The VistaShares Target 15 Berkshire Select Income ETF (ticker: OMAH) presents an innovative way for income-focused investors to gain exposure to Warren Buffett’s investment portfolio. Since its inception in March, the fund has attracted nearly $250 million in assets, delivering a robust 15% annualized distribution rate, paid monthly. The strategy combines equity holdings with a call-option overlay to generate consistent income.
The ETF invests 10% of its assets in Berkshire Hathaway’s Class B shares and the remaining 90% across 20 stocks from Berkshire's equity portfolio. Key holdings include Apple (10.2%), Berkshire Class B shares (9.8%), American Express (8.4%), and Coca-Cola (6.2%), with allocations weighted by Berkshire’s positions. The ETF rebalances quarterly, with the last adjustment in May.
VistaShares CEO Adam Patti highlights the appeal of mirroring Berkshire’s portfolio while addressing the lack of a dividend from Berkshire’s shares. “Warren Buffett is the greatest investor of all time, and Berkshire attracts a broad investor base. By mirroring the portfolio and integrating a call-writing strategy, we aim to provide investors with a target 15% annual yield,” he explains.
Income-Focused Strategy with Call Options
The fund’s call-writing strategy, a method of selling covered call options on its holdings, generates the income necessary to meet its distribution goals. While this limits upside potential during strong bull markets, it positions the ETF to perform well in flat or modestly rising markets. Patti acknowledges that “any income strategy will not keep up in an aggressive bull market due to the options,” but emphasizes the reliability of income generation in less volatile conditions.
However, this strategy doesn’t provide downside protection during market downturns. Instead, the monthly income distributions aim to cushion losses. The ETF charges an annual fee of 0.95%.
Performance Metrics
Since its launch, the fund has maintained a flat total return, offsetting a 4% decline in the Berkshire index it tracks with income from its options strategy. While the ETF’s primary goal is to meet its ambitious 15% income target, investors seeking significant capital appreciation should temper expectations. “Our No. 1 goal is to hit 15%, with capital appreciation as a secondary priority,” Patti notes.
Given its tax-efficient income orientation, the ETF is particularly suited for retirement accounts like IRAs and 401(k)s, where distributions aren’t immediately taxable.
The Broader ETF Landscape
The ETF operates in a competitive market of income-focused funds that use call-writing strategies. For example, the $40 billion JPMorgan Equity Premium Income ETF (JEPI) offers an 11% current yield with a similar structure. VistaShares aims to differentiate itself with its alignment to Berkshire Hathaway’s portfolio and higher yield target.
Expansion Plans
Building on the early success of the Berkshire ETF, VistaShares plans to introduce several new actively managed ETFs based on the disclosed holdings of renowned investors Bill Ackman, Stan Druckenmiller, and Michael Burry. These funds will be available in two formats: one mirroring their stock holdings and another integrating a call-writing strategy. Additionally, VistaShares plans to launch a second Berkshire ETF, identical in portfolio composition to the existing fund but without the options overlay, for investors prioritizing capital growth over income.
The new ETFs, expected by Labor Day, reflect VistaShares’ broader strategy to cater to investors seeking income and portfolio diversification through high-profile, actively managed strategies.
In summary, the VistaShares Target 15 Berkshire Select Income ETF offers wealth advisors and RIAs an intriguing option for clients seeking predictable income from a portfolio aligned with Buffett’s legendary investing principles. While the call-writing strategy limits upside potential, it delivers substantial income in a market where reliable yields are increasingly scarce.
