Realmente los fondos de dividendos son más seguros?

Cita de Barabs

Digamos que eres una persona que ha hecho bien los deberes toda su vida, ha acumulado 600k + fondo de emergencia y decide jubilarse con eso. Eres una persona muy racional y solo te basas en datos, estudios y estadísticas, por lo que sabes que los dividendos son irrelevantes y siempre has invertido en indexados de acumulación porque sabes que a largo plazo son imbatibles.

Pero ahora has dejado de trabajar y te da pánico un crash bursátil. Sabiendo que gastas 12000k al año en gastos básicos (facturas, vehículo, comida, …) echas cuentas y decides hacer lo siguiente:

300k los metes en un fondo de dividendos de acumulación (vender el 4% anual de este fondo te pagaría tus gastos básicos), pensando que en un gran crash, este fondo bajará muy poco.

300k los dejas en el indexado, porque sabes que es lo más rentable a largo plazo (de aquí sacarías sólo para caprichos, viajes, etc, por lo que no lo tocarías en los años malos.

¿Es real este concepto de “las empresas de dividendo caen mucho menos que el mercado”? O realmente si quieres bajar riesgo es mucho más eficiente pasarse a una cartera 60/40 y tirar millas?

Cita de Barabs

¿Es real este concepto de “las empresas de dividendo caen mucho menos que el mercado”?

Cita de nipapipas niná

Depende de si quieres dejar herencia o no.
600.000€/30 años = 20.000€/año, puedes vivir sin invertir.
Yo creo que monetario, por lo de añadir los beneficios anuales al gasto de cada año.

Cita de Bernoulli

Claro, seguro que con 20.000 euros dentro de 30 años vivirá muy bien. La inflación no existe.

Con 600k dudo mucho que puedas vivir 30 años invirtiendo, ya no te digo sin invertir.

Cita de SoyAdrian

600k no da para retirarse
Perfectamente te puedes meter en un lio y verte entre cartones.



A partir de 3 millones de euros ya cambia la cosa

Cita de J.Colez

Mejor 30 millones shur, con 3 millones eres un tieso.

Cita de Barabs

Digamos que eres una persona que ha hecho bien los deberes toda su vida, ha acumulado 600k + fondo de emergencia y decide jubilarse con eso. Eres una persona muy racional y solo te basas en datos, estudios y estadísticas, por lo que sabes que los dividendos son irrelevantes y siempre has invertido en indexados de acumulación porque sabes que a largo plazo son imbatibles.

Pero ahora has dejado de trabajar y te da pánico un crash bursátil. Sabiendo que gastas 12000k al año en gastos básicos (facturas, vehículo, comida, …) echas cuentas y decides hacer lo siguiente:

300k los metes en un fondo de dividendos de acumulación (vender el 4% anual de este fondo te pagaría tus gastos básicos), pensando que en un gran crash, este fondo bajará muy poco.

300k los dejas en el indexado, porque sabes que es lo más rentable a largo plazo (de aquí sacarías sólo para caprichos, viajes, etc, por lo que no lo tocarías en los años malos.

¿Es real este concepto de “las empresas de dividendo caen mucho menos que el mercado”? O realmente si quieres bajar riesgo es mucho más eficiente pasarse a una cartera 60/40 y tirar millas?

7 Best Covered Call ETFs for Income Investors in 2025
Last Updated: July 19, 2024 1 Comment – 12 min. read


Covered calls are options sold on owned investments to generate current income. Here we'll review the best covered call ETFs for 2025.


Disclosure: Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I may get. Read more here.


Contents
Video – The Best Covered Call ETFs
Introduction – What Are Covered Call ETFs and How Do They Work?
7 Best Covered Call ETFs
QYLD – Global X NASDAQ 100 Covered Call ETF
XYLD – Global X S&P 500 Covered Call ETF
RYLD – Global X Russell 2000 Covered Call ETF
DIVO – Amplify CWP Enhanced Dividend Income ETF
JEPI – JPMorgan Equity Premium Income ETF
KNG – First Trust Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF
PBP – Invesco S&P 500 BuyWrite ETF
Covered Call ETFs Performance Compared
Conclusion – Are Covered Call ETFs a Good Investment?
Covered Call ETF FAQ's
What is a covered call ETF?
How do covered call ETFs work?
Are covered call ETFs safe?
Are covered call ETF dividends qualified?
How are covered call ETF dividends taxed?
Are covered call ETFs worth it?
Are covered call ETFs good for retirement?
Video – The Best Covered Call ETFs
Prefer video? Watch it here:


Introduction – What Are Covered Call ETFs and How Do They Work?
Covered call ETFs own stocks, typically from some underlying index, and sell call options on them to generate income. As such, they're usually somewhat in between a true index fund and an actively managed fund that selects stocks.


m1 money moves
Covered call writers own the underlying security and collect a premium on the option sold, providing current income. The call option written is considered “covered” because the underlying security is already owned.


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The buyer of the call option has the right to buy the underlying at the strike price at or before expiration.For example, if I own a fund like QQQ for the NASDAQ 100 and I think it's going to be relatively flat for the next 30 days or so, I might sell a call option on it, for which I receive cash immediately (called the premium). The buyer of that call option is hoping QQQ goes up. As the seller, I'm hoping it stays flat. Call options are usually sold to generate income in a flat or mild bear market.


Covered calls are also referred to as a “buy-write” strategy, i.e. buying something and writing an option on that thing. This strategy allows covered call ETFs to have huge distribution yields upwards of 10% that typically pay monthly, making them attractive to income investors and retirees. That yield may be classified and taxed as return of capital (ROC) or ordinary income, depending on the year. That is, those dividends (which are technically really not dividends but rather distributions from option premiums) are not considered qualified dividends.


