ETF Education Report: Western Asset Inflation-Linked Income Fund (WIA)

What this ETF is trying to do

The Western Asset Inflation-Linked Income Fund (WIA) is an ETF traded on the NYSE. While the specific investment strategy is not detailed in the provided data, the name suggests it focuses on income related to inflation-linked assets.

What the numbers show

It is important to understand the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and any cash distributions (dividends) paid out to investors.

Based on the data:

• Year-to-Date (YTD): The price return is approximately -5.68%. However, the YTD total return is -0.72%.

• One Year: The one-year price return is approximately -7.58%, while the one-year total return is approximately -0.26%.

• Three Years: The three-year price return is approximately -3.94%, but the three-year total return is 21.80%.

To visualize the price change, we can look at an estimate from roughly one year ago. The estimated price was $8.44, and the current price is $7.80.

Income and distribution explanation

This ETF has a distribution yield of 8%. This means the fund pays out cash relative to its share price. These distributions usually happen monthly, and in the last 12 months, there were 12 payouts. Most of these payments have occurred on Fridays.

It is important to remember that a high distribution yield does not mean you are earning that same amount in total return. You must look at the total return figures to see how the investment performed overall after including those cash payments.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price is not the same thing as NAV erosion, we use "erosion-risk scores" to measure this risk.

WIA has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk, not a guarantee that the fund's value has collapsed. There is no severe erosion-risk flag for this ETF.

Pros

• The fund provides regular monthly cash distributions.

• Over a three-year period, the total return was positive at 21.80%, even though the share price itself declined.

Cons

• The share price has seen declines over the last year and year-to-date.

• There is a "mild" erosion-risk score of 75.

Beginner takeaway

When looking at ETFs like WIA, don't just look at the 8% yield. Always compare the price return (the change in share price) with the total return (the change in value including cash paid out). This helps you see if the cash distributions are helping to offset declines in the share price.