Nuveen Investments plans to launch a new closed-end exchange-traded fund this month that will invest in call and put options in order to enhance performance and hedge against downside risk. It will be called the Nuveen Equity Premium Advantage Fund.
"We believe this new fund may offer traditional fixed-income investors as well as equity investors a risk-managed equity-based strategy with the potential to generate high levels of consistent cash flow and to provide some appreciation over time," said Bill Adams, executive vice president at Chicago-based Nuveen.
Nuveen Asset Management, which will determine the overall investment strategy, will manage the fund; but portfolio managers from Gateway Investment Advisers will manage the index option strategy and equity portfolio.
The fund will invest in an equity portfolio and then sell call options to enhance dividends and buy put options to hedge against losses on the S&P 500 and Nasdaq-100 indexes. The equity portfolio will replicate the weighted average price movements of the two indexes, initially starting with a 50/50 blend but shifting in time if demanded by changes in the index.