A covered call ETF may be suitable for your portfolio if you desire a yield-focused strategy for current income, with the trade-offs being greater fees (the average covered call ETF expense ratio is 0.71%), muted long term total returns, less diversification, lower portfolio efficiency, and possibly greater tax costs. Because of these things, recognize that it inarguably makes little sense for the young accumulator with a long time horizon to own a covered call ETF.


Now let's cover the list of the best covered call ETFs.


7 Best Covered Call ETFs
Here are the 7 best covered call ETFs that are the most popular, in no particular order.


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QYLD – Global X NASDAQ 100 Covered Call ETF
QYLD is the most popular covered call ETF with nearly $7 billion in assets, which is more than half of the total assets under management of all covered call ETFs combined (about $12 billion).


QYLD launched in late 2013. Its popularity has soared in recent years with choppy, faltering markets, high inflation, and low interest rates during which investors scrambled for yield. There's even an entire community on Reddit dedicated to this single fund.


QYLD is the Global X NASDAQ 100 Covered Call ETF. It is one of three covered call ETFs from Global X; each use a different subset of the U.S. stock market. We'll go over the other two shortly. Technically these funds also have indexes for a hypothetical buy-write strategy. For QYLD, it's the CBOE NASDAQ-100 BuyWrite V2 Index.


As the name suggests, QYLD from Global X owns stocks from the NASDAQ 100 Index and writes covered calls on them. QYLD was the first covered call ETF to use this index. The NASDAQ 100 is a tech-heavy index of non-financial large cap growth stocks in the U.S. that trade on the Nasdaq exchange.


While the NASDAQ 100 is obviously much less diversified than something like the S&P 500, its greater volatility may be desirable in this context because it means greater option premiums, which of course is the focus of the fund.


QYLD has a distribution yield of 13.27% and an expense ratio of 0.60%. I wrote a separate comprehensive post on QYLD here.


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XYLD – Global X S&P 500 Covered Call ETF
While QYLD uses the NASDAQ 100, Global X also offers XYLD, which uses the famous S&P 500, comprised of the 500 largest publicly traded companies in the United States.


This makes XYLD more diversified than QYLD. The retiree withdrawing regularly and using covered calls as income may want that greater diversification because it means lower volatility.


XYLD is next in popularity with a little over $2 billion in assets. The fund launched in 2013. Its index is the CBOE S&P 500 BuyWrite Index.


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XYLD has a distribution yield of 13.13% and a fee of 0.60%.


spend retirement with more
RYLD – Global X Russell 2000 Covered Call ETF
RYLD finishes the Global X covered call ETF trifecta and uses the Russell 2000, which is roughly 2000 small- and mid-cap stocks from the investable U.S. stock market.


That is, whereas XYLD is using large caps via the S&P 500, RYLD covers the rest of the U.S. market with smaller stocks. As such, investors may want to combine XYLD and RYLD for greater diversification to capture the entire U.S. stock market.


RYLD launched later than its peers in 2019 and has about $1.4 billion in assets. Its index is the CBOE Russell 2000 BuyWrite Index.


RYLD has a distribution yield of 13.20% and an expense ratio of 0.60%.


DIVO – Amplify CWP Enhanced Dividend Income ETF
DIVO is an income-focused covered call ETF from Amplify that launched in late 2016 and has roughly $2.6 billion in assets.


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DIVO aims to provide income from both dividends themselves and option premiums. To do so, the fund's managers actively select a handful of dividend stocks from the S&P 500 – selection criteria are basically dividend growth and strong earnings – and tactically writes short-term covered calls on some of them. In doing so, DIVO leaves more upside potential but has a lower distribution yield than other funds on this list.


This has worked out well historically with a greater total return than its broader counterpart XYLD since inception, but DIVO is also much less diversified with only 25 holdings. We also know active management tends to perform passive indexing over 10+ year periods.


DIVO has a distribution yield of 4.80% and a fee of 0.55%.


JEPI – JPMorgan Equity Premium Income ETF
JEPI is a comparatively newer ETF from J.P. Morgan that launched in mid-2020 and has quickly amassed nearly $19 billion in assets.


Earlier I said QYLD is the most popular covered call ETF. This is because technically JEPI is not really a true covered call ETF. It uses equity linked notes, or ELN's, that basically have covered call mechanics baked in. These ELN's introduce a layer of credit risk for investors.


JEPI is somewhat similar to DIVO in that it is actively selecting stocks from the S&P 500, this time based on value (e.g. price-to-earnings ratio), low volatility, and ESG, resulting in a basked of a little over 100 holdings.


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JEPI has a distribution yield of 11.66% and a fee of 0.35%, making it the most affordable fund on this list.


KNG – First Trust Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF
KNG is a covered call ETF from First Trust that launched in early 2018 and has a little over $500 million in assets.


KNG holds a famous group of stocks called the Dividend Aristocrats – U.S. stocks that have increased their dividend over the past 25 consecutive years – and equally weights them and then overlays a limited covered call strategy on them to generate income. I say limited because the fund simply aims for a yield about 3% above that of the S&P 500.


KNG has 67 holdings, a distribution yield of 4.07%, and a fee of 0.75%, making it the most expensive fund on this list.


PBP – Invesco S&P 500 BuyWrite ETF
Lastly, PBP is an older covered call ETF from Invesco that launched in 2007 and has about $100 million in assets.


If you don't care about yield per se but like the characteristics of a covered call strategy, PBP may be the fund for you because it simply reinvests all the dividends and option premiums from its holdings, giving it a relatively low yield of only 1.30%. Those holdings are just the straight S&P 500, via the same index as XYLD – the
CBOE S&P 500 BuyWrite Index.


As such, with a fee of 0.49%, you could think of PBP as basically a cheaper version of XYLD that reinvests dividends and option premiums instead of distributing them. Their total return performance has been nearly identical historically.


