Nicholas Fixed Income Alternative ETF Stock Price, News & Analysis

The Nicholas Fixed Income Alternative ETF (FIAX) is an actively managed exchange-traded fund that, according to Nicholas Wealth, seeks to provide income by using U.S. Treasury fixed income securities together with a defined risk option premium strategy. FIAX is described as a fund that is distinct in the fixed-income space, combining exposure to U.S. Treasury securities with options-based techniques that can replicate a diversified portfolio of income-producing ETFs while seeking to mitigate risk with a core holding in United States Treasuries.

Fund structure and investment approach

FIAX is organized as an ETF and its shares are bought and sold on an exchange at market price, not at net asset value (NAV). The fund is characterized as actively managed, meaning portfolio decisions are made on an ongoing basis rather than tracking a fixed index. Nicholas Wealth states that FIAX employs options contracts and a defined risk option premium approach in combination with U.S. Treasury fixed income securities. Through the use of options, the fund can replicate a diversified portfolio of income-producing ETFs and may have lower correlation to traditional equity and fixed-income asset classes.

The fund is identified as non-diversified, which means it may invest a greater percentage of its assets in the securities of a single issuer or a smaller number of issuers than a diversified fund. The fund may also actively and frequently trade a significant portion of its holdings, which can increase transaction costs and expenses.

Income focus and distributions

Nicholas Wealth communications describe FIAX as seeking to provide income, with references to monthly or periodic distributions. These distributions may include a combination of ordinary dividends, capital gains, and return of investor capital. The materials emphasize that distributions are not guaranteed, can vary significantly from month to month, and may be zero in some periods. Distribution rates and 30-Day SEC yields cited in fund communications are presented as historical data that may not be indicative of future distributions.

The fund’s disclosures note that distribution rates may be influenced by market conditions and may not be sustainable over time. They also highlight that distributions which include return of capital can decrease the fund’s NAV and trading price over time, and that investors may suffer significant losses to their investment.

Use of derivatives and options

FIAX’s strategy involves derivatives, particularly options contracts. Derivatives are described as financial instruments that derive value from underlying reference assets such as stocks, bonds, funds (including ETFs), interest rates, or indexes. The fund’s use of options introduces risks that can be greater than those associated with directly investing in securities. These risks include market risk, imperfect correlation with underlying investments or other portfolio holdings, higher price volatility, lack of availability, counterparty risk, liquidity constraints, valuation challenges, and legal restrictions.

The fund is subject to counterparty risk because its investments in option contracts expose it to the possibility that the counterparty may not fulfill its obligations. By virtue of its investments in option contracts on equity ETFs and equity indices, FIAX is exposed indirectly to common stocks and therefore to equity market risk.

Risk profile and key risk factors

Fund materials emphasize that investments involve risk and principal loss is possible. FIAX is described as involving a high degree of risk. In addition to derivatives and counterparty risk, the fund highlights several other risk factors:

• Equity market risk: Exposure to equity ETFs and equity indices through options can subject the fund to fluctuations in equity markets.
• High portfolio turnover risk: Active and frequent trading may increase transaction costs and fund expenses.
• Non-diversification risk: Concentrated exposure may magnify the impact of adverse events affecting particular issuers or sectors.
• Hedging transactions risk: Hedging strategies may not move in line with underlying positions, which can lead to losses on both the hedge and the underlying investments or limit opportunities for gain.
• Illiquid investments risk: At times the fund may hold investments without a readily available market or subject to legal or contractual restrictions on sales.
• Interest rate risk: The value of the fund’s investments in fixed income Treasury securities will fluctuate with changes in interest rates.
• New fund risk: FIAX is described as a recently organized management investment company with no operating history, which means prospective investors do not have a long track record on which to base decisions.
• U.S. obligations risk (as described in related materials): For funds investing in U.S. government or agency securities, repayment may depend on the issuing or guaranteeing agency or instrumentality, and there is no assurance of financial support where it is not obligated.

Relationship to Nicholas Wealth and service providers

FIAX is associated with Nicholas Wealth, which is described as a provider of actively managed income ETFs. Communications note that the fund is distributed by Foreside Fund Services, LLC, and that Foreside Fund Services, LLC is not affiliated with Tidal Financial Group. Tidal Financial Group is referenced as a launch and structure partner. Fund communications also state that the fund, its trust, and sub-adviser are not affiliated with any underlying ETF referenced in its strategies.

Exchange listing and trading

FIAX is referred to as the Nicholas Fixed Income Alternative ETF (NYSE: FIAX) in connection with the New York Stock Exchange. As an ETF, shares are bought and sold at market price and may trade at a discount or premium to NAV. Shares are not individually redeemable from the fund and may only be acquired or redeemed in creation units. Brokerage commissions and trading costs can reduce investor returns.

Investor considerations

Fund materials repeatedly emphasize that past performance does not guarantee future results and that the investment return and principal value of an investment will fluctuate. Prospective investors are encouraged in those materials to carefully consider investment objectives, risks, charges, and expenses, and to review the prospectus or summary prospectus before investing. Because FIAX uses derivatives, options, and a non-diversified structure, its risk and return profile can differ from traditional fixed income funds that invest primarily in bonds without derivatives.

Key concepts referenced in fund materials

In describing FIAX and related funds, Nicholas Wealth materials define several fixed income and income-related concepts:

• 30-Day SEC Yield: Represents net investment income, excluding option income, earned over a 30-day period, expressed as an annual percentage rate based on the ETF’s share price at the end of the period.
• Distribution rate: The annual rate an investor would receive if the most recent distribution, including option income, remained the same going forward. It is calculated by multiplying an ETF’s distribution per share by twelve and dividing by the most recent NAV. It represents a single distribution and does not represent total return.
• Yield to maturity (YTM): The total return anticipated on a bond if held until maturity.
• Dividend yield (as defined in related materials): A financial ratio showing how much a company pays out in dividends each year relative to its stock price.
• Average duration: A measure of a fund’s interest-rate sensitivity, with longer duration implying greater sensitivity to interest rate changes.

These definitions are provided in Nicholas Wealth communications to help explain how income and yield measures are presented for FIAX and related income-focused ETFs.