These income funds offer double-digit yields – but come with cost and complexity. How they work

A category of exchange-traded funds offering eye-catching coupons is creating buzz among the income-seeking set, but investors who want to dabble in these offerings should prepare to do their homework. Enter the autocallable ETF, an offering that aims to bring a strategy that's normally for the institutional set to the retail investor. These funds can tout weighted average coupons that are upward of 10% — but the mechanisms that are behind these rates are complex. "The yield is definitely one of the biggest draws to these products," said Zachary Evens, manager research analyst at Morningstar. "In the derivative income category, we're seeing more interest because investors are able to get these appetizing yields that can't be achieved in traditional asset classes or historically through other more broadly available products." Morningstar's derivative income category includes 260 funds and $182.77 billion in assets, which include covered call strategies like JPMorgan Equity Premium Income ETF (JEPI) . Autocallables are a subsector of this cohort, accounting for 19 ETFs with $2.25 billion in assets across the board, Evens said. Of these, the Calamos Autocallable Income ETF (CAIE) is the biggest, approaching $1 billion in assets and its one-year anniversary on the market. The FT Vest Laddered Autocallable Barrier & Income ETF (ACYN) is in a distant second with $615 million in assets, according to Morningstar. …