I think the PBP never attracted assets is because it launched right before the Global Financial Crisis of 2008 and then looked terrible during the market's recovery, as covered calls cap upside potential.


Covered Call ETFs Performance Compared
Since some of these covered call ETFs have substantially different methodologies, you're probably most interested in a performance comparison among them. Since JEPI launched in mid-2020, we can't go back too far if we include it, so first we'll look at a short backtest that includes it and then another one without it to look back a bit further.


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Here are the risk and total return metrics for QYLD, XYLD, RYLD, DIVO, JEPI, KNG, the S&P 500, and a traditional 60/40 portfolio for the period June 2020 through 2022. Because we're looking at total return, we can exclude PBP because its total return is virtually identical to XYLD. Also note this is the precise time period of an environment in which we'd expect covered call funds to beat the market – a gradual bear market.


Ticker CAGR St. Dev. Max Drawdown Sharpe
QYLD 2.19% 14.53% -22.74% 0.17
XYLD 8.21% 12.19% -18.25% 0.64
RYLD 11.36% 13.72% -18.18% 0.79
DIVO 15.07% 15.37% -13.10% 0.94
JEPI 12.51% 12.86% -12.99% 0.92
KNG 13.55% 17.28% -17.88% 0.78
SP500 10.97% 18.86% -23.95% 0.60
60/40 3.76% 13.05% -20.62% 0.29
Data Source: PortfolioVisualizer.com
Also note that large cap growth stocks suffered greatly over precisely this time period, illustrated by QYLD's abysmal performance. Small stocks also beat large stocks over this time period, which explains RYLD's outperformance of both XYLD and QYLD.


DIVO's tactical strategy seems to have paid off over the backtested period, even with just a handful of stocks. When we stop to think, this makes perfect sense, as Value crushed Growth in 2021 and 2022, and DIVO is specifically selecting Value stocks.


Now let's remove JEPI and RYLD to go back a bit further to April 2018, which is when KNG launched:


Ticker CAGR St. Dev. Max Drawdown Sharpe
QYLD 2.86% 14.45% -22.74% 0.18
XYLD 4.41% 14.98% -23.43% 0.28
DIVO 11.51% 15.69% -18.86% 0.69
KNG 9.42% 17.66% -23.52% 0.53
SP500 9.97% 18.87% -23.95% 0.53
60/40 6.30% 11.64% -20.62% 0.48
Data Source: PortfolioVisualizer.com
DIVO also performed comparatively best over this time period on both a general and risk adjusted basis. Does that make it the best covered call ETF? Impossible to say. 25 holdings makes me nervous, regardless of what these numbers say.


In the interest of full disclosure, it's also worth noting that these short backtests paint a somewhat unrealistically rosy picture for these covered call funds. If we go back to PBP's inception in 2007 and look through 2022, we can see a visualization of the shortcomings I mentioned at the top, mainly that covered calls are not an efficient way to de-risk a portfolio and they tend to hamper long term returns:


covered call etf long term performance
Source: PortfolioVisualizer.com
Conclusion – Are Covered Call ETFs a Good Investment?
So are covered call ETFs a good investment? Maybe, but probably not.


Remember what I said earlier. Covered call funds are only suitable for the short-term investor who consciously wants an option writing strategy to generate current income that they're using every month. Otherwise, they make little sense.


Prefer video? Watch it below. If not, keep scrolling to continue reading.


Even then, as I've noted elsewhere and as the backtests above show, there are more efficient, more effective ways to de-risk a portfolio, like bonds. This inefficiency also comes at a much greater cost, as covered call funds are typically pretty pricey.


Novice investors seem to have this idea that the “income” from these expensive buy-write funds are free money and that selling shares of a low-cost index fund like VTI to realize gains of an equal amount is somehow inferior to receiving a monthly distribution. Neither of these things is true.


This irrational preference of dividends as income is just a well-documented – and admittedly understandable – mental accounting fallacy. Removing that high yield, the capital appreciation component of some of these funds has actually been negative since inception, as is the case for QYLD:


qyld negative performance
QYLD without dividend reinvestment. Source: PortfolioVisualizer.com
Proponents seem to erroneously believe that covered call ETFs are somehow made “safe” by their selling options. This is provably false, as we easily showed earlier.


The promises and benefits touted by these funds and their supporters – such as greater Sharpe ratios – often don't hold water under the smallest amount of scrutiny, such as their objective inability to outperform the underlying index of their holdings even on a risk-adjusted basis, much less a better diversified portfolio across asset classes like a 60/40. Basically, in market downturns, a covered call fund will fall with the market by an amount precisely equal to the market's drawdown minus the income received from the option premium.


This doesn't even consider potential tax costs. You're taxed on any taxable distributions, regardless of whether or not you reinvest them. Thankfully, some of the distributions of covered call ETFs may be classified as a return of capital or ROC, meaning no taxes (until your cost basis is zero), and most of them have indeed been ROC in many years, but this hasn't always been the case, so that preferable tax treatment is by no means guaranteed. This was a big wake-up call for many QYLD investors in early 2022, when Global X announced that 100% of QYLD's distributions for 2021 would be classified as – and thus taxed as – ordinary income, not as ROC. Ouch.


In fairness, novice investors likely see the extremely attractive, high distribution yields of these funds and don't look much further, and they probably don't understand how covered calls work. The problem I hinted at earlier is that most new, young investors are investing for retirement, have a very long time horizon, and don't need current income, so any advisor worth their salt would conclude that covered call funds are unsuitable for them.


Don't succumb to mental accounting bias; the premium received doesn't mean much if the market crashes. At the end of the day, total return is what matters. Period. I suspect income investors who own these funds perhaps simply aren't being honest with themselves by selectively ignoring their long term total returns compared to a benchmark like the S&P 500 or 60/40 and instead are just focusing on that juicy monthly yield. Discussing and celebrating that yield, such as in dividend-focused communities on Reddit, usually just seem to be a clique of confirmation bias.


