Harvest ETFs’ flagship healthcare fund, the Harvest Healthcare Leaders Income ETF – HHL-T, is built on these enduring themes. The fund’s strategy combines diversification across subsectors—pharmaceuticals, medical devices, managed care, and more—with a disciplined approach to selecting high-quality, market-leading companies.
A disciplined approach: Diversification and active income strategies
The process begins with narrowing a broad universe of healthcare companies to a focused portfolio of 20 holdings, all vetted for market leadership, innovation, and financial health. “I often say to people, look at the underlying holdings first,” MacDonald explains. “Are these the 20 stocks you want to hold long-term? If so, are you willing to forego a little upside each month for a big tax-efficient distribution? That trade-off has remained relevant over the years.”
A unique element of HHL’s strategy is its active covered call approach, which enhances monthly distributions while managing risk. By writing options on up to 33% of the portfolio, the fund generates consistent, tax-efficient income. “It’s not about hitting the enter key,” MacDonald explains. “We assess each position, weighing potential catalysts like FDA approvals or industry events to decide how much to write on a stock.”
This disciplined management has enabled HHL to deliver steady distributions for a decade, recently surpassing $500 million in payouts. Even during volatile markets, the fund has maintained its focus on balancing income and growth. “We’ve never missed a distribution,” MacDonald points out. “That kind of stability doesn’t happen by accident.”
While healthcare is less tied to economic cycles, it is not without risks. One common concern is politics, particularly regulatory changes that could impact the industry. However, MacDonald sees this as less of a factor in today’s environment. “Politics always come up as a potential risk,” he acknowledges, “but right now, it’s the quietest I’ve seen in a decade. The current policies, like the Inflation Reduction Act, are already being implemented, and there’s minimal new political rhetoric affecting the sector.”
