Investors Shovel Money Into YieldMax Income ETFs
- MSTY and ULTY have pulled in billions as S&P 500 valuations soar.
- ULTY pulled in $2.2 billion over the past three months while gaining 30%.
- Experts caution that income strategies carry big fees and risks.
While stock valuations soar, investors are suddenly piling into exchange-traded funds that aim to generate a little something extra along the way: income.
YieldMax is among the beneficiaries of the movement into income ETFs, and its two largest exchange-traded funds—the $5.8 billion YieldMax MSTR Option Income Strategy ETF (MSTY) and the $2.5 billion YieldMax Ultra Option Income Strategy ETF (ULTY)—are hauling in billions.
MSTY, ULTY See Strong Inflows
MSTY uses derivatives to produce income based on the performance of Strategy Inc. (MSTR), one of the world’s biggest Bitcoin holders. It’s pulled in $3.3 billion in the past three months, while ULTY, which invests in a range of companies, has had net inflows of $2.2 billion.
The funds boast massive distribution rates, with MSTY offering just over 79% and ULTY paying out 86.3%, according to their YieldMax fund pages. The distribution rate takes the last distribution per share and divides it by the most recent net asset value.
YieldMax's 5 Biggest Funds
Ticker | Fund Name | Assets Under Management | Expense Ratio | Three-Month Total Return |
$5.8B | 0.99% | 4.8% | ||
$2.5B | 1.3% | 29.5% | ||
$1.9B | 1.27% | 49.1% | ||
$1.4B | 1.22% | 46.3% | ||
$1.1B | 1.04% | 11.9% |
Source: etf.com & FactSet
The success of MSTY has driven investors to ULTY, according to Michael Venuto, chief investment officer for Tidal Financial, the so-called white label issuer of the funds for YieldMax. MSTY, which uses a covered call strategy to provide income and capped gains based on MSTR performance, had around $1 billion in assets as the year began. It’s gained as Strategy has jumped 40% this year.
“People got really excited with MSTY and they said ‘let’s move into ULTY,’ which gave them some diversification,” he said in an interview. “With ULTY we can do any kind of option strategy—it’s doing a lot of things the hedge fund community does, in an ETF.”
Inflows Surge
Both funds were among the top 10 in inflows on July 30, and YieldMax has brought in $12.5 billion, Bloomberg Intelligence ETF Analyst Eric Balchunas wrote in an X post.
“Never saw that before ... A bit surprised but then again ppl freakin love income,” he wrote.
Still, experts caution that income funds can be risky. Investors give up some upside gains when investing in income ETFs, and the funds don’t protect against losses. They also carry hefty management fees, with MSTY charging 0.99% and ULTY charging 1.3%.
“Despite their names, these aren't safe income plays but rather covered call strategies on a risky single stock (in the case of MSTY) or a basket of risky stocks (in the case of ULTY),” etf.com Senior Analyst Sumit Roy said.
