Evolve US Banks Enhanced Yield Fund (CALL): A High-Yield Play in Volatile Markets, but Risks Lurk

The Evolve US Banks Enhanced Yield Fund Hedged Units ETF (CALL) has emerged as a compelling option for income-seeking investors in a low-yield world, offering a trailing 12-month yield of 12.88% as of April 2025. This Canadian-listed ETF, which invests in the largest U.S. banks while employing a covered call strategy, has drawn attention for its ability to generate steady dividends amid market turbulence. Yet its high yield comes with trade-offs, including sector concentration and sensitivity to interest rate shifts. Here's why it's worth considering—and why caution is still warranted.

The Covered Call Edge: Income and Hedging in One

The fund's strategy hinges on writing covered call options on up to 33% of its portfolio, a technique designed to boost income and buffer against equity declines. By selling call options, the fund collects premiums, which are distributed to investors as dividends. This approach can stabilize returns in sideways or falling markets but limits upside potential if the underlying bank stocks surge.

For example, if the fund holds shares of JPMorgan Chase (JPM) and sells a call option with a $150 strike price, it pockets the premium even if JPM's stock stays below that level. If JPM rises above $150, the fund's gains are capped at that strike price, but the premium offsets some of the opportunity cost. This dual-income mechanism has helped CALL maintain a consistent $0.125 monthly dividend since early 2025, with the most recent distribution payable on July 8, 2025, to shareholders as of June 30.

Performance and Market Conditions: A Mixed Picture

While the fund's yield is impressive, its capital returns have been uneven. As of May 21, 2025, CALL's year-to-date (YTD) return was -9.28%, reflecting broader headwinds in the banking sector. The S&P 500 Financials Index fell roughly 5% over the same period, pressured by recession fears, tariff-related uncertainty, and a potential U.S. GDP contraction in early 2025.

The fund's 1-year return of 9.6% (as of May 2025) underscores its resilience over longer horizons, but short-term volatility remains a concern. The covered call strategy has helped mitigate some downside: during the Q1 2025 selloff, the fund's losses were tempered by the premiums collected from sold options.

Risks to Consider Before Buying

1. Sector Concentration: CALL holds up to 15 positions, all in top U.S. banks like JPMorgan, Bank of America (BAC), and Citigroup (C). A downturn in the banking sector—driven by loan defaults, regulatory changes, or a sharp rise in interest rates—could hit the fund hard.
2. Interest Rate Sensitivity: Banks benefit from rising rates, as higher spreads boost lending profits. But if rates reverse or stagnate, their earnings could stall. With the U.S. Federal Reserve signaling a pause in hikes, this creates uncertainty.
3. Capped Upside: The covered call strategy's “income first” approach means investors forgo gains above the strike prices. In a strong bull market for banks, CALL would lag its benchmarks.

Who Should Invest in CALL?

This ETF is best suited for income-focused investors willing to accept moderate capital volatility. Its 0.45% management fee is competitive, and the monthly dividend stream offers steady cash flow. However, it's not a “set-and-forget” investment: investors must monitor the banking sector's health and interest rate trends.

Final Considerations

The Evolve US Banks Enhanced Yield Fund's 12.88% yield is a standout in today's environment, but it's not without pitfalls. Pair it with broader market exposure or use it as a tactical allocation within a diversified portfolio. For now, the fund's dividend consistency and hedging benefits make it a contender—just don't forget the risks lurking behind those double-digit payouts.

Investment advice: Consider CALL as a supplemental income source but keep allocations small to limit sector-specific risk. Monitor the fund's NAV and the Federal Reserve's rate decisions closely.