Redefine your client engagement with the new Harvest ETFs
This article was produced in partnership with Harvest ETFs
Crossing $2.5 billion in assets in its first year wasn’t just a milestone for Harvest’s single-stock ETF suite. It captured a broader shift in the market, where covered call strategies are quickly moving from niche options to core holdings in Canadian advisor portfolios.
Once seen as niche products for yield-hungry investors, these ETFs are increasingly being used as foundational income tools, blending cash flow generation with equity exposure in ways that traditional strategies cannot easily match.
The appeal is easy to understand. Clients want income, but they do not want to sacrifice all the upside to earn it. They are asking for portfolios that can provide cash flow today without undermining the long-term compounding they rely on for tomorrow. That shift in expectations is reshaping how advisors think about income solutions and driving a closer look at covered call strategies to solve for both needs at once.
“The goal is not to squeeze every last drop of income from a portfolio,” says Chris Heakes, Senior Portfolio Manager at Harvest ETFs. “It is to deliver income without entirely cutting off future growth. If we cover too much of the equity exposure, we limit the upside. If we cover too little, we leave income on the table. The real skill is in finding the balance between those two forces.”
For Harvest, that balance typically means writing 30 to 40 percent of the underlying stocks, comfortably below the 50 percent cap. Leaving a meaningful portion of the portfolio uncovered ensures it is positioned to capture gains when markets rally. “That uncovered portion is critical,” Heakes adds. “It keeps clients positioned to benefit from market strength while still receiving regular distributions.”
Borrowing carefully, building intentionally
Covered call overlays are only one part of the design. Leverage, when applied thoughtfully, can enhance both income and growth potential. In its single-stock ETFs, Harvest borrows 25% of the fund’s net asset value to create more equity exposure, a level that provides a lift without fundamentally altering the portfolio’s risk profile.
The approach changes in multi-stock products. HHIS, which holds a basket of enhanced single-stock ETFs, does not add additional leverage because it is already embedded in the underlying ETFs. HHIC, which holds stocks directly, does make use of borrowing but within the same disciplined framework.
“We are very intentional about how we use leverage,” Heakes says. “It is not about amplifying risk. It is about enhancing outcomes while keeping the strategy aligned with its purpose. In income-focused products, you are not just managing volatility, you are managing opportunity cost. If leverage helps us maintain growth potential without taking on undue risk, then it is doing its job.”
That discipline is significant for advisors. Many income-focused products on the market lean heavily on leverage or write options across the entire portfolio, often trading away future growth for short-term yield. Harvest’s approach seeks to avoid those trade-offs and instead focuses on creating strategies that support client objectives across different market environments.
Different tools for different jobs
The rapid adoption of covered call ETFs is not just about yield. It reflects how advisors are rethinking their toolkit for client portfolios. Some prefer concentrated single-stock ETFs, which offer targeted exposure to specific companies while adding income through call overlays. Others choose diversified solutions like HHIS or HHIC, which spread exposure across a broader set of names and can act as a core allocation.
“Both approaches are valid,” says Heakes. “We are seeing advisors use them together, with individual ETFs for specific tilts and diversified strategies as a core income engine. It is about building the mix that best aligns with client goals.”
That flexibility is part of why covered call ETFs are resonating. They allow advisors to tailor portfolios more precisely, combining conviction-driven exposures with broader income solutions. They also offer a way to introduce higher cash flow into client accounts without having to exit equities or compromise on growth potential.
Tax efficiency as a performance driver
Beyond yield and growth, the tax treatment of these strategies is another critical consideration. Harvest’s Canadian single-stock ETFs are structured as Mutual Fund Corporations (MFCs), while its U.S. offerings use mutual fund trusts. This is not simply an administrative detail. It is a design choice with real implications for client outcomes.
“Covered call premiums are taxed as capital gains rather than income,” Heakes notes. “That is a meaningful difference for taxable investors. In addition, some of our strategies distribute Canadian-eligible dividends, which further improve after-tax results.”
That focus on tax efficiency extends beyond client returns. It also supports net asset value stability and helps make distributions more predictable, benefits that resonate with advisors managing client expectations and long-term plans.
The broader message is that income no longer needs to come at the expense of growth. Through careful structuring, measured leverage, and attention to tax outcomes, covered call strategies can support both. For advisors, the opportunity lies in knowing when and how to use them.
