Q: What am I missing here? This is a bond fund with an almost 12% payout? Is this something you can put $100k in and get $12k paid out every year forever? I get that it does covered calls but it just seems too easy. It completely trashes the TSX yearly returns with far less risk?
5i Research Answer:
BOND is up 4.24% this year, and indicated yield is 11.97%. The covered calls enhance income, and lower rates can help the ETF's bond portfolio. But note that 76% of the distribution is considered return of capital (ROC). This potentially could result in a decaying net asset value over time. Over a one year period, the fund is up 1.15% but does not have a longer history than that. We are comfortable with the fund, certainly, but it is important to understand the difference between pure interest and ROC.