What this ETF is trying to do

The Madison Covered Call & Equity Strategy Fund (MCN) is an ETF designed to use a covered call strategy. This means it uses options to help generate income for its investors. Because it uses these types of options, it is classified as an option-income ETF.

What the numbers show

When looking at MCN, it is important to understand the difference between price return and total return. The price return only shows how much the share price itself has changed. The total return includes both the change in share price and the cash distributions paid out to investors.

Here is what the data shows:

• Year-to-Date (YTD): The price return is approximately -12.17%. However, the total return is -3.61%.

• One Year: The price return was approximately -13.89%, while the total return was approximately -2.61%.

• Three Years: The price return was approximately -24.71%, but the total return was 5.32%.

These numbers show that while the share price has gone down over these periods, the cash distributions helped make the total return better than the price return alone.

Income and distribution explanation

MCN provides a high level of cash distributions. The distribution yield is approximately 13.66%. This represents the amount of cash distributed relative to the current ETF price. The fund usually pays these distributions monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not guarantee that an investor will earn that same percentage as a total return. High yields can sometimes be accompanied by a falling share price.

NAV erosion explanation

Some investors look for "NAV erosion," which refers to a decline in the fund's Net Asset Value (the actual value of the assets held by the fund). The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

Regarding price erosion, the fund has an erosion-risk score of 75, which is labeled as "Mild price erosion." This is a measurement of how the share price has behaved, not a confirmation that the underlying assets have lost value.

Pros

• High Income Potential: The fund offers a high distribution yield of approximately 13.66%.

• Regular Payouts: The fund typically pays out distributions on a monthly basis.

• Total Return Buffer: In the three-year period, the total return (5.32%) was much higher than the price return (-24.71%), showing that distributions added value back to the overall performance.

Cons

• Share-Price Decline: The fund has experienced significant declines in its share price over the one-year and three-year periods.

• Mild Price Erosion: The fund's erosion-risk score indicates a mild trend of price deterioration.

Beginner takeaway

MCN is an income-focused ETF that uses options to pay out regular monthly cash. While it provides a high distribution yield, the share price has declined over the last year and three years. For this fund, the total return (which includes the cash you receive) has performed better than the price return alone, but investors should be aware of the mild price erosion risk.