Evolve launches European bank ETF with covered call strategy

An exchange-traded fund with European bank equity exposure began trading Tuesday, Evolve Funds Group Inc. announced.

Evolve’s European Banks Enhanced Yield ETF is meant for investors seeking increased yield from a covered call strategy, Evolve said Jan. 5 in its final ETF Facts posted to SEDAR.

The ETF began trading Jan. 11 on the Toronto Stock Exchange under the ticker symbol EBNK. Evolve describes the ETF as high risk.

At the moment, the European banking sector is “trading at steep discounts” as compared to before Covid, Evolve ETFs CEO Raj Lala said Tuesday in a release.

The new ETF seeks to replicate the performance of the Solactive European Bank Top 20 Equal Weight Index (Canadian dollar hedged) “while writing covered call options on up to 33% of the portfolio securities,” the Evolve release said.

The index is composed of the 20 largest issuers by market capitalization that have been classified as major and regional banks. The largest regional allocation (21.6%) is to U.K.-based firms. The fund is rebalanced quarterly.

“The level of covered call option writing may vary based on market volatility and other factors,” said Evolve, which has about $2 billion in assets under management.

The fund’s management fee is 0.60%.