctuations may affect the Fund’s performance.
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Expense ratio: QDPL charges a total expense ratio of 0.60%, which is slightly higher than common stock ETFs. Investors should consider the costs of investing in QDPL and evaluate whether the potential benefits outweigh the fees.
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Market Risk: As with any investment in the stock market, QDPL is subject to market risk. Changes in general market conditions and economic factors may affect the performance of the Fund.
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Limited Track Record: QDPL is a relatively new ETF, with a launch date of July 12, 2021. Investors should consider the fund’s limited track record and carefully evaluate its long-term performance when making investment decisions.
in conclusion
The Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF is an interesting ETF. QDPL aims to provide a 4x return on the S&P 500 while maintaining exposure to the index’s share price performance, providing a potential avenue for income-oriented investors seeking growth. It’s basically the S&P 500 that generates the majority of total return in dividends rather than capital appreciation. I can see how this could be valuable to some investors who see income. If you fall into this category, it’s worth considering.