In my opinion, complex funds like these are usually just a great way for asset managers to extract more fees at the detriment of retail investors.


I'm a fan of simply selling shares as needed for any “income” needed, which should be mathematically preferable anyway if you don't actually need that income on a monthly basis, as it allows you to leave more money in the market longer. On this point, proponents of covered call funds may concede that they're not great for young investors, but they still like to claim that these products are a crucial component for retirees.


The story goes something like this: For the retiree, current income is used monthly for expenses and thus should be an important focus, so the high distribution yield from a covered call fund makes for a higher safe withdrawal rate because it allows you to avoid dipping into the principal as much, which is particularly useful during crashes and bear markets. This sounds nice and arguably even sensible, but upon empirical investigation, this argument doesn't hold much water either, at least over the past 15 years.


Using live fund data, here's a backtest for the period 2008-2022 for PBP, the covered call ETF from Invesco for the S&P 500 that we covered earlier, a 60/40 portfolio using PBP for the equities side, and a classic 60/40 portfolio using a starting balance of $1 million and monthly withdrawals of $5,000, adjusted for inflation:


covered call etfs backtest
Source: PortfolioVisualizer.com
After 15 years, final balances would be $186k, $320k, and $853k respectively. The safe withdrawal rates (SWR) of these portfolios for that period were 6.89%, 7.59%, and 9.09% respectively. Conveniently, this backtest includes the major drawdowns of 2008, 2018, and 2022, giving us a pretty good stress test.


Once again, thinking of yield as income separate from “principal,” while it may make you feel better, is just mental accounting with no magical benefits. Total return is what matters.


If one is set on using yield as income, you've also got other, cheaper, more efficient options like REITs, dividend stocks, junk bonds, etc. I designed a dividend portfolio for income investors here that may appeal to you.


Even if you hate bonds, we can construct a demonstrably superior strategy to QYLD, for example, with even the simplest, naive mix of 50% NASDAQ-100 and 50% T-bills, which are the risk-free asset.I've created that pie for M1 Finance here if you're interested. I wrote a comprehensive review of M1 and why it's great for income investors here.


To be fair, covered call funds certainly aren't the worst way I've seen to try to generate income. We'd expect buy-write strategies to outperform over brief periods of flat or mild bear markets when other assets like stocks and bonds are all declining, such as we saw for some months in the past few years. So some small allocation to a covered call fund may be warranted for the income investor or retiree.

Cita de nipapipas niná

Venga, tengo otra propuesta: ETF de covered calls. ETF con tickers como QYLD, XYLD, RYLD, DIVO, JEPI, KNG y PBP, por ejemplo. Ideales si el largo-largo plazo te la suda.


Más info en webs como esta (https://www.optimizedportfolio.com/covered-call-etfs/), de la que pego el texto a continuación porque no es pan:

Cita de depuniet

No entiendo de dividendos pero te lo upeo y te dejo la reflexión.


No entiendo está pregunta. Què es el mercado? No son empresas? Y viceversa?


Quieres decir que al repartir dividendo, como te dan esa parte del VL cae menos el propio VL? Eso sería como decir que si no invierto no pierdo

Por contra sería diferente, y dirías que acciones del nasdaq caen menos que un fondo del nasdaq? No creo

La segunda reflexión de la RF es otro tema. Los fondos de RF supuestamente tiene menos volatilidad pero eso puede que sea lo contrario luego en rentabilidad. En mi opinión no están todos los riesgos añadidos a esta forma de medir su riesgo. Tema diferente monetario, depósito, obligaciones

Cita de hetairoi

Te lo subo a ETF Clozs
JAAA
JBBB
CLOZ

Cita de nipapipas niná

Ostras, muy interesante. Desconocía el concepto completamente.


¿Sabes de algún broker que permita comprarlos?


Aún me tengo que informar, pero parece una respuesta aceptable a la pregunta del OP. Se llevaría un buen pico mensual, casi 3000 tras impuestos, sin casi revalorización del capital, pero a cambio de evitar casi del todo las caídas normales de la bolsa (no hablo de COVID etc, aunque en esa también se recuperó, poer ejemplo, JAAA).

Cita de hetairoi

Por opciones los puedes comprar en IBKR
Creo que tambien en Freedom24, pero no tiene buena prensa este broker

Cita de hetairoi

Te lo subo a ETF Clozs
JAAA
JBBB
CLOZ

Cita de Barabs

¿¿Eso que es?? Podrías resumir como funciona? Me suena a producto derivado con 90% de producir poquito, 10% de explotar e irse a cero, tipo las subprime.

Cree el hilo buscando eso, activos que vayan un poco a su bola, aunque renten menos a largo plazo. De momento monetarios, jepi y cartera permanente es lo que tenía en mente.


Respecto a los dividendos, los dividendos en sí me dan igual, son un proxy para empresa sana con beneficios estables. En una crisis, tesla debería caer mucho más que cocacola o mcdonalds. ¿Pero que cae menos, empresas de ese tipo, o 60sp/40bonos?

Cita de Barabs

Si, la web de JAAA le he echado un vistazo y me llama mucho la atención, pero no me cuadra nada. Dice riesgo si cambian los tipos, pero la grafica es prácticamente plana, casi no cae en 2022. Luego dice deuda muy segura , pero trocear hipotecas random y convertirlas en AAA me suena a exactamente lo que causó la crisis de 2008. Tienes más información de ese tipo de etf? Nunca los había escuchado.

