HEMI generates income by selling call options on equity holdings while maintaining upside participation through a partial overlay approach. This strategy targets premium income of 6-8% annually while keeping roughly half the portfolio's upside potential intact.
How It Works
The fund holds a diversified equity portfolio and writes call options on approximately 50% of holdings, typically at 2-5% out-of-the-money with 30-45 day expirations. Hartford actively manages strike selection and roll timing based on volatility conditions and market outlook. The partial overlay differentiates this from typical buy-write strategies that cap 100% of upside.
Key Features
- Partial call writing preserves ~50% upside participation vs full covered call strategies
- Active strike and expiration management adapts to changing volatility regimes
- Zero expense ratio makes this cheaper than most options-based income strategies
Risks
- Capped upside means missing 50% of gains in strong rallies — painful in momentum markets
- Premium income taxed as ordinary income, creating 10-15% tax drag vs qualified dividends
- New fund with no track record — Hartford's options expertise in this wrapper remains unproven
Who Should Own This
Best for retirees or conservative investors who want equity exposure but prioritize current income over growth. Works as a bond substitute in low-yield environments or as a 10-20% sleeve in balanced portfolios. Avoid if you're accumulating assets or believe markets will rally strongly.