Hamilton Enhanced Covered Call ETF HYLD – Too Good to Be True?

WRITTEN BY Dan Kent | UPDATED ON: May 29, 2024

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ETFs offer investors an opportunity to diversify their portfolios without the complexity of managing individual stocks or bonds.

The Hamilton Enhanced Multi-Sector Covered Call ETF, or HYLD, provides a unique approach to income generation. 

Canadian investors seeking to bolster their income streams may find HYLD, and Hamilton ETFs in general, a compelling addition to their portfolios, particularly within accounts like the TFSA or RRSP where dividend income benefits from favourable tax treatment.

But is this fund really worth it, or is it just another high-fee, low-return option for long-term investors?

Let's dig into what this fund does, how it produces the yields it does, and whether or not it would be a solid addition to your portfolio today.

Overview of the Hamilton Enhanced U.S. Covered Call ETF (TSE)

The Hamilton Enhanced U.S. Covered Call ETF, also known by its ticker symbol HYLD, utilizes a combination of covered call funds to give an investor exposure to blue-chip US equities all while providing similar volatility to the S&P 500. 

In addition to this, the fund utilizes leverage. But we'll get to that a bit later on.

Fees and expenses

HYLD doesn't actually charge a management fee itself. Instead, it relies on the underlying holdings of the fund to generate revenue for the manager. This is because all of the funds inside HYLD are Hamilton's own funds, at least at this point in time.

So, instead of double dipping, the inflows to HYLD ultimately increase the AUM of the underlying holdings, which therefore increases fee revenue for Hamilton.

Make no mistake, there is a fee here, and it's high; you just aren't paying it directly to own HYLD.

Top holdings

The top holdings of HYLD consist of a variety of covered call funds operated by Hamilton itself.

  • Hamilton U.S. Equity Yield Maximizer ETF (TSE:SMAX)
  • Hamilton Technology Yield Maximizer ETF (TSE:QMAX)
  • Hamilton Healthcare Yield Maximizer ETF (TSE:LMAX)
  • Hamilton U.S. Financials Yield Maximizer ETF (TSE:FMAX)
  • Hamilton Gold Producer Yield Maximizer ETF (TSE:AMAX)
  • Hamilton Energy Yield Maximizer ETF (TSE:EMAX)
  • Hamilton U.S. Bond Yield Maximizer ETF (TSE:HBND)

In terms of total allocations, the fund has the bulk of its portfolio (65%+) inside SMAX and over 90% of the total portfolio inside SMAX, QMAX, and LMAX.

It also has some fixed-income exposure with its US Bond Yield Maximizer ETF, but this is a very small portion of the fund.

In the past, this fund has held US options like JEPI, JEPQ, XYLD, RYLD, and QYLD. If this ever happens again, I'd imagine the fund has to start charging a management fee again because these are not Hamilton funds.

But, as of the last time I checked the fund page, these were the holdings. However, with this being an actively managed fund, it's very important you check when you're interested.

Assets under management

Despite only starting in early 2022, HYLD has grown to nearly $500M in AUM at the time of writing. Considering the vast majority of 2022 was a pretty harsh bear market, it's impressive to see that assets continued to rise despite falling markets. People really are hooked on high-income funds.

This is likely due to the fact that investors are told the fund will perform a little better during bear markets because of the heavily covered call strategy it deploys. It also offers seemingly lower volatility because of its high distributions.


One of the pivotal features of HYLD is its ability to pay very high monthly distributions, which can be a compelling factor for investors who prioritize steady income and want a monthly income ETF.

The fund has a current annualized yield of over 11%, and it does this by combining the underlying covered call holdings it has with 25% leverage.

The important thing to understand is the overall makeup of the distribution for tax purposes. Remember, a distribution is not a dividend. Instead, it is made up of a wide variety of forms of investment income, including foreign income, eligible dividends, capital gains, return of capital, or even interest income.

I won't speak much about HYLD's distribution makeup in this article as it will vary significantly from year to year and even fromdistribution to distribution.

How does the Hamilton Enhanced U.S. Covered Call ETF work?

The Hamilton Enhanced U.S. Covered Call ETF (HYLD) operates with a straightforward approach aiming to provide higher monthly income and the potential for long-term capital appreciation. 

This is achieved by employing a covered call strategy on U.S. equity ETFs with modest leverage.

Overall strategy

HYLD focuses on holding a portfolio of its own U.S. equity ETFs. Those underlying ETFs write covered calls primarily on US-based holdings. The fund collects option premiums by selling call options, which can provide higher income than just holding the underlying stocks.

This strategy certainly has its uses. However, it will cap the upside potential if the stocks' prices rise above the call options' strike price. The fund will be forced to liquidate those holdings at a lower price than market value or offset the call option, which comes at a cost.