Collateralized loan obligation: CLO vs: CDO: Unraveling the Differences


1. What are Collateralized Loan Obligations (CLOs) and Collateralized Debt Obligations (CDOs)?


Collateralized loan obligations and collateralized debt obligations are two types of structured finance instruments that pool together different kinds of debt and sell them to investors as securities. They are similar in some ways, but also have important differences that affect their risk and return profiles. In this section, we will explore the following aspects of CLOs and CDOs:


1. The types of debt they include: CLOs mainly consist of leveraged loans, which are loans to companies with low credit ratings or high debt levels. CDOs can include a wider range of debt, such as corporate bonds, mortgages, credit card receivables, and even other CLOs or CDOs. For example, a CDO that contains mortgages is called a collateralized mortgage obligation (CMO), and a CDO that contains other CDOs is called a CDO-squared.


2. The way they are structured: Both CLOs and CDOs are divided into different tranches, or slices, that have different levels of seniority and risk. The senior tranches are paid first from the cash flows of the underlying debt, and have the lowest risk and return. The junior tranches are paid last, and have the highest risk and return. The junior tranches also absorb the first losses if any of the underlying debt defaults. For example, if a CLO has four tranches: A, B, C, and D, with A being the most senior and D being the most junior, then the order of payment and loss allocation would be A > B > C > D.


3. The way they are managed: CLOs are actively managed by a collateral manager, who can buy and sell loans in the portfolio to improve the performance and diversification of the CLO. CDOs are typically passively managed, meaning that the portfolio is fixed at the time of issuance and does not change over time. However, some CDOs may have a reinvestment period, during which the collateral manager can replace defaulted or prepaid debt with new debt. For example, a CLO may have a reinvestment period of five years, during which the collateral manager can trade up to 20% of the portfolio per year. A CDO may have a reinvestment period of two years, during which the collateral manager can only replace debt that has been paid off or defaulted.




2. How are They Created and Managed?
Both CLOs and CDOs are complex financial instruments that involve pooling different types of debt and issuing securities backed by the underlying cash flows. However, they differ in several aspects, such as the composition of the debt, the risk profile, the management style, and the market dynamics. In this section, we will explore how CLOs and CDOs are created and managed, and what are the implications for investors and the financial system.


- Creation: CLOs and CDOs are created by a process called securitization, which involves transferring a portfolio of loans or other debt obligations to a special purpose vehicle (SPV), a legal entity that is separate from the originator of the debt. The SPV then issues securities, called tranches, that are backed by the cash flows from the debt portfolio. The tranches have different seniority levels, meaning that they have different claims on the cash flows and different exposure to losses. The most senior tranche has the highest priority and the lowest risk, while the most junior tranche has the lowest priority and the highest risk. The tranches are sold to investors who receive interest and principal payments from the SPV.


- Composition: CLOs and CDOs differ in the type of debt that they pool and securitize. CLOs mainly consist of leveraged loans, which are loans to companies with low credit ratings or high debt levels. Leveraged loans are typically floating-rate, meaning that their interest rate adjusts periodically based on a benchmark rate. CDOs, on the other hand, can include a variety of debt instruments, such as corporate bonds, mortgage-backed securities, asset-backed securities, or even other CDOs. CDOs can be classified into different categories based on the composition of their collateral, such as synthetic CDOs, which use credit default swaps to create exposure to the underlying debt, or bespoke CDOs, which are tailored to the specific needs of the investors.


- Management: CLOs and CDOs also differ in the way they are managed after they are issued. CLOs are actively managed by a collateral manager, who has the discretion to buy and sell loans in the portfolio, subject to certain constraints and tests. The collateral manager aims to optimize the performance of the CLO by selecting loans that have attractive yields, low default rates, and high recovery rates. CDOs, on the other hand, are usually passively managed, meaning that the portfolio remains fixed after the issuance, unless there is a credit event, such as a default or a downgrade, that triggers a substitution or a liquidation of the affected debt.


- Market dynamics: CLOs and CDOs have different market dynamics, influenced by factors such as supply and demand, regulation, and innovation. CLOs have been more resilient and stable than CDOs, especially during the global financial crisis of 2007-2009, when many CDOs suffered severe losses or collapsed due to the deterioration of the subprime mortgage market. CLOs have also benefited from the strong demand for leveraged loans, driven by the low interest rate environment and the search for yield by investors. CDOs, on the other hand, have faced more challenges and scrutiny, as regulators have imposed stricter rules and requirements on their issuance and operation, such as the risk retention rule, which requires the originator or the manager of the CDO to retain a portion of the credit risk. CDOs have also seen more innovation and experimentation, as new types of CDOs have emerged, such as CDO-squared, which are CDOs backed by other CDOs, or CDO-cubed, which are CDOs backed by CDO-squared.




3. Who Invests in Them and Why?
CLOs and CDOs are complex financial instruments that involve pooling and securitizing loans or other assets and selling them to investors as bonds with different levels of risk and return. These products have been widely used by banks, hedge funds, insurance companies, and other institutional investors to diversify their portfolios, generate income, and reduce capital requirements. However, they also pose significant challenges and dangers, especially in times of market stress or uncertainty. In this section, we will explore some of the benefits and risks of CLOs and CDOs, as well as the motivations and preferences of different types of investors who buy them.


Some of the benefits of CLOs and CDOs are:


- Diversification: By investing in a pool of loans or assets, rather than a single borrower or issuer, investors can reduce their exposure to idiosyncratic risks and benefit from the law of large numbers. For example, if one of the loans in a CLO defaults, the impact on the overall performance of the CLO is limited, as long as the default rate is within the expected range.


- Enhanced returns: CLOs and CDOs offer higher yields than comparable bonds with similar ratings, as they reflect the risk premium of the underlying loans or assets. For example, a CLO tranche rated BBB may pay a coupon of LIBOR + 300 basis points, while a corporate bond with the same rating may pay LIBOR + 200 basis points. This extra spread compensates investors for the complexity and illiquidity of CLOs and CDOs.


