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BMO Covered Call Canadian Banks ETF (ZWB)
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BMO Equal Weight Banks Index ETF (ZEB)
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Hamilton Canadian Financials YIELD MAXIMIZER TM ETF (HMAX)
Comparing total return for ZEB vs ZWB over various timeframes is easy, since they both have adequate history. The complication arises when adding HMAX to the comparison, due to it's very short history and therefore not being through a full cycle. It is apparent to me that the covered call ETFs do indeed give up total return for higher steady income.
To my amateur eyes, it appears that ZEB is the clear winner over 1-3-5 year timeframes, with HMAX taking over 2nd place in the 1 year timeframe.
However without the benefit of a full economic cycle, I can not come to a final decision. I have started building a position in HMAX, but I am now wondering if I should have been building a ZEB-ZWC position. I know that ZEB is banks, whereas HMAX is financials (banks, ins, etc).
Any thoughts you could throw in the mix would be helpful. Any indication of how it might perform over the longer term, based on the history so far....thanks...Steve
Looking at total returns, HMAX is in third place (+31%) over a one-year timeframe, with ZWB in second (33%), and ZEB in first (+44%). Your sentiment is correct though, where we can see that both the covered call funds have generated less returns over the multiple time periods. We have no problem with any of the funds listed. We will note that covered calls can offer some beneficial downside protection. If there is a big drop in the markets, then the covered call funds will perform similarly or better than ZEB. Over a long-term, it is likely that ZEB outperforms, but if one is seeking higher income and some protection to market volatility then there is no issues with owning a covered call fund like HMAX or ZWB.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWB.