Voya Global Advantage: Sustainable Dividends or Return of Capital Risk?

The Voya Global Advantage and Premium Opportunity Fund (NYSE: IGA) has long been a magnet for income-seeking investors, offering monthly distributions that have averaged $0.085 per share since mid-2024. But beneath its steady payout lies a critical question: How sustainable are these distributions, and what does the heavy reliance on return of capital (ROC) mean for shareholders? For investors considering IGA—or those already invested—the answers could determine whether they're collecting dividends or merely seeing their capital erode.

The ROC Reality Check

Voya's July 2025 distribution, set at $0.085 per share, highlights a stark truth. According to the fund's latest disclosures, 75.3% of this month's payout is classified as return of capital. Year-to-date through June, ROC accounts for 47.4% of cumulative distributions, with the remainder split between net investment income (25.6%) and long-term capital gains (27%). This isn't a temporary blip: since 2023, ROC has consistently made up over 40% of IGA's distributions.

ROC is a red flag because it means the fund is returning investors' principal rather than profits. Over time, this reduces the fund's net asset value (NAV), potentially creating a hidden tax liability and signaling that income-generating assets may be underperforming.

Why the Heavy Reliance on ROC?

Voya's strategy offers clues. The fund employs a managed distribution plan, promising steady monthly payouts regardless of market conditions. This fixed-schedule approach often leads to ROC when investment income and capital gains fall short of the target.

The fund's portfolio structure adds complexity. While its 5-year annualized return of 11.56% (at NAV) suggests resilience, its strategy of writing call options on equity indexes and hedging currency exposure introduces volatility. Derivatives can amplify returns in bull markets but strain income stability during downturns.

Another clue lies in IGA's persistent discount to NAV. As of June 2025, its shares traded at a 7.59% discount to NAV, a trend that has persisted for years. This discount reflects investor skepticism about the fund's ability to sustain distributions or grow assets.

Risks and Implications for Investors

The math is clear: ROC isn't free. When a fund returns principal, it reduces shareholders' cost basis, which could increase future capital gains taxes or shrink the eventual payout upon sale. For example, if an investor paid $10 per share and $0.241 of their YTD distributions were ROC, their adjusted cost basis drops to $9.76—a silent tax trap.

Moreover, the fund's 1.00% expense ratio eats into returns, leaving less room for profit-driven distributions. With the annualized distribution rate at 9.89% of NAV, the math becomes precarious. If NAV stagnates or falls, the fund may need to raise ROC further to maintain payouts—a cycle that could erode investor capital over time.

The Bottom Line: Proceed with Caution

Voya Global Advantage remains an intriguing option for income investors, especially those willing to navigate its complexities. Its global diversification (68.96% in U.S. equities, with exposure to sectors like Financials and Industrials) and hedged currency strategy offer defensive qualities. However, the reliance on ROC demands scrutiny:

1. Tax Awareness: Investors must track ROC components closely to adjust cost bases and avoid unexpected liabilities.
2. Discount Dynamics: Buying at a discount to NAV reduces the immediate impact of ROC, but it doesn't resolve long-term sustainability concerns.
3. Performance Monitoring: If NAV growth falters, ROC could climb further. Investors should watch for distributions exceeding 10% of NAV—a red flag.

For now, IGA's managed distribution plan and historical returns justify its place in some portfolios—but only for those who understand the risks. Income seekers should pair it with funds less reliant on ROC and maintain a watchful eye on Voya's evolving strategy.

In a market where steady dividends are coveted, the return of capital game can be a double-edged sword. Investors in IGA are playing a high-stakes bet: that Voya's managers can sustain the balance between income and principal long enough to justify the trade-off.