The VistaShares Target 15 Berkshire Select Income ETF (OMAH) is an exchange-traded fund designed to mirror the top holdings of Berkshire Hathaway, with additional direct exposure to BRK.B shares. This fund aims to boost income through a strategy of writing covered calls on some of its underlying assets, resulting in an attractive distribution yield of 14.3%. While its past performance has been noteworthy, OMAH is a relatively new fund that carries a 0.95% expense ratio and presents inherent limitations in its upside potential.
Details on the VistaShares Target 15 Berkshire Select Income ETF (OMAH)
The VistaShares Target 15 Berkshire Select Income ETF (OMAH) is an actively managed fund that strategically invests in Berkshire Hathaway (BRK.B) and a selection of its most substantial equity holdings. This innovative ETF employs a covered call strategy, selling call options on a portion of its equity portfolio to generate additional income. This approach aims to enhance the fund's yield, making it particularly appealing to income-focused investors. However, a key trade-off of this strategy is a cap on potential capital appreciation, as the sold call options limit the upside gains if the underlying stocks experience significant price increases.
OMAH's investment objective is to provide current income and capital appreciation, albeit with an emphasis on income. The fund's portfolio is structured to reflect Warren Buffett's long-term investment philosophy, focusing on high-quality companies with strong fundamentals. By combining direct exposure to Berkshire Hathaway with its top equity positions, OMAH offers investors a diversified way to access the value-oriented approach championed by Buffett.
Despite its compelling yield, investors should be aware of OMAH's operational aspects. The fund carries a relatively high expense ratio of 0.95%, which can impact overall returns over time. Furthermore, as a newer fund, OMAH has a limited track record, making it essential for prospective investors to conduct thorough due diligence and consider their investment horizons and risk tolerance. The covered call strategy, while providing consistent income, may not suit those seeking aggressive growth and full participation in market rallies.
My Perspective on the OMAH ETF
The VistaShares Target 15 Berkshire Select Income ETF (OMAH) presents an intriguing opportunity for income-seeking investors, particularly those who admire Warren Buffett's investment philosophy. The substantial 14.3% distribution yield, bolstered by the covered call strategy, is undeniably attractive in the current market environment. For retirees or those prioritizing regular cash flow, OMAH could be a valuable addition to a diversified portfolio. Its replication of Berkshire Hathaway's top holdings offers a degree of stability and exposure to established, high-quality businesses.
However, I believe it's crucial for investors to fully understand the implications of the covered call strategy. While it generates income, it inherently limits the fund's upside potential. In strong bull markets, OMAH might lag behind a traditional equity fund invested in the same underlying assets, as the sold call options would cap gains. This trade-off between income and growth needs to align with an investor's overall financial goals and risk profile. Additionally, the 0.95% expense ratio is on the higher side for an ETF, and its long-term impact on net returns should not be overlooked.
As a relatively young fund, OMAH lacks the extensive performance history of more seasoned ETFs. While its initial performance may be promising, sustained success over various market cycles remains to be seen. I would advise a cautious approach, perhaps allocating a smaller portion of one's portfolio to OMAH initially, and closely monitoring its performance and consistency of distributions. For those comfortable with the income-growth trade-off and a higher expense ratio, OMAH could be a strategic tool, but a clear understanding of its mechanics and limitations is paramount before investing.