- Capital relief: CLOs and CDOs enable banks and other originators to transfer the credit risk of their loans or assets to investors, thereby freeing up capital and improving their regulatory ratios. For example, a bank that originates a $100 million loan portfolio may retain only the $10 million equity tranche of the CLO that securitizes the portfolio, while selling the remaining $90 million of senior and mezzanine tranches to investors. This way, the bank reduces its risk-weighted assets and increases its capital adequacy ratio.


Some of the risks of CLOs and CDOs are:


- Correlation risk: The assumption that the loans or assets in a CLO or CDO are independent and diversifiable may not hold in reality, as they may be affected by common factors or shocks that increase their correlation. For example, during the global financial crisis of 2007-2009, many CDOs that were backed by subprime mortgages suffered from widespread defaults and downgrades, as the housing market collapsed and triggered a systemic crisis. This resulted in massive losses for investors who held the lower-rated tranches of CDOs, as well as for the originators who retained the equity tranches or provided credit enhancements.


- Leverage risk: CLOs and CDOs are highly leveraged structures, as they use debt to finance the purchase of loans or assets. This magnifies the returns and losses of the equity tranche, which is the first to absorb any losses and the last to receive any payments. For example, a CLO that has a debt-to-equity ratio of 10:1 may generate a return on equity of 20% if the underlying loans pay an average interest rate of 8% and have no defaults. However, if the default rate of the loans increases to 10%, the return on equity may turn negative, as the equity tranche bears the entire loss of $10 million on a $100 million portfolio.


- Liquidity risk: CLOs and CDOs are illiquid and opaque products, as they are not traded on public exchanges and have limited price discovery and transparency. This makes it difficult for investors to value, sell, or hedge their positions, especially in times of market turmoil or stress. For example, during the COVID-19 pandemic of 2020, many CLOs and CDOs faced severe liquidity pressures and valuation challenges, as the credit quality and cash flows of the underlying loans or assets deteriorated and the demand and supply of the products dried up. This forced some investors to sell their holdings at fire-sale prices or to mark them down significantly, resulting in large losses and impairments.


Different types of investors have different preferences and objectives when investing in CLOs and CDOs, depending on their risk appetite, return expectations, and regulatory constraints. Some of the common types of investors are:


- Banks and insurance companies: These investors typically buy the senior and mezzanine tranches of CLOs and CDOs, as they offer relatively stable and attractive returns with low credit risk and capital requirements. They also benefit from the diversification and capital relief that CLOs and CDOs provide for their loan or asset portfolios. However, they may face regulatory and accounting challenges, such as basel III and solvency II, that limit their exposure or increase their capital charges for CLOs and CDOs.


- hedge funds and private equity firms: These investors usually target the equity and lower-rated tranches of CLOs and CDOs, as they offer high yields and leveraged returns with significant upside potential. They also have more flexibility and expertise to manage and trade CLOs and CDOs, as they are not subject to the same regulatory and reporting standards as banks and insurance companies. However, they also bear the highest risk and volatility, as they are exposed to the first losses and the last payments of CLOs and CDOs.


- Pension funds and endowments: These investors generally seek the higher-rated tranches of CLOs and CDOs, as they provide steady and predictable income streams with low default risk and duration risk. They also match their long-term liabilities and obligations with the long-term maturity and cash flows of CLOs and CDOs. However, they may face fiduciary and ethical issues, as they have to ensure that their investments are consistent with their social and environmental responsibilities and values.




4. Asset Quality, Diversification, Ratings, and Performance
Asset quality
Both CLOs and cdos are structured finance products that pool together various types of debt and issue securities backed by the underlying cash flows. However, there are significant differences between them in terms of asset quality, diversification, ratings, and performance. These differences have implications for the risk and return profiles of the investors who buy these securities. Let us examine these differences in more detail:


- Asset quality: CLOs typically invest in senior secured loans that have a first lien on the borrower's assets in case of default. These loans are usually rated below investment grade, but have a relatively low default rate and high recovery rate. CDOs, on the other hand, can invest in a wider range of debt instruments, such as corporate bonds, mortgages, consumer loans, and even other CDOs. These assets can have varying degrees of credit quality, from investment grade to distressed, and may have a higher default rate and lower recovery rate than senior secured loans.


- Diversification: CLOs are required to have a minimum level of diversification in their portfolios, which limits their exposure to any single borrower, industry, or geographic region. For example, a typical CLO may have a limit of 2% for the largest borrower, 15% for the largest industry, and 20% for the largest country. CDOs, however, may have less diversification and more concentration in their portfolios, depending on the manager's strategy and the market conditions. For example, a CDO that invests in mortgage-backed securities may have a high exposure to the US housing market, which can be affected by macroeconomic factors and regulatory changes.


- Ratings: CLOs and CDOs both issue securities with different seniority levels, from senior AAA-rated tranches to junior unrated tranches. The senior tranches have the highest priority in receiving the cash flows from the underlying assets, and are therefore less risky and offer lower returns. The junior tranches have the lowest priority and bear the first losses in case of defaults, and are therefore more risky and offer higher returns. The ratings of these securities are determined by the credit rating agencies, such as Moody's, S&P, and Fitch, based on their assessment of the quality and diversification of the underlying assets, the structure and alignment of interests of the issuer, and the historical and expected performance of the sector.


- Performance: CLOs and CDOs both have a finite life span, usually ranging from 5 to 10 years. During this period, they may experience changes in their performance due to various factors, such as changes in interest rates, credit spreads, default rates, prepayment rates, and market liquidity. CLOs tend to have more stable and predictable performance than CDOs, as they benefit from the seniority and security of the underlying loans, the diversification and covenants of the portfolio, and the active management and reinvestment of the issuer. CDOs tend to have more volatile and uncertain performance than CLOs, as they are exposed to the credit quality and correlation of the underlying assets, the concentration and leverage of the portfolio, and the passive management and amortization of the issuer.




