These ETFs Made a Bundle. For Their Managers

The most popular single-stock covered-call exchange-traded funds have gathered more than $18 billion in net inflows since November 2022 while earning solid returns in absolute terms (26.6% per year in aggregate). Yet they had only $5.8 billion in net assets as of September 2026, far less than logic would suggest given the sums investors have contributed and the total returns the ETFs notched.

Where did the assets go? In this article, I examine the toll that fees, yield- and return-chasing, and chronic returns of capital took. In all, I estimate investors had only $392 million in pre-fee income and gains to show for their forays into these ETFs from November 2022 to September 2026 while paying around $186 million in expenses over that span.

Finding an Audience

I’ve previously written about single-stock covered-call ETFs, which utilize options to participate in a portion of a reference stock’s gains while also selling options to collect income that partially cushions against losses when the stock slides.

In my view, these ETFs have little if any investment merit. They’re costly compared with readily available alternatives, which they’ve underperformed; they’re tax-inefficient; and they’ve proved difficult for investors to use successfully in practice (more on that shortly).

But there’s no denying their popularity. The 20 largest single-stock covered-call ETFs by net assets gathered more than $18 billion in aggregate inflows from November 2022, when they first incepted, through Sept. 9, 2026.

They’ve also notched strong returns in absolute terms. To illustrate, I built an equal-weighted portfolio consisting of the 20 largest single-stock covered-call ETFs (adding each ETF to the portfolio on its inception date) and tracked its performance versus a mirror portfolio holding the stocks the ETFs reference.

Here’s how their performance compared from November 2022 to September 2026.

Though the hypothetical portfolio of single-stock covered-call ETFs earned only half as much as the hypothetical stock portfolio did—reflecting the limits that call-writing places on the strategies’ upside potential—a 26.6% annual return is not too shabby.

Where Are the Assets?

Given the strong absolute returns and heavy flows these 20 ETFs have seen, you’d think they’d be awash in assets by now. But that’s not the case: As of Sept. 9, 2026, they held just $5.8 billion of net assets in total.

Why don’t they have more?

Here’s a breakdown of the ETFs’ estimated aggregate cumulative net income and gains before fees, cumulative fees, cumulative distributions, and cumulative net flows from November 2022 through September 2026.

These ETFs distributed gigantic sums, $13.1 billion in total, and those distributions far exceeded the net income and gains investors amassed after fees. It appears the ETFs’ expenses, which were around $186 million over this period, ate up more than half the roughly $392 million in income and gains investors made before fees.

I shared these estimates with Tidal Financial Group, which manages the YieldMax ETFs, which represent 19 of the 20 largest single-stock covered call ETFs. A representative didn’t comment on the accuracy of these estimates, but cautioned against using dollar figures to gauge investor success, as such figures reflect not just the ETFs’ performance but also the timing and magnitude of investors’ buy and sell decisions.

Yield and Returns, Returns and Yield

While there’s no disputing that, the question remains: Why didn’t investors see more income and gains before fees, considering the sheer amount of assets involved and the ETFs’ lofty reported returns?

Although the ETFs’ returns were indeed high in absolute terms, those figures assume an initial lump-sum investment held to the end, whereas in real life investors come and go depending on their circumstances and other factors. And it appears the two biggest factors here, by far, were these ETFs’ “distribution yields” (that is, their most recent distribution, annualized, and then divided by net assets) and their recent returns.

Let’s start with the distribution yields—these ETFs routinely made distributions that, when annualized, equated to at least half of net assets, as shown below.

All told, the average distribution yield was 68%, with the very largest ETFs yielding 50% to 80% on average over their lifetimes. (The horizontal axis is sorted left to right by ETF size, with the largest on the left and the smallest on the right.)

In general, the ETFs that brought in the most money from investors were those that paid higher lifetime average distribution yields, as shown below.

Investors also showed a clear preference for the ETFs that generated higher total returns. In all, nearly two-thirds of all flows went to the ETFs that returned 20% or more per year over their lifetimes.

The picture becomes even more vivid when you take the two—distribution yields and since-inception annual returns—together, which I’ve done in the plot below. Each dot represents an ETF, and the dot’s size corresponds to its lifetime cumulative inflows.

In summary, while all these ETFs routinely made very large distributions, investors tended to pour the most money into the single-stock covered-call ETFs that paid the highest average distribution yields and boasted higher total returns.

Rampant Chasing

But that alone doesn’t necessarily explain why investors appear not to have made more in dollars on their investments.

To better understand that, we’d need to assess the interplay between flows, distribution yields, and short-term returns.

To that end, here’s a breakdown of these ETFs’ cumulative net flows over the November 2022 to September 2026 period by the distribution yield at the time it was made, as well as the ETFs’ recent returns (measured as the return in the period between the two most recent distributions). This encompasses nearly 1,400 distributions across the 20 ETFs.

