EMCC Profile
The Global X MSCI Emerging Markets Covered Call ETF seeks to provide investors with exposure to emerging market equities while generating income through a covered call strategy. Under normal market conditions, the fund invests at least 80% of its net assets, including any borrowings for investment purposes, in the securities of the underlying index or in investments that closely match the economic characteristics of these component securities. This investment approach aims to capture the performance of emerging market equities while incorporating an options strategy to enhance yield.
The underlying index is designed to reflect the performance of a theoretical portfolio that implements a covered call strategy. This strategy involves holding a portfolio of emerging market stocks and selling call options on these stocks to generate additional income. By doing so, the fund aims to provide investors with enhanced income through option premiums while maintaining exposure to the underlying equities. The index tracks the performance of this strategy, providing a benchmark for the fund’s investment approach.
The covered call strategy used by the fund can help mitigate volatility and provide additional income, particularly in flat or mildly bullish markets. This approach involves selling call options on the stocks held in the portfolio, which allows the fund to collect option premiums. This income can contribute to the fund’s overall return, though it may also limit the fund’s upside potential if the underlying equities experience significant gains beyond the strike price of the sold options.
It is important to note that the fund’s 80% investment policy is non-fundamental and may be changed with 60 days’ prior written notice to shareholders. This policy flexibility allows the fund to adjust its investment strategy as needed, but investors should be aware of this potential change when evaluating the fund’s alignment with their investment objectives. Overall, the Global X MSCI Emerging Markets Covered Call ETF offers a blend of emerging market equity exposure and income generation through a covered call strategy, catering to investors seeking both growth and income in emerging markets.
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