5. How Did They Fare and What Lessons Were Learned?
The global financial crisis of 2007-2009 had a profound impact on the structured finance market, especially on collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs). These two types of securities share some similarities, such as being backed by pools of loans or bonds and having multiple tranches with different risk-return profiles. However, they also differ in several aspects, such as the nature and quality of the underlying assets, the degree of active management, and the exposure to market and credit risks. In this section, we will examine how CLOs and CDOs performed during and after the crisis, and what lessons were learned from their experience. Some of the main points are:


- CLOs generally fared better than CDOs during the crisis, as they had more diversified and higher-quality portfolios, lower leverage, and more flexibility to adjust to changing market conditions. CLOs also benefited from the recovery of the leveraged loan market, which improved the cash flows and valuations of their assets. CDOs, on the other hand, suffered from the collapse of the subprime mortgage market, which triggered massive defaults and downgrades of their assets. CDOs also faced more liquidity and refinancing risks, as they relied more on short-term funding and had more complex structures.


- The crisis exposed some of the flaws and limitations of the rating methodologies and models used by the credit rating agencies (CRAs) to assess the creditworthiness of CLOs and CDOs. The CRAs underestimated the correlation and contagion effects among the underlying assets, the impact of market illiquidity and volatility, and the potential conflicts of interest and misalignment of incentives among the various parties involved in the origination, structuring, and servicing of the securities. The CRAs also failed to provide timely and transparent information to the investors and regulators about the assumptions, data, and scenarios used in their analysis.


- The crisis also highlighted the importance of due diligence, risk management, and disclosure for the investors and regulators of CLOs and CDOs. The investors and regulators needed to have a better understanding of the characteristics, risks, and performance of the underlying assets, the structure and mechanics of the securities, and the roles and responsibilities of the managers, servicers, trustees, and other intermediaries. The investors and regulators also needed to have access to more frequent and granular data and reports on the cash flows, valuations, ratings, and triggers of the securities, as well as the market conditions and trends affecting them.


- The crisis led to some regulatory and market reforms aimed at improving the resilience, transparency, and accountability of the CLO and CDO markets. Some of the reforms included the introduction of risk retention rules, which required the originators or sponsors of the securities to retain a portion of the credit risk; the enhancement of the disclosure and reporting standards, which required the issuers and CRAs to provide more comprehensive and timely information to the investors and regulators; and the revision of the rating methodologies and models, which required the CRAs to incorporate more realistic and stress-tested assumptions and scenarios in their analysis.




6. What are the Rules and Standards that Govern Them?
One of the main differences between CLOs and CDOs is the degree of regulation and oversight that they are subject to. CLOs and CDOs are both complex financial instruments that involve pooling and securitizing loans or other assets, and issuing different tranches of securities with varying risk and return profiles. However, CLOs and CDOs have different legal structures, market participants, and regulatory frameworks that affect their performance and risk characteristics. Some of the key aspects of the regulatory and legal environment of CLOs and CDOs are:


- The dodd-Frank act and the Volcker Rule: The Dodd-Frank Act, enacted in 2010 in response to the global financial crisis, introduced several reforms to the financial system, including the Volcker Rule, which prohibits banks from engaging in proprietary trading and investing in certain types of hedge funds and private equity funds. The Volcker Rule also restricts banks from sponsoring or investing in CDOs backed by asset-backed securities (ABS), such as mortgage-backed securities (MBS) or collateralized debt obligations (CDOs). This rule effectively banned banks from the CDO market, which was one of the main sources of demand for CDOs before the crisis. However, the Volcker Rule does not apply to CLOs that are backed by loans, as loans are not considered ABS under the rule. Therefore, banks can still sponsor and invest in CLOs, which gives CLOs an advantage over CDOs in terms of market liquidity and demand.


- The Risk Retention Rule: Another reform introduced by the Dodd-Frank Act is the risk retention rule, which requires securitizers of ABS to retain at least 5% of the credit risk of the assets they securitize. The purpose of this rule is to align the interests of securitizers and investors, and to prevent securitizers from transferring all the risk to investors without bearing any consequences. The risk retention rule applies to both CLOs and CDOs, but with different implications. For CDOs, the rule means that the securitizer (usually a bank or a hedge fund) has to hold 5% of the equity tranche, which is the most risky and junior tranche of the CDO. This reduces the profitability and attractiveness of CDOs for securitizers, as they have to bear more risk and capital requirements. For CLOs, the rule means that the CLO manager (usually an asset management firm) has to hold 5% of the CLO, which can be either the equity tranche or a vertical slice of all the tranches. This increases the alignment of interests and incentives between the CLO manager and the investors, as the CLO manager has to invest its own capital and share the risk and return of the CLO. However, the risk retention rule also imposes some challenges and costs for CLO managers, such as raising capital, complying with reporting and disclosure requirements, and managing conflicts of interest.


- The basel III Capital requirements: The Basel III framework, adopted in 2010 by the Basel Committee on Banking Supervision, is a set of global standards for bank capital adequacy, liquidity, and leverage. The basel III framework aims to strengthen the resilience and stability of the banking system, and to reduce the systemic risk posed by banks. The Basel III framework affects both CLOs and CDOs, as it imposes higher capital requirements for banks that invest in these securities. The Basel III framework assigns different risk weights to different tranches of CLOs and CDOs, based on their credit ratings, seniority, and underlying assets. The higher the risk weight, the more capital the bank has to hold against the investment. For example, the risk weight for a AAA-rated senior tranche of a CLO backed by corporate loans is 20%, while the risk weight for a BBB-rated mezzanine tranche of a CDO backed by MBS is 1250%. This means that a bank that invests $100 in the CLO tranche has to hold $2.8 of capital, while a bank that invests $100 in the CDO tranche has to hold $140 of capital. The Basel III framework therefore affects the demand and pricing of CLOs and CDOs, as banks have to consider the trade-off between risk, return, and capital.




