Boosting Income from Shares:
BetaShares Equity Yield Maximiser Fund (YMAX)
Disclaimer
The information contained in this document is general information only and
does not constitute personal financial advice. It does not take into account
any person’s financial objectives, situation or needs. It has been prepared
with all reasonable care by BetaShares Capital Limited (ABN 78 139 566
868, Australian Financial Services Licence No. 341181) (“BetaShares”). The
information is provided for information purposes only and is not a
recommendation to buy units or adopt any particular strategy. Performance
and statistical results noted are unaudited. Past performance is not
indicative of future performance. Investments in BetaShares Funds are
subject to investment risk and investors may not get back the full amount
originally invested. Any person wishing to invest in BetaShares Funds
should obtain a copy of the relevant PDS from www.betashares.com.au
and obtain financial advice in light of their individual circumstances.
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Necessity is the mother of innovation
 Investors need more income and less volatility as they age
 Interest rates have been declining and are at historic lows
 Recent market events have shown how volatile equities can
be
 Investors are finding it difficult to rely upon traditional
exposure to cash, bonds or equities to deliver adequate
income with reasonable volatility
 A different approach is available
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Equity Income Strategies – a Conservative Approach to
Equity Investing
A solution: enhance yields from shares by using options
 Greater yield than dividends alone in most market
conditions
 Retain franking credits
 The opportunity for some capital appreciation
 Reduced volatility
 Downside risk management
= BetaShares “YMAX”
How can an investor earn higher income from shares?
• Additional income comes from selling away some of the upside
potential
• This additional income can be generated using options
• Strategy involves buying a share and simultaneously selling, or
“writing”, call options
• The investor is selling to the buyer of the option, for a premium, the
right to buy the relevant share
• Option “premiums” provide an additional source of income to the
investor
• In addition, option premium earned will partially hedge against any
decline in the price of the relevant shares
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BetaShares Australian Top 20 Equity Yield Maximiser
Fund (managed fund)
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Equity Yield Maximiser Fund offers competitive levels of
income combined with reduced volatility
Sources of income in BetaShares Equity Yield Maximiser Fund
Dividends on passive
stock portfolio
Franking credits on Premium on call options
passive stock portfolio
sold
YMAX Total Income
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Example: Equity Income Strategy outperforming in a
bear market
July 2007 – March 2009
120
ASX/University of Sydney “Delta” Strategy(1)
S&P/ASX 20 Index
110
100
90
-12%
80
70
-37%
60
50
40
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Source: Bloomberg, ASX (1) ASX Market Insights “An Encyclopedia of Australian Buy-Write Returns (August 2012). Data from the ASX study is a general illustration of how various
equity income (buy write) strategies have performed in different market conditions. The BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) will use an equity
income strategy that combines elements from the different buy-write strategies described and evaluated in the ASX research, along with certain modifications that seek to optimise the
strategy. As a result the strategy of the BetaShares Fund is not identical to that described in the ASX research, and the performance described in the ASX research is not indicative of the
future performance of the Fund.
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Example: Equity Income Strategy outperforming in a
modest bull market
January 2009 – January 2011
150
ASX/University of Sydney “Delta” Strategy(1)
S&P/ASX 20 Index
40%
140
27 %
130
120
110
100
90
80
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Source: Bloomberg, ASX (1) ASX Market Insights “An Encyclopedia of Australian Buy-Write Returns (August 2012). Data from the ASX study is a general illustration of how various
equity income (buy write) strategies have performed in different market conditions. The BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) will use an equity
income strategy combines elements from the different buy-write strategies described and evaluated in the ASX research, along with certain modifications that seek to optimise the
strategy. As a result the strategy of the BetaShares Fund is not identical to that described in the ASX research, and the performance described in the ASX research is not indicative of the
future performance of the Fund.
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Example: Equity Income Strategy outperforming in a
range bound market
October 2009 – January 2011
115
ASX/University of Sydney “Delta” Strategy(1)
110
S&P/ASX 20 Index
9%
105
100
-1%
95
90
85
80
75
70
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Source: Bloomberg, ASX (1) ASX Market Insights “An Encyclopedia of Australian Buy-Write Returns (August 2012”). Data from the ASX study is a general illustration of how various
equity income (buy write) strategies have performed in different market conditions. The BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) will use an equity
income strategy that combines elements from the different buy-write strategies described and evaluated in the ASX research, along with certain modifications that seek to optimise the
strategy. As a result the strategy of the BetaShares Fund is not identical to that described in the ASX research, and the performance described in the ASX research is not indicative of the
future performance of the Fund.
