A newcomer to the income ETF market is offering products with a taste of everything ranging from crypto to single stocks to thematics.

And that’s not all, said CEO Matthew Tuttle, whose firm is behind 21 new ETFs in registration. The funds would differ substantially from the popular option income products currently available that use covered calls for their income components. Instead, the new products would use put spreads and would not have caps on their upsides, Tuttle said.“I’m trading options all day every day for my personal account,” he said. “I don’t like covered calls. I don’t like them because you’re sacrificing your upside. And when you put them on a volatile [stock] name, you’re not really protecting much on the downside.”

Options Abound

The forthcoming Tuttle Capital Management funds would boost the number of derivative income ETFs on the market by more than 10%. Among 170 such ETFs operating today, there are more than $141 billion in assets, though about half of that is in just two popular products: the JPMorgan Equity Premium Income ETF (JEPI) and JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), data from Morningstar Direct show. The category took off in 2020 and 2022, when some investors showed a preference for the high-yielding income strategies in volatile markets.

“People were expecting that when the market became less volatile … investor interest would dry up — but that’s been bucking the trend,” said Lan Anh Tran, analyst on the passive strategies team at Morningstar. “It’s a very high yield that they are able to pay out, and I think that is pushing a lot of people into the space.”

Sales have only gone up, data from Morningstar Direct show:

• Derivative income ETFs brought in a total of $21 billion in 2022, nearly $28 billion in 2023 and over $35 billion in 2024.
• This year through July, net sales are higher than ever, at about $35.5 billion.

New Toys: It all started with a focus on index-based ETFs, though the category has recently veered into single-stock focused products, she said. For example, one of the biggest derivative income ETFs is the YieldMax MSTR Option Income Strategy ETF, a $4.8 billion fund focused on MicroStrategy. Depending on the stock, the options available may be limited for the more niche derivative income ETFs, especially compared with the array of options for indexes, and that has the potential to limit liquidity — something investors looking at the category should consider, Anh Tran said. And in general, the income feature works against the tax benefits of the ETF structure, and investors may be better off using them in a tax-preferred account like an IRA, she noted.

“It’s a shiny object,” Tuttle said of the trend in income-generating ETFs. “Investors have been conditioned that you want to invest for income. I don’t think that’s accurate. I think you want to invest so you have the most money possible.” Using puts rather than covered calls can have more upside for those shiny objects, he said. “If I’m going to write options, I’m going to write puts. And nobody really seemed to be thinking about puts. So might as well do it.”

They aren’t called emerging markets for nothing.

Emerging market equities are booming, and for investors, it raises a familiar question: Is this the time to double down on developing economies? The MSCI Emerging Markets Index, a compendium of stocks in 25 of the fastest-growing countries, is expected to grow 15% in the next year, and analysts predict a 10-year annualized return of 11% for emerging market stocks, according to Paul Arnold, global head of multi-asset research at Morningstar. Some noteworthy markets include Latin America, which had a 10-year return of 12.3%, led by Brazil, he added. China, which holds more than a quarter of the MSCI Emerging Markets Index, also rallied in 2024. But Arnold said caution is key.

“There is increasing geopolitical risk and anti-globalization sentiment that poses unique risks to EM forecasts,” Arnold said. “While the reward-for-risk is certainly attractive, it’s not a free lunch.”

What’s the Dollar Got to Do With It?

Part of the reason for recent rallies is the relative underperformance of the US dollar. The greenback has been sliding steadily since January. Over the past year, the US Dollar Index value has decreased by 3.56%, according to TradingEconomics, giving international investors more bang for their buck when investing abroad. Another factor driving performance has been local monetary policy decisions, as developing countries’ rate-cutting cycles often started sooner than their developed-market counterparts.

The Trump administration’s recent pressure on the Federal Reserve to lower interest rates has also strengthened the appeal of emerging markets, said Brent Coggins, chief investment officer at Triad Wealth Partners. “Generally, emerging market central banks tend to follow the Fed,” Coggins said. “Part of the reason the US dollar has depreciated since January is not so much because of Fed policy, but because of the administration.”

Some high-performing emerging markets ETFs include:

• The iShares Core MSCI Emerging Markets ETF (IEMG), which is up 20% year-to-date.
• Vanguard’s FTSE Emerging Markets ETF (VWO), which is up 17.46%.
• The SPDR Portfolio Emerging Markets ETF (SPEM), which is up 17.2% YTD.

Long-Term Tailwinds. Despite ongoing geopolitical conflict and potential risks, Coggins said the long-term outlook for emerging markets is promising because of continued dollar depreciation and growth rates in emerging markets that are generally above their developed counterparts. But they should never occupy more than a modest overweight because of expected retracement in global equity markets before the end of the year, he added. “We are currently in ‘watch-and-wait’ mode,” Coggins said.

That was quick: Raymond James’ asset manager recently brought on a new head for its ETF business, which has yet to launch but is expected to before the end of the year.

Raymond James Investment Management announced last week that it hired Johan Grahn, who helped build up Allianz Investment Management’s ETF product line. Grahn replaces Mo Sparks, whom the firm appointed last year to lead its expansion into ETFs but who left earlier this year for a role as chief product officer at Direxion. Raymond James Investment Management had announced its intentions for the ETF market last year, following up with SEC filings for four products in January of this year. Since then, the firm has delayed the effective date of the registrations for its ETFs, the latest of which would go live Sept. 12.

“While it is later to enter the ETF market, we have seen room for new entrants to have success with active ETFs,” said Todd Rosenbluth, head of research and editorial at TMX VettaFi. “Capital Group is a great example from a few years ago, but firms like Cohen & Steers, Lazard and MFS are more recent ones.”

Ready, Set, Distribute

The forthcoming actively managed funds are the RJ Chartwell Premium Income, RJ Eagle Municipal Income, RJ Eagle Vertical Income and RJ Eagle GCM Dividend Select Income ETFs. Those products are different from the strategies Raymond James’ subsidiaries have in the mutual fund format. It’s hardly the first brokerage to have affiliates that manage ETFs and mutual funds, but having an army of advisors could obviously help distribution.

For example:

• Morgan Stanley’s affiliates Eaton Vance, Calvert and Parametric provide a wide range of funds that are used by advisors generally, not limited to those at Morgan Stanley, Rosenbluth noted.
• Ameriprise Financial has its Columbia Threadneedle, which includes more than $650 billion in assets under management.
• Wells Fargo’s former unit Wells Fargo Asset Management and its affiliates were sold in 2021 to private equity firms and rebranded as Allspring Global Investments, while Wells Fargo retained a minority stake.

More in Store? Raymond James Investment Management is stepping into the ETF game as the market is being flooded with a record number of new products, many of which are flashy, niche funds, such as leveraged single-stock ETFs. The number may only grow after the Securities and Exchange Commission approves dual share classes, which would let mutual fund companies extend strategies in ETF form.