Introducing KQQQ: A Large Cap Tech ETF with Dynamic Downside Mitigation

Investors today face a clear challenge. The three to five-year outlook for large-cap tech stocks remains compelling. But these names have led the markets to all-time highs, raising concerns about a looming correction. How can an investor gain strategic exposure to such   exciting growth companies, without making a tactical mistake when it comes to timing their allocation?

An innovative new ETF may offer the solution. The Kurv Technology Titans Select ETF (Ticker: KQQQ) seeks to maximize total return by actively managing a portfolio with concentrated exposure to high conviction technology giants, while at the same time generating potentially tax-efficient income.

Large technology firms have been the growth engine of the economy (and indeed, the market), for quite some time now. And there’s little reason to believe this will change anytime soon. If anything, the embrace of generative AI should further cement these companies’ place as market leaders. What’s more, a curious characteristic of today’s tech giants is that they have exhibited similar performance to broad indices during corrections—but performed better during market upswings. Talk about a favorable risk-reward proposition.

KQQQ aims to own 15-20 large-cap tech stocks at any given time. Crucially, KQQQ is not limited to the Nasdaq 100, nor those names officially classified as technology companies. This feature allows the portfolio managers to own a company such as Oracle (which isn’t listed on the Nasdaq)—and it also means the ETF can own Amazon (which technically is a consumer company).

The ETF is slightly overweight stocks in the portfolio with the best price momentum. As most traders intuitively know, names that are going up tend to keep going up, until they reach a pivot point.

Of course, some of the stocks owned by the ETF may at times lack momentum. In these situations, KQQQ writes call options, which can generate income for the ETF—and may be distributed to investors on a tax-advantaged basis.

The ability to write covered calls against portfolio holdings becomes arguably even more important when equity markets experience sharp selloffs. In these episodes, the ETF writes call options against every name in the portfolio, providing some measure of downside mitigation for investors. With market corrections comes higher options premiums (due to a rise in implied volatility), further enhancing the income received by KQQQ.

Many income investors shy away from tech stocks, as dividends are either paltry or non-existent. As a result, these individuals end up owning ‘old economy’ stocks in the financial, energy, or utility sectors. In the process they end up sacrificing the growth that comes from large-cap tech.

KQQQ solves this problem. Investors can have their cake (access to growth companies) and eat it, too (receive income). Add in savvy downside mitigation and that’s a recipe for success.