ETF Education Report: John Hancock Hedged Equity & Income Fund (HEQ)

What this ETF is trying to do

The John Hancock Hedged Equity & Income Fund (HEQ) is an exchange-traded fund (ETF) traded on the NYSE. While the specific investment strategy details are not listed in the provided data, the name suggests it focuses on a mix of equity (stocks) and income.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only how much the share price has changed.

• Total Return: This includes both the change in share price *and* any cash distributions (dividends) paid out to investors.

For HEQ, the numbers show:

• Year-to-Date (YTD): The price return is approximately 4.00%, while the total return is approximately 11.11%.

• One Year: The price return was approximately 6.07%, while the total return was approximately 15.97%.

• Three Years: The price return was approximately 17.07%, while the total return was approximately 54.99%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was approximately $10.54, and the current price is $11.18.

Income and distribution explanation

This ETF has a distribution yield of approximately 8.94%. This number describes the cash distributions relative to the ETF's price. The fund usually pays out these distributions quarterly, and it has made 4 payments in the last 12 months.

It is important to remember that a high distribution yield is not the same as total return. While distributions provide cash income, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. Some investors worry about this because if the value of the fund drops significantly, it can be hard to get their original money back.

For HEQ, the erosion-risk score is 100, and the label states "No price erosion detected." There is no severe erosion-risk flag for this ETF.

Pros

• The fund shows a positive total return across one-year, three-year, and five-year periods.

• The fund has a high income rating grade of "B."

Cons

• The provided data does not list any top holdings, so the specific companies owned by the fund are unknown.

Beginner takeaway

When studying HEQ, notice the difference between the price return and the total return. Because the total return is higher than the price return, it shows that the cash distributions are adding significant value to the overall performance. Always remember that high yields provide cash, but they are separate from the movement of the share price itself.