This is generally why you will see these funds struggle to keep up with major indexes. They tend to perform better in bear markets and flat markets but underperform during bull markets.

Considering the markets are in a bull situation much more than a bear, it's safe to assume you will struggle to keep up with a major benchmark index like the S&P 500.

Its use of leverage

HYLD uses 25% leverage to amplify returns and pay out a higher distribution. The use of leverage can amplify gains but also increase potential losses and volatility compared to a non-leveraged investment.

The theory here, at least for most long-term leveraged holds, is much the same as I explained above. Stocks, particularly blue-chip US equities, are more often than not accelerating in price, and for this reason, a leveraged investment can make sense. However, that doesn't mean it isn't without risk. 

Because drawdowns in price require a larger increase in price to get back to your original investment, the leveraged component to the downside is more detrimental than its benefits to the upside in isolated scenarios, especially in large crash-like scenarios.

What I mean by this is if a stock falls 50%, you don't need a 50% gain to get your money back; you need a 100% gain.

Asset allocation

The fund's asset allocation strategically focuses on the U.S. market, primarily via a diversified selection of sector-based covered call ETFs. 


Through its investment in multiple covered call ETFs, the fund offers a diversified portfolio across different sectors of the S&P 500. 


The fund is actively managed, and for this reason, it can vary in terms of underlying holdings and investment objectives. It's important to check the fund's website as it will publish the most accurate version of its current holdings.

Who is HYLD for?

As you'll see in my overall opinion on this fund, I struggle to find this fund well suited for any portfolio. However, if you are absolutely dead set on generating more income, here is how it could be valuable.

Those who want more income

Investors seeking to enhance their income stream may find HYLD an appealing option due to its attractive monthly income. This ETF is tailored for those who are particularly interested in the income-generating aspect of their investments, relying on consistent distribution payouts. 

HYLD has a reputation for offering a relatively high yield, making it a potential fit for income-focused portfolios.

Those who aren't seeking total return

HYLD may not be ideal for investors whose primary goal is total return, which includes both income and capital appreciation. 

The focus of this ETF is rather on yield and dividend distributions. Because its main strategy is to generate this by writing covered calls, or at least that's what the underlying holdings of the fund do, this tends to cap potential upside.

For this reason, when stocks are in a bull market, HYLD will tend to lag the US markets.

How has HYLD performed?

HYLD's performance is going to be quite opinionated. This is because some people who own the fund do not care about its underlying performance relative to a benchmark. However, to take a completely objective approach to this review, I am going to compare it to some benchmarks.

An additional caveat as well. The fund has started to perform better since it ditched a lot of the poor covered call funds like QYLD, XYLD, and RYLD. It will be interesting to see where it goes from here now that it has started to hold its own underlying funds.

In terms of the S&P 500, HYLD has lagged by a wide margin at the time of writing. In fact, since its early 2022 inception, the S&P 500 is up over 15% while HYLD is breakeven if you had reinvested the dividends.

The S&P 500 may be a bit too unfair of a benchmark to some, considering this fund is income-focused. Which, I do tend to agree. If we utilize two other income-based funds like the Vanguard High Dividend Yield ETF (VYM) and the Schwab US Dividend Equity ETF (SCHD), the performance still lags, but it does get a bit better.

When we compare it to other covered call income funds in the United States, like the JPMorgan Equity Premium Income ETF (JEPI), it's underperformed by quite a wide margin, too.

Most of the returns I've calculated also consider the fact you have had to reinvest the dividends to achieve them as well, meaning you wouldn't be benefitting from the distribution income of HYLD.

Overall, if I'm being brutally honest, since this fund's inception, its returns have been relatively lacklustre. It will be interesting to see what they do in the future.

What are some alternatives to HYLD?

Some viable alternatives to HYLD, particularly for those who are interested in income, could be traditional dividend-focused, high-yielding ETFs. Here in Canada, we have multiple, of which I speak about here.

You could also search for more Hamilton products, as they do have a strong suite of ETFs. For example, I know it's a much more niche ETF with no exposure to the United States, but I'm a fan of HCAL, the Canadian Bank ETF Hamilton has that deploys leverage to amplify returns.

My overall opinion on HYLD

Thus far, HYLD has failed to impress me. It's important to understand that yield does not equal total return, and this fund has struggled to keep up with any major index and even other income-based funds.

Keep in mind that most of this performance is also adding in the fact you need to reinvest the dividends. If you are utilizing the dividends for cash flow reasons, your returns look worse.

Hamilton has a strong suite of ETFs, and this is certainly nothing against the fund manager. Its equal-weight banking ETF is one of the best in the business and has the lowest fee, and some of its leveraged ETFs provide Canadians with a very easy way to take advantage of leverage if they want.

I'm just not really a huge fan of this particular fund, period.