Assessing the Sustainability of Voya Global Advantage and Premium Opportunity Fund's High-Yield Strategy

The Voya Global Advantage and Premium Opportunity Fund (IGA) has long been a magnet for income-seeking investors, offering a 10.38% distribution yield as of August 2025. However, beneath this attractive surface lies a critical question: Can IGA sustain its high-yield strategy without eroding long-term value? A closer look at its distribution structure reveals a heavy reliance on return of capital (ROC), which now accounts for 74.4% of its monthly $0.085-per-share payout. This raises red flags for investors prioritizing capital preservation and tax efficiency.

The Mechanics of IGA's Distribution Strategy

IGA's managed distribution policy guarantees a fixed $0.085-per-share payout, regardless of market conditions. To meet this target, the fund combines net investment income (25.6% of distributions), long-term capital gains (27%), and ROC (47.4% year-to-date through June 2025). While income and gains reflect performance, ROC is a return of the investor's original principal. This distinction is critical: ROC does not generate tax-advantaged income and instead reduces the investor's cost basis, potentially triggering higher capital gains taxes upon sale.

For example, an investor who purchased IGA shares at $10.00 would see their cost basis drop to $9.76 after a $0.24 ROC distribution. Over time, repeated ROC distributions could erode the fund's net asset value (NAV), which has grown by 11.56% annually over five years but faces headwinds from a 1.00% expense ratio.

Historical Trends and Sustainability Risks

Since 2023, ROC has consistently made up over 40% of IGA's distributions, with the proportion spiking to 75.3% in July 2025. This trend reflects a structural challenge: the fund's income generation (25.6% of distributions) is insufficient to meet its payout target. To bridge the gap, IGA increasingly returns capital, which risks depleting its asset base.

The fund's NAV has appreciated from $9.99 to $10.45 since February 2024, but its market price trades at a 7.59% discount to NAV as of June 2025. This discount suggests investor skepticism about IGA's ability to maintain its distribution rate and grow NAV. A shrinking NAV could force the fund to rely even more heavily on ROC, creating a self-reinforcing cycle of capital erosion.

Tax Implications and Investor Considerations

ROC distributions are not tax-free. While they reduce an investor's cost basis, they also increase future capital gains liabilities. For tax-conscious investors, this hidden tax burden can offset the allure of a high yield. Additionally, IGA's derivatives-heavy strategy—selling call options on 50–100% of its equity holdings—introduces volatility that could further strain income generation during market downturns.

Strategic Recommendations for Investors

1. Diversify Income Sources: Pair IGA with more sustainable income vehicles (e.g., dividend-paying equities or high-quality bonds) to mitigate the risks of ROC-heavy distributions.
2. Monitor NAV Trends: Closely track IGA's NAV growth and distribution sources. A decline in NAV or a further increase in ROC percentages should trigger a reevaluation of the investment.
3. Tax Planning: Consult a tax advisor to optimize the reporting of ROC distributions and adjust cost bases accordingly.
4. Evaluate Long-Term Objectives: IGA may suit investors with a short-term horizon seeking immediate income, but its reliance on ROC makes it a poor fit for those prioritizing capital preservation.

Conclusion

IGA's high-yield strategy is a double-edged sword. While its 11.56% five-year NAV return and 10.38% yield are enticing, the fund's heavy use of ROC introduces significant sustainability risks. Investors must weigh the immediate benefits of income against the long-term erosion of capital and tax inefficiencies. For those who proceed, vigilance and diversification will be key to navigating the complexities of this closed-end fund.