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So, the people over at YieldMax appear to be pursuing a new approach when it comes to tackling the biggest issue that exists with nearly all of their dividend ETFs, which is NAV erosion. Although, if you happen to be a fan of their investments, you might not be a fan of what they appear to be doing when it comes to tackling this issue.
YieldMax submitted paperwork to the SEC to introduce 10 more ETFs on top of their 57 that already exist. According to this N-1A form, they're going to be launching 10 target income ETFs in the near future, which are based on their most popular covered call funds. We can see there's going to be a target income ETF for C3.ai, AMD, Amazon, Coinbase, Mara Holdings, Micro Strategy, Nvidia, Palanteer, Super Micro Computers, and Tesla. According to the names of these funds as well as their investment objectives, they all intend to provide a stable 25% dividend yield.
Now, in my opinion, this seems like an odd move for this company to make, but I'm fairly certain that they're introducing these funds so they can offer different options that'll have less NAV erosion. How these target income funds work is they use an option strategy to provide a fixed dividend yield, which in this case is 25% per year or 2.2% per month. And then whatever additional amount they earn over this amount is going to be put back into the fund to avoid NAV erosion. At least that's going to be the plan. If the underlying stock pays a dividend, then they would keep that dividend and use it to maintain its NAV as well or even potentially grow it if possible.
Nearly all target income ETFs that exist have been around for less than one year at this point, and most aren't even that popular when looking at their assets under management, but that's now going to be the latest direction for YieldMax to go. It should be noted that when these do come out, these funds will be the highest yielding target income ETFs available. Last time I checked, there were eight target income ETFs. So, this will more than double the amount that are in this subcategory of options-based ETFs. Vista Shares currently has four ETFs. Defiance has two, Round has one, and Simplify has one. The highest yielding funds in this category as of right now are Round Hills XPay and Defiance's SPYT and QQQT. All three funds currently yield 20% or at least they aim for that. The others have a target yield of 15%. So 25% will make the YieldMax funds the highest.
Okay, so I'm editing this video and I forgot to mention that YieldMax themselves already have three of their own target income ETFs. They just have so many funds that I simply forgot these even existed. But they're all diversified rather than being exposed to just one single holding, which is what their new funds are going to do. Not surprisingly, none of these ETFs are very popular, and they rank towards the bottom when ranking all of their ETFs by assets under management.
Now, if you're a fan of YieldMax, you might be asking a couple of questions about this plan. I think what people would have preferred was trying to update the strategies of the funds that already exist. In my opinion, most people would probably prefer settling for a slightly lower yield in exchange for better share price performance. If we pull up some of YieldMax's funds, we can see how disastrous the NAV erosion has been for some of them. Ticker MRNY has lost 90% of its value in less than 2 years since it launched. Ticker AIY, which is their AI option income strategy ETF, has lost 86% in less than two years. Now, the high dividends would help make up for their losses, but this one is still down over 56% from a total return perspective.
And if you recall, I've covered the times where this company decided to make changes to their already existing funds. For example, it was just a couple of months ago that YieldMax made some changes to ticker ULTY. They appear to have stopped relying on a synthetic covered call strategy alone, and they now actually own the underlying securities as opposed to simply trying to replicate their movements using options. They also began using something called a collar strategy. This involves buying a downside put and selling an upside call to protect against very big losses. Then of course they also switched to paying weekly dividends as opposed to monthly and this was a huge hit. So we can see they were making moves to try and improve their existing funds. In the case of their Ultra Option Income ETF, the changes seem to have stopped its rapid decline in share price. It's still been trending downward, but just not as severely. People also pointed out that ULTY's dividend yield did go down after the changes were made, but it's still doing better in terms of NAV erosion.
But now, since they're introducing all of these new ETFs, which are going to make up a huge part of their ETF lineup, it appears they might be giving up on updating their existing funds. 10 ETFs is a major announcement. This is going to make up almost 20% of their ETF lineup. I don't think this company has ever released 10 ETFs at the same time before. I also question just how much these new ETFs are actually going to appeal to YieldMax fans. Getting the highest yield possible is what attracts the majority of their investors. People who like their funds, in my opinion, won't like the idea of a lower fixed dividend yield.
I also found a couple of interesting things about these new target income ETFs. While scanning through their SEC documents, while they all have different expense ratios, I noticed that some of these are really expensive. The C3 AI target income fund will charge a 1.67% expense ratio. This might be one of the highest expense ratios I've ever seen for an ETF. I mean, this is pretty close to what a closed-end fund can charge. And these provide much steadier distributions. They're not all this expensive, which is good, though. Their AMD fund will charge 1.23%. And their Tesla fund, TEST, comes with a 1.04% expense ratio, which is almost identical to Tesla.
So, like I mentioned earlier, basically all of these fixed income ETFs work in a pretty similar manner. And luckily for us, YieldMax already has some that we can take a look at and see their histories. Let's start by looking at ticker RNT, which is their real estate target income fund. This one holds roughly 60 different REITs, and since being launched in April, its share price is down 2.27%. Compared to VNQ, a real estate ETF, we can see that REITs have done pretty well over the past 6 months, but RNTY is still down. Ticker SOXY by YieldMax holds semiconductor stocks, and it's currently up 15.36% since its IPO. Google isn't showing the correct information here. It didn't jump up 1,600% on its first trading day. Then there's BIGY, ticker BIGY, which according to their website holds 50 different large companies. I can't really compare this to anything, but so far it's up 4.77%.
Ultimately, I will say this, when it comes to these target income ETFs, I do prefer the more diversified options that exist. It simply adds more safety by having more diversification. But tell me what you think about YieldMax's move to dedicate a large part of their lineup to target income ETFs. Remember, this will make up almost 20% of their entire lineup. There will be less NAV erosion with these funds, but I question if YieldMax fans are actually going to like them. I think the vast majority of YieldMax fans are still going to prefer trading in and out of those ultra high yielding ETFs instead of going for these new target income funds. But feel free to let me know your thoughts.
And with that being said, that's going to wrap up today's video. If you'd like to connect with me and see what's inside of my own high yielding dividend portfolio, then feel free to check me out over on Patreon. You'll be notified when I make trades and you'll get access to our Discord with other high yielding investors. Thanks again for watching. Please be sure to like this video and subscribe if you want more high yielding investment content. Thanks again for watching and I hope you all have a great day.