German-based index provider Solactive writes that with interest rates expected to rise in 2022, banks could increase their profit margins, which is leading investors to keep an eye on the sector as a strategy for their portfolio.
Within this framework, Evolve Funds Group Inc. launched an ETF based on a Solactive index designed for investors who seek increased yield from a covered call strategy.
The new Evolve European Banks Enhanced Yield ETF pursues to replicate, to the extent reasonably possible before fees and expenses, the performance of the Solactive European Bank Top 20 Equal Weight Index Canadian Dollar Hedged while writing covered call options on up to 33 per cent of the portfolio securities, at the discretion of the manager. The level of covered call option writing may vary based on market volatility and other factors.
The Solactive index tracks the performance of major and regional banks, and its starting point of the index is the GBS Index Universe of the Solactive GBS Developed Markets Europe All Cap Index PR.
The ETF began trading on the Toronto Stock Exchange under the ticker symbol EBNK.
Timo Pfeiffer, Chief Markets Officer at Solactive, says: “We are thrilled to partner with Evolve for a product featuring banking, as the sector has been showing great potential of growth in the current environment with expected higher rates. We cannot wait to provide them more indices for future products going forward.”
Raj Lala, President and CEO at Evolve ETFs, says: “European banks were one of the top performing sectors in Europe last year and posted their best returns since 2009. The sector is currently trading at steep discounts relative to pre-Covid levels and other regions like the US. Improving economic growth, higher earnings expectations, and lifted dividend restrictions have continued to attract assets to the sector in early 2022. Given current valuations, European banks may offer investors diversification benefits and potentially more upside than North-American counterparts.