Nuveen Investments will launch a second closed-end exchange-traded fund that uses an equity index option strategy supported by a portfolio of common stock and hedged with options. The company launched its first, the Nuveen Equity Premium Income Fund (JPZ), last October.
"We believe investors are searching today for risk-managed, equity-based strategies that have the potential to generate high levels of consistent cash flow and provide some appreciation over time," says Bill Adams, executive vice president at Nuveen. "This fund will likely appeal to traditional fixed-income investors concerned with the potential impact of higher rates on bond strategies and to equity investors looking for attractive, tax-advantaged dividend income with reduced volatility and the potential for more stable returns."
The new offering, the Nuveen Equity Premium Opportunity Fund, will track both the S&P 500 and the Nasdaq 100. The target blend will be three-quarters S&P 500 and one-quarter Nasdaq 100. The portfolio will attempt to yield greater than the weighted average yield of those indexes by selling index call options. Downside risk will be hedged through the purchase of index puts.