Harvest Portfolios has launched a new ETF providing high-income exposure to Canadian equities.

Michael Kovacs, President and CEO of Harvest Portfolios.

The Harvest Canadian Equity Income Leaders ETF (HLIF CN) has been listed on Toronto Stock Exchange with a management fee of 0.65%.

According to Harvest, the fund may serve as a core diversified income solution as it has been designed to provide monthly cash distributions, the opportunity for capital appreciation, and lower volatility compared to the broad Canadian equity market.

The ETF screens a universe of large and mid-cap Canadian companies for firms with attractive dividends and a history of maintaining or increasing their payments. From this screened universe, the fund selects and equally weights the 30 largest companies.

Harvest also utilizes an actively managed options overlay that seeks to further boost the ETF’s income profile while also reducing portfolio volatility. The options sleeve consists of covered calls on up to 33% of the value of the ETF’s assets.

Covered call strategies involve holding a long position in an asset and selling or “writing” call options on that same asset in an attempt to generate more income (the additional income from option premium) than the asset would otherwise provide on its own from dividends or other distributions.

Historically, during bear markets, range-bound markets, and modest bull markets, covered call strategies have generally outperformed their underlying securities. However, during strong bull markets, when the underlying securities may frequently rise through their strike prices, covered call strategies historically have tended to lag.

Commenting on the ETF’s launch, Michael Kovacs, President and CEO of Harvest Portfolios, said: “HLIF adds a vital Canadian component to our line-up of equity income ETFs. HLIF offers a portfolio of large-cap equally weighted dividend-paying Canadian equities combined with our proven option writing strategy. It aims to deliver attractive steady monthly income initially targeted at 7% annually that many Canadian investors require in the current interest rate environment.”