What the data shows, among other things, is:

• 94% of flows came in a period immediately after the ETFs posted a distribution yield of at least 50%, 69% when the posted yield was 80% or higher.
• 75% of flows came immediately after a period when the ETFs generated gains, 37% after returns of 10% or more.
• $12.9 billion of net inflows came immediately after a time when posted yields were at least 50% and the ETFs had just earned a positive return.

If high distribution yields and positive recent returns were correlated with higher, or at least comparable, subsequent returns, then investors could have made out quite well. But I found these ETFs made almost nothing in the average period that came after a very large distribution and a period of positive returns.

To illustrate, here’s a breakdown of the average subsequent return based on whether the distribution yield was 50% or higher at the time it was made and returns in the lead-up to that distribution were positive or negative.

Poor Dollar-Weighted Results

How did this translate at the individual ETF level? I estimated each of the 20 ETFs’ dollar-weighted returns from inception through Sept. 9, 2026. This estimate, which is akin to an internal rate of return calculation, accounts for the timing and magnitude of investors’ purchases and sales, thereby making it a proxy for the average dollar’s return.

Below, I’ve compared each ETF’s dollar-weighted return to its total return. In 14 of the 20 cases, the dollar-weighted return fell shy of the ETF’s total return, the average shortfall being around 10 percentage points per year (median of about 9 percentage points).

From there, I tallied up the percentage of lifetime net inflows each ETF had received in periods that immediately followed a posted 50%-plus distribution yield and a positive return. Using that tally, I assigned the ETFs to two buckets—those that had received at least half their lifetime flows in such periods and those that hadn’t—and calculated the average annual dollar-weighted gap of ETFs in each bucket. (I’ve also broken out the average gap per year of the five largest ETFs, all of which received more than half their lifetime flows in such periods.)

In summary, the ETFs that received most of their lifetime net flows in periods after posting a 50%-plus distribution yield and earning a positive return had far wider average annual gaps than ETFs that garnered a smaller share of their flows in such periods. The difference was starkest for the five largest ETFs by net assets, where the average dollar’s return lagged the ETFs’ total returns by the widest margin.

Insult to Injury

It appears investors engaged in rampant yield- and return-chasing in which they often bought these ETFs before their returns were beginning to moderate. That would at least partly explain why their dollar-based returns weren’t better. But there was another factor that appears to have contributed to this issue: The distributions themselves. The sequence goes something like this.

1. Manager sets a very high distribution rate (based on the reference stock’s implied volatility), and the ETF earns a positive return.
2. Investors buy, attracted by the ETF’s high posted yield and recent gain.
3. The ETF’s assets swell because of investor inflows.
4. Returns moderate or even turn negative, but the distribution rate remains very high.
5. The ETF’s income and gains aren’t sufficient to fully fund the distribution.
6. To cover any shortfall, the ETF returns capital to investors.

To give a sense of how commonplace this pattern was, here’s a time-lapse in which I compare these 20 ETFs’ aggregate monthly net income and capital gains (losses) against their monthly aggregate distributions. When the latter exceeds the former, the ETFs are effectively returning shareholders’ own money to them.

The ETFs’ aggregate net income and gains were insufficient to cover the aggregate distributions they made in 30 of 42 months. In all, I estimate the ETFs collectively distributed $12.9 billion more than they made on their investments over their lifetimes between November 2022 and Sept. 2026.

Frequent, large returns of capital like these can short-circuit dollar compounding in scenarios where assets incur a short-term loss. However, that loss might ultimately prove fleeting—that is, the ETF rallies over subsequent periods, it becomes moot when the manager so often ejects capital in this fashion, as it denies those purged assets the opportunity to participate in future gains.

A Case Study

There’s no better example of this dynamic among these 20 ETFs than YieldMax MSTR Option Income Strategy ETF MSTY. That ETF, which invests in options tied to bitcoin-Treasury firm Strategy, gathered around $4.1 billion of net inflows from its February 2024 inception through early May 2025, a remarkable haul for a new ETF.

Over that period, the ETF touted enormous distribution yields (114% on average) and streaked higher (a 330%-plus cumulative return), reflecting the Strategy stock’s sharply upward trajectory at the time.

Yet even during this very heady period, the ETF wasn’t able to fully fund its distributions from net income and gains, as shown below.

This proved costly.

For instance, by mid-March 2025, the ETF had already distributed $1 billion more than it had earned since inception, meaning it held $1 billion less than it would have had otherwise if distributions had been better aligned to available net income and gains. This denied the ETF the chance to reap gains on that absent $1 billion when it soared nearly 50% higher over the next eight weeks.

It would get worse from there.

Distribution yields remained sky-high from late May 2025 through early February 2026 (averaging 83%), but this time performance hit the skids, with the ETF losing around 68% of its value over that span. In addition, shareholders began to flee, yanking over $600 million from September 2025 through early February 2026.