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Example: Equity Income Strategy lagging in a strong
bull market
March 2009 – March 2010
160
ASX/University of Sydney “Delta” Equity Income Strategy(1)
S&P/ASX 20 Index
150
50%
140
39%
130
120
110
100
90
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Source: Bloomberg, ASX (1) ASX Market Insights “An Encyclopedia of Australian Buy-Write Returns (August 2012). Data from the ASX study is a general illustration of how various
equity income (buy write) strategies have performed in different market conditions. The BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) will use an equity
income strategy that combines elements from the different buy-write strategies described and evaluated in the ASX research, along with certain modifications that seek to optimise the
strategy. As a result the strategy of the BetaShares Fund is not identical to that described in the ASX research, and the performance described in the ASX research is not indicative of the
future performance of the Fund.
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YMAX – Underlying portfolio
S&P/ASX 20 Index Constituents – Yield & Franking 2012 (as at November 2012)
Share
2012 Yield + Franking
Share
2012 Yield + Franking
AMP
5.9% (50% franked)
QBE
6.0% (15% franked)
ANZ
6.1% (100% franked)
Rio Tinto
2.7% (100% franked)
BHP
3.2% (100% franked)
Santos
2.8% (100% franked)
Brambles
3.7% (30% franked)
Suncorp
4.3% (100% franked)
CBA
5.7% (100% franked)
Telstra
6.8% (100% franked)
CSL
1.7% (0% franked)
Wesfarmers
4.9% (100% franked)
Macquarie Bank
4.9% (0% franked)
Westfield
4.7% (0% franked)
NAB
7.8% (100% franked)
Westpac
6.8% (100% franked)
Newcrest
1.4% (0% franked)
Woodside
3.4% (100% franked)
Origin
5.1% (100% franked)
Woolworths
4.5% (100% franked)
Source: IRESS. Past Performance is not an indicator of future performance. Shows performance of underlying index constituents. YMAX inception date
22 November 2012
Research has shown that equity income strategies
using options may outperform
Summary results from ASX Buy-Write Study – April 2005 – December 2011(1)
(1) ASX Market Insights “An Encyclopedia of Australian Buy-Write Returns (August 2012”). Data from the ASX study is a general illustration of how various equity income (buy write)
strategies have performed in different market conditions. The BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) will use an equity income strategy that
combines elements from different buy-write strategies described and evaluated in the ASX research, along with certain modifications that seek to optimise the strategy. As a result the
strategy of the BetaShares Fund is not identical to that described in the ASX research, and the performance described in the ASX research is not indicative of the future performance of
the Fund.
Comparison of popular income generating investments
BETASHARES
EQUITY YIELD
MAXIMISER
FUND
TERM DEPOSITS
INCOMEGENERATING
STOCKS
(TLS/Financials)
BONDS
MANAGED
FUNDS
COMPARATIVE
YIELD
HIGH –
Dividends +
Franking +
Option
Premium
LOW – tied to
cash rate
MEDIUM –
Dividends +
Franking only
MEDIUM
VARIABLE
LIQUIDITY
HIGH –
intraday
liquidity
LOW – liquidity
at maturity
HIGH
HIGH
VARIABLE
ACCESSIBILITY
SIMPLE –
purchased
like a share
SIMPLE
SIMPLE
DOCUMENT
INTENSIVE
DOCUMENT
INTENSIVE
VOLATILITY
HIGH MEDIUM
strategy has
potential to
reduce
volatility
LOW
HIGH
HIGH-MEDIUM
VARIABLE
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YMAX in a model portfolio
Illustrative Model Portfolio using ETPs– Defensive bias
ASSET CLASS
% ALLOCATION
Domestic Equities
Income
30%
BetaShares Equity Yield Maximiser Fund
YMAX
International
15%
US
US Large Cap ETF
Global
Global Developed Markets ETF
Emerging Mkts
Emerging Markets ETF
Fixed Income
Bonds
25%
Diversified Bond Index ETF
Alternatives
10%
Precious Metals
Gold Bullion ETF – Currency Hedged
QAU
Commodities
Agriculture ETF – Currency Hedged
QAG
Cash
Australian Cash
20%
BetaShares Australian High Interest Cash ETF
Source: BetaShares. Illustrative only. Not a recommendation to adopt any particular investment strategy. Before
making an investment decision, always consider the relevant PDS, your particular circumstances and obtain
financial advice
AAA
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FOR MORE INFORMATION
Website
Visit www.betashares.com.au
BetaShares Sales & Distribution Contact
Tony Rumble PhD
Head of Portfolio Construction
[email protected]
1300 487 577 (within Australia)
+61 2 9290 6888 (outside Australia)
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