Invesco looks at income portfolio strategies

How ETF managers manage volatility and why you might want to consider...

the CBOE Volatility Indexalso known as Wall Street’s fear gauge, is coming off its most volatile week since April.

For investors hesitant to ride out the recent wild volatility, John Borrello, senior portfolio manager at Invesco, sees income funds that use options-based strategies as a sound game plan. Area: They have more structural protection built into them.

“Options are not based on correlations of stocks to another asset class,” Borrello told CNBC.Edge ETFsThis week. “They can have a more reliable form of downside protection, and they can also offer income that is not affected by interest rates.”

Borello who serves InvescoAmazon’s global asset allocation team suggests that should be an advantage for investors Because of the price reduction cycle. Policymakers are expected to cut interest rates by a quarter of a percentage point later this month. According to Wall Street consensus.

“Adding income without relying on the Fed is becoming more important. I think that’s driving some growth in this area,” he noted.

Includes income generating funds at Invesco Invesco QQQ Income Advantage ETF, Invesco S&P 500 Equal Weight Income ETF and Invesco MSCI EAFE Income Advantage ETF.

So far this year, the Invesco MSCI EAFE Income Advantage ETF has gained about 14%, while the company’s QQQ Income Advantage ETF is up about 6%. They have also risen by two percent over the past week.

Meanwhile, the Invesco S&P 500 Equal Weight Advantage ETF is roughly flat for the year.

“Never goes out of style”

According to Borrello, there are “very significant tailwinds” to options and specific outcome strategies that can last for many years.

“The demand themes of income and defense against equity drawdowns should never go out of style,” Borrello said. “These are things that every portfolio will probably need at some point throughout someone’s life. They may want to reduce risk on stocks. They may also want to add income that is a diversified source and, again, not be dependent on interest rates.”

Burrello finds that the discretionary income space has attracted a lot of new product launches That can make it difficult for investors To understand the differences.

His advice: Look for option income ETFs managed by institutional-level options professionals, and beware of unsustainable returns with potentially high fees.