Navigating Healthcare Volatility: The Case for CI Health Care Giants Covered Call ETF

The CI Health Care Giants Covered Call ETF (FHI) has announced a June 2025 dividend of $0.2127 per unit, maintaining its reputation as a reliable income generator for investors amid a healthcare sector rife with uncertainty. With a dividend yield of 7.97%, this ETF offers a compelling entry point for those seeking stability in an industry buffeted by regulatory shifts, pricing pressures, and evolving consumer demands. But what lies behind this income stream, and how does the ETF's USD hedging feature amplify its appeal? Let's dissect the strategy and its implications.

The Covered Call Mechanism: A Shield Against Volatility

The FHI ETF employs a covered call strategy, which involves writing call options on its portfolio holdings—primarily large-cap U.S. healthcare stocks. This approach generates premium income, which contributes to the dividend stream. By capping the upside potential of these holdings, the strategy reduces exposure to sharp declines or sideways markets, providing a predictable income floor. For instance, reveals consistent quarterly payouts, even as healthcare stocks faced headwinds like drug price negotiations and supply chain disruptions.

However, this stability comes at a cost. Covered calls limit upside participation, meaning investors may miss out on gains if healthcare stocks surge. Yet, in an environment where volatility has become the norm—think of the sector's 10-year standard deviation of returns cited in its prospectus—the trade-off could be worth it for income-focused investors.

USD Hedging: A Dual-Edged Sword

For Canadian investors, the USD-hedged version (FHI.U) adds another layer of protection. By neutralizing currency fluctuations, this share class ensures that gains (or losses) are purely tied to the U.S. healthcare sector's performance, not exchange rate swings. This is particularly valuable now, as the Canadian dollar's recent weakness against the U.S. dollar has made unhedged investments riskier.

Consider this: . A Canadian investor holding unhedged U.S. healthcare stocks would have faced significant currency-related volatility, whereas FHI.U investors avoid that noise. Yet, hedging isn't free—its effectiveness depends on the accuracy of the ETF's hedging strategy, which incurs costs that could marginally reduce returns if the Canadian dollar strengthens.

Healthcare Sector: A Sector in Flux

The healthcare sector's volatility is undeniable. Recent months have seen clashes over drug pricing, Medicare reforms, and AI-driven diagnostic breakthroughs, all of which create uncertainty. FHI's portfolio, which includes giants like Johnson & Johnson and Pfizer, is inherently less exposed to niche biotech risks but still faces macroeconomic pressures. The ETF's 52-week price range of $8.62 to $10.49 (as of June 19, 2025) underscores this volatility.

Yet, the sector's defensive qualities—steady demand for healthcare services, aging populations, and innovation-driven growth—remain intact. The covered call strategy here acts as a stabilizer, smoothing out the sector's bumps while still capturing long-term trends.

Investment Thesis: A Steady Hand in a Stormy Sector

FHI's 7.97% yield stands out in a low-interest-rate environment, but investors must weigh its risks. The ETF's MER, while unspecified, likely aligns with CI's other ETFs (typically around 0.6% to 0.8%), which is reasonable for an actively managed strategy. Still, fees and the capped upside of covered calls mean this isn't a get-rich-quick vehicle.

For income seekers willing to trade growth potential for steady payouts, FHI could be a core holding. The USD-hedged version is ideal for Canadian investors aiming to avoid currency exposure, though they should monitor hedging costs. Meanwhile, the ETF's focus on large-cap stability mitigates the risk of smaller biotech volatility, making it a safer bet than direct stock picking.

Final Considerations

• Risk Tolerance: The ETF's use of derivatives and short selling (as noted in its prospectus) adds complexity. Investors should review the fund's risk profile and past performance volatility.
• Tax Implications: Dividends may be taxed differently than capital gains, so consult a tax advisor.
• Market Timing: With healthcare stocks trading near recent lows, now could be a buying opportunity—if the sector's fundamentals hold.

In conclusion, the CI Health Care Giants Covered Call ETF offers a pragmatic approach to income generation in a turbulent sector. While it won't thrill growth investors, its hedged dividend stream and covered call discipline make it a sturdy option for portfolios needing ballast. As always, diversification and professional guidance are key—especially when navigating the healthcare sector's unpredictable tides.