7. CLOs vsCDOs: A Summary and Comparison of the Main Points
After examining the definitions, features, risks, and benefits of collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs), we can draw some comparisons and contrasts between these two types of structured finance products. The main points to consider are:


- The underlying assets: CLOs are backed by corporate loans, while CDOs can be backed by various types of debt, such as mortgages, bonds, or even other CDOs. This means that CLOs have a more homogeneous and transparent pool of assets, while CDOs have a more heterogeneous and complex pool of assets. For example, a CLO may consist of 100 loans from different companies in different sectors, while a CDO may consist of 50 mortgage-backed securities, 25 corporate bonds, and 25 cdo-squared tranches.


- The credit quality: CLOs typically have a higher credit quality than CDOs, as they are mostly composed of senior secured loans that have a lower default risk and higher recovery rate than other types of debt. CDOs, on the other hand, often include subprime or distressed debt that have a higher default risk and lower recovery rate than senior secured loans. For example, a CLO may have an average rating of BBB, while a CDO may have an average rating of B.


- The tranche structure: CLOs and CDOs both have a tranche structure that divides the cash flows from the underlying assets into different slices with different risk-return profiles. However, CLOs have a more dynamic and flexible tranche structure than CDOs, as they can actively manage and trade their assets to optimize their performance and meet certain tests and covenants. CDOs, on the other hand, have a more static and rigid tranche structure, as they cannot change their assets once they are issued and have to rely on the original collateral quality and diversification. For example, a CLO may have 5 tranches: equity, mezzanine, junior, senior, and super senior, while a CDO may have 10 tranches: equity, 8 mezzanine, and super senior.


- The market conditions: CLOs and CDOs both respond to the changes in the market conditions, such as interest rates, credit spreads, default rates, and liquidity. However, CLOs tend to be more resilient and stable than CDOs, as they have a lower correlation with the broader market and a higher diversification across sectors and geographies. CDOs, on the other hand, tend to be more volatile and sensitive than CLOs, as they have a higher correlation with the broader market and a lower diversification across sectors and geographies. For example, during the global financial crisis of 2008-2009, CLOs performed better than CDOs, as they suffered less losses and downgrades and recovered faster and stronger.


CLOs and CDOs are both complex and sophisticated instruments that offer investors different opportunities and challenges. While they share some similarities, such as being backed by pools of debt and having a tranche structure, they also have many differences, such as the types, quality, and management of the underlying assets, and the impact of the market conditions. Therefore, investors should carefully evaluate the risks and rewards of each product before making their investment decisions.

Cita de hetairoi

El ETF JAAA es un fondo cotizado (ETF) gestionado por Janus Henderson, que invierte en valores de renta fija de alta calidad, específicamente en bonos de grado de inversión respaldados por activos (Asset-Backed Securities o ABS). Estos bonos están garantizados por activos como préstamos estudiantiles, préstamos para automóviles o tarjetas de crédito. En términos simples, este ETF presta dinero a través de bonos respaldados por activos, esperando recibir intereses por ello.
¿Cómo funciona?

1. Compra de bonos respaldados por activos: El ETF adquiere bonos que pagan intereses regularmente.
2. Diversificación: El fondo invierte en una amplia variedad de bonos para minimizar el riesgo asociado a un único tipo de activo.
3. Pago de rendimientos: Los intereses generados por los bonos se distribuyen a los inversores del ETF (como tú).

Por ser de "alta calidad" (grado de inversión), estos bonos tienen un riesgo bajo de impago.
Riesgos del JAAA

Aunque el JAAA es relativamente seguro, aquí algunos riesgos a considerar:

1. Riesgo de tasas de interés:
   • Cuando las tasas de interés suben, el valor de los bonos en el fondo puede bajar. Esto afecta negativamente el precio del ETF.
   • Si las tasas bajan, el precio del ETF puede subir.
2. Riesgo crediticio:
   • Aunque invierte en bonos de alta calidad, sigue existiendo un riesgo, aunque pequeño, de que los deudores no paguen.
3. Riesgo de liquidez:
   • En momentos de estrés financiero, algunos activos en los que invierte el ETF podrían ser difíciles de vender rápidamente sin pérdidas.
4. Riesgo de reinversión:
   • Si los bonos que posee el fondo vencen y las tasas de interés son bajas, podría tener que reinvertir en activos con menores rendimientos.

¿Cuándo sería favorable invertir en el JAAA?

1. Entornos de tasas de interés estables o decrecientes:
   • Si las tasas de interés están bajando o son estables, los bonos en los que invierte JAAA se vuelven más atractivos, lo que beneficia al ETF.
2. Mercados volátiles o inciertos:
   • Debido a su enfoque en activos de alta calidad, es una opción defensiva en comparación con inversiones más riesgosas como acciones.

¿Cuándo sería desfavorable?

1. Entornos de tasas de interés en alza:
   • Los precios de los bonos tienden a caer cuando las tasas de interés suben, lo que puede afectar el rendimiento del ETF.
2. Mercados en recuperación:
   • En momentos donde las acciones y activos más riesgosos están creciendo rápidamente, el JAAA podría ofrecer rendimientos relativamente bajos en comparación.

¿Es una buena opción para ti?

El JAAA podría ser adecuado si buscas:

• Seguridad y estabilidad.
• Ingresos pasivos mediante intereses.
• Diversificación en un portafolio más amplio.

Sin embargo, no esperes rendimientos altos como los de las acciones u otros activos de riesgo. Este ETF es más para proteger tu dinero y generar ingresos modestos.

Cita de HectorMann

Pero esto es un ETF americano, ¿hay versión UCITS para comprar y no tener que ir por opciones?
Y lluego ya estaría convencer a una persona mayor y con cierto patrimonio de meterse en eso...