Products with Purpose | Q&A with Yuan Gao

In 2022, Purpose Investments debuted Yield Shares, the world’s first suite of yield-focused single-stock ETFs designed to help investors get exposure to the long-term growth of their favourite stocks, like Apple and Tesla, while maximizing their portfolio’s yield.

The Yield Shares suite has since been expanded twice, most recently, with the addition of Meta (META) Yield Shares ETF and AMD (AMD) Yield Shares ETF earlier this month.

We spoke to the lead product manager of the funds, Yuan Gao, to learn more about what it takes to launch new products and why Yield Shares is such an easy way to increase yield in investor portfolios.

What is the thought process when you create a new product?

Purpose has always been a client-centric firm and our clients are always our main consideration. This approach carries over to when we launch a new fund.

Some of the questions we always ask ourselves while considering launching a new product are:

1. What challenges are investors facing in the current market environment?
2. How can Purpose help investors address these challenges in an innovative way?
3. How will the new product benefit investors and allow them to achieve their long-term financial goals?

What are the steps to launching a fund?

The first step is identifying the problem we are attempting to solve. We then look at the overall market landscape and evaluate the current market offerings. From there, we brainstorm and design an innovative solution that attempts to address investor needs. Finally, we implement the fund launch with the help of various firm stakeholders.

Could you tell us a bit about Yield Shares?

Yield Shares by Purpose was launched in December 2022 as the world’s first suite of yield-focused single-stock ETFs. The suite uses a systematic covered call option strategy and moderate leverage to generate yield for investors who want to go long on individual stocks like Tesla, NVIDIA, and Apple.

For a a high-level overview of how Yield Shares works and how you might incorporate these ETFs in your portfolio, check out this video by the portfolio manager for the suite, Nick Mersch.

You recently expanded the suite to include Yield Shares for Meta and AMD. Can you explain the thought process behind those additions?

We've gotten great feedback ever since we've launched Yield Shares. But our clients kept coming to us asking for more global companies to add to the suite. Since launching, we added NVIDIA and Microsoft in January 2024. And now we've added Meta and AMD to the lineup.

Adding Meta was an easy call because now we have Yield Shares ETFs for all the Magnificent 7. Plus, we believe that through its open-source AI platform that Meta is democratizing AI for all. Some are calling AMD vs NVIDIA the AI version of the Cola wars for this generation, and we didn't want investors to have to pick sides. AMD is making huge waves in high-performance computing, AI, and cloud tech, and their new processors are a big deal for all sorts of industries, like healthcare and finance.

At the end of the day, we released these because our clients asked us to. At its core, Purpose is a client-centric firm that cares and listens to its investors. Our number one goal is to make sure we're empowering them for success.

You mentioned the covered call strategy used by Yield Shares. Do you mind giving readers a simple explanation as to how covered calls work?

The covered call option strategy is often used by investors to generate income from their stock holdings. The investor will typically sell call options on stocks that they own, collecting the premium form the sale of the option as income.

If the stock price remains below the strike price of the option, the option will not be exercised and the investor will keep both the stock and the premium. If the stock price rises above the strike price, the option will likely be exercised and the investor will sell their stock at the agreed-upon strike price.

To get more info on how call options work, we actually have a whitepaper on covered calls and a video explaining them by one of our portfolio managers.

Looking to the future, what are you most excited about for Yield Shares?

I was glad to play a part in helping Purpose Investments continue its tradition of bringing new, innovative solutions to market with the launch of Yield Shares. We continue to explore the possibility of expanding the suite with more products, and in the meantime, I’m excited to watch Yield Shares prove to be an excellent tool for maximizing yield in investor portfolios.?

The content of this document is for informational purposes only, and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice.

Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

Certain statements in this document are forward-looking. Forward-looking statements ("FLS") are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as "may,” "will,” "should,” "could,” "expect,” "anticipate," intend,” "plan,” "believe,” "estimate" or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.