This was a one-two punch, with massive returns of capital and redemptions expelling even more assets from the ETF, potentially locking in losses (in the case of the outflows) or at least precluding the possibility of further compounding on those sums.

It, too, proved costly when the ETF subsequently rallied, gaining around 68% between early February 2026 and mid-May 2026.

Multiple episodes like these decimated shareholders’ returns in dollars. From inception through Sept. 9, 2026, the ETF had incurred more than $1.7 billion in net losses. I estimate that the average dollar lost 37.2% annually, despite the fact that the ETF had posted a 22.4% per year total return over this span.

The Performance Picture

These ETFs’ managers, Tidal Financial Group and GraniteShares, could argue they should be measured based only on the ETFs’ total returns, as that reflects the matters within their control—that is, running the funds—whereas dollar-weighted results incorporate investors’ buy and sell decisions.

But such an argument seems to downplay the manager’s role in setting each ETF’s distribution per share, subject to the fund board’s oversight. These ETFs’ high distribution yields are their main selling point. Yet as we saw, those lofty distribution yields led to massive returns of capital which, in turn, appear to have sapped the ETFs’ ability to confer more income and gains in dollars to shareholders after fees.

Putting that debate aside, these 20 ETFs fell woefully short even on a total return basis. Yes, as mentioned, those returns were solid in absolute terms: 26.6% per year, in aggregate, from November 2022 through September 2026. Yet the stocks they reference did far better than that, gaining more than twice as much over that period, and boasting better risk-adjusted returns.

When I raised this issue with Tidal, a representative pointed out that the firm had made a series of changes to each ETF’s investment approach in 2024 and 2025, with those changes aimed at increasing the extent to which the ETFs participated in the reference stock’s upside, among other things.

Yet it’s not apparent that the ETFs captured more of the stocks’ upside after the changes were fully implemented by June 2025, as shown below. In addition, while the ETFs’ rolling 52-week excess returns (again compared with the reference stocks) improved somewhat following the changes, it wasn’t dramatic.

Looking beyond pretax performance, the data suggests these ETFs have been dreadfully tax-inefficient. This stems mainly from how often they realize and distribute gains, which accelerates taxes that are subject to punitive short-term rates. Below, I’ve compared these ETFs’ trailing three-year pre- and post-tax returns as of Aug. 31, 2026.

In most cases, taxes are estimated to claim 50% or more of the ETFs’ pre-tax returns by the time the investor sells shares. (Post-tax return estimates can be found in each ETF’s prospectus.)

A Better Way?

Understandably, some investors might be enamored with the idea of partaking in stocks’ gains while partially protecting against losses and getting a plump yield to boot. But that goal can be accomplished in ways that are far cheaper, simpler, and more tax-efficient.

Had one simply combined the basket of stocks these ETFs track with cash and then rebalanced each month, the hypothetical stocks-and-cash portfolio would have delivered better risk-adjusted returns than the ETFs. I tested five such portfolios—with cash stakes ranging from 10% to 50%—and all handily outperformed the ETFs. (This would have been true even before the ETFs’ fees.)

It’s true that these stocks-and-cash portfolios wouldn’t throw off copious amounts of cash flow as the ETFs do. But even this is illusory: The ETFs’ managers have wide latitude when setting the per-share distribution that dictates an ETF’s “distribution yield.” And as we saw, the payouts they chose, based on each stock’s implied volatility, often far exceeded the income and gains the ETFs’ holdings yielded.

Given that, you could take a page from their book and set your own “distribution yield.” For instance, if you were seeking to garner the equivalent of 10% of the portfolio’s value on an annual basis, then you’d divide the portfolio’s balance by 120, and that figure becomes your monthly withdrawal.

No, it’s not advisable to target a yield so lofty that it’s bound to atrophy the portfolio from overdisbursing assets over time. (Even a 10% “distribution yield” would be pushing it.) And, yes, you’re better off diversifying broadly across stocks and bonds, an approach my colleagues have found does a better job of maintaining spending, especially if you’re in or entering retirement. But if you have a long time horizon and are hellbent on juicing higher-volatility stocks for income, it’s relatively straightforward to pair them with cash and set up an automated selling plan.

Such an approach would avoid the fees, taxes, and general complexity these ETFs have entailed.

Switched On

Here are other things I’m reading, watching, and listening to:

• “Which Fund Families Give Their Stock-Pickers the Longest Leash?”
• Semiliquid fund buys a lifeboat; lifeboat springs a leak; investors get soaked; and scene
• The regenerative power of teaching and learning
• Tame Impala “Is It True”
• Maybe the best 30ish-minute episode in the history of sprawling fantasy epics?

Don’t Be a Stranger

I love hearing from you. Have some feedback? An angle for an article? Email me at jeffrey.ptak@morningstar.com. If you’re so inclined, you can also follow me on Twitter/X at @syouth1, and I do some odds-and-ends writing on a Substack called Basis Pointing.