At a glance
PAPI charges 0.29% a year, below the 0.39% average of the 8 funds most like it (the 3rd cheapest of 9). It has $399.8M in assets, the 6th largest of that group; it paid 7.39% of its price in distributions over the past 12 months, monthly. Over the past year it returned +17.5% with distributions reinvested (S&P 500: +11.5%), 3rd of those 9 funds; over three years it returned +13.1% a year. Its ten largest positions make up 7.5% of the fund, out of 189 in all.
The short version
Parametric Equity Premium Income ETF (PAPI) is an actively managed Morgan Stanley fund. It holds about 189 US dividend-paying stocks and sells short-term call options on the S&P 500 to earn extra income. As of October 27, 2026, its trailing yield was 7.39%, paid monthly. Its 0.29% expense ratio is below the 0.39% average for similar funds. The tradeoff is that the options limit its gains in strong markets.
Price history
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PAPI +17.5% over the year to Oct 27, 2026, total return with distributions reinvested.
How it has behaved
| YTD | 1 yr | 3 yr | 5 yr | 10 yr | Since start | |
|---|---|---|---|---|---|---|
| PAPI official prospectus, to Dec 31, 2025 | — | +6.63% | — | — | — | +9.07% |
| S&P 500® Index (reflects no deduction for fees, expenses or taxes) index, same period | — | +17.88% | — | — | — | +24.17% |
| Russell 1000® Value Index (reflects no deduction for fees, expenses or taxes) index, same period | — | +15.91% | — | — | — | +18.39% |
| PAPI price data to Oct 27, 2026 | +15.1% | +17.5% | +13.1% | — | — | +11.9% |
- Over the year to Oct 27, 2026, PAPI returned +17.5%, 3rd of 9 among similar funds.
- Its worst full calendar year was 2025 (+6.3%); its best was 2024 (+8.8%).
- The deepest fall in its price history was 14.3% (Nov 25, 2024 to Apr 8, 2025), recovered by Dec 10, 2025.
Show as a table
| Year | Price data | Prospectus (official) |
|---|---|---|
| 2026 (to date) | +15.1% | — |
| 2025 | +6.3% | +6.63% |
| 2024 | +8.8% | +8.88% |
| 2008 financial crisis stocks fell Oct 9, 2007 – Mar 9, 2009 | Before this security existed |
|---|---|
| 2020 COVID crash stocks fell Feb 19, 2020 – Mar 23, 2020 | Before this security existed |
| 2022 bear market stocks fell Jan 3, 2022 – Oct 12, 2022 | Before this security existed |
Dividends and income
Show as a table
| Year | Per share | Change |
|---|---|---|
| 2026 (to date) | $1.5900 | |
| 2025 | $1.9500 | +6.6% |
| 2024 | $1.8300 |
What's inside
As of Jun 30, 2026, the fund held 189 securities; the ten largest made up 7.51% of assets.
| Holding | Weight | |
|---|---|---|
| Corning, Inc. | 1.00% | |
| TD SYNNEX Corp. | 0.80% | |
| Cisco Systems, Inc. | 0.76% | |
| Power Integrations, Inc. | 0.73% | |
| Royalty Pharma plc | 0.72% | |
| Millicom International Cellular SA | 0.72% | |
| Texas Instruments, Inc. | 0.70% | |
| Avnet, Inc. | 0.70% | |
| Cummins, Inc. | 0.70% | |
| Reynolds Consumer Products, Inc. | 0.68% | |
| Target Corp. | 0.67% | |
| MSC Industrial Direct Co., Inc. | 0.66% | |
| Valero Energy Corp. | 0.64% | |
| Best Buy Co., Inc. | 0.64% | |
| International Business Machines Corp. | 0.64% |
By country
United States 90.53%Ireland 1.77%United Kingdom 1.18%Jersey 1.08%Canada 0.96%By asset type
Stocks 99.24%By sector
Sectors of the companies held, for the 43.1% of the fund in companies that have a stock page here; other holdings and cash aren't classified. Source: N-PORT holdings report as of Jun 30, 2026. Cash, money-market funds and derivatives are shown separately from the securities list.What changed recently
- Over the three months to Jun 30, 2026, investors added a net $62.9M (creations minus redemptions, per the N-PORT report).
- Monthly total returns reported for that quarter: -1.37%, -1.02%, +1.79%.
How it works
PAPI, issued by Morgan Stanley, is actively managed, with Parametric Portfolio Associates as sub-adviser, and runs two strategies. The first is a stock portfolio drawn from the Russell 3000 Index of U.S. companies. A rules-based model ranks dividend payers on income over the prior 12 months and on risk versus sector peers. Each sector generally gets an equal weight, as do the top-ranked stocks within it. The portfolio is rebalanced periodically and rebuilt yearly. As of June 30, 2026, its 189 holdings were led by Corning at about 1% of assets, and the top 10 totaled 7.51%.
The second strategy is selling call options on the SPDR S&P 500 ETF Trust or the S&P 500 Index. A call gives its buyer the right to buy at a set "strike" price; the seller collects a cash premium. The fund sells calls with strikes above the market price that expire in about two weeks, staggering expirations roughly every three to four trading days. It may use FLEX options, customizable exchange-traded contracts guaranteed by the Options Clearing Corporation. The fund gives up S&P 500 gains above the strike. Because the calls are tied to the S&P 500, not the fund's own stocks, a sharp rally can cost money on the options even if its dividend stocks lag.
What it really costs
- PAPI charges 0.29% a year, versus an average of 0.39% for the similar funds below (3rd of 9, cheapest first).
- Using the prospectus's standard example, $10,000 invested would cost about $30 in the first year and $368 over 10 years (assuming a 5% annual return).
| Cost of $10,000 (SEC example) | 1 yr | 3 yrs | 5 yrs | 10 yrs |
|---|---|---|---|---|
| PAPI | $30 | $93 | $163 | $368 |
Structure and tax notes
- Generates much of its income from selling options (directly or through notes). That income is usually taxed as ordinary income rather than as qualified dividends, and the strategy gives up some upside in strong markets.
In a retirement portfolio
PAPI combines dividend stocks with option premiums to pay a high monthly distribution, and in exchange it gives up some stock-market growth.
PAPI launched in October 2023, so it has no record from the 2008, 2020 or 2022 downturns. Its deepest drop was 14.3%, from November 25, 2024 to April 8, 2025. It took about eight months to recover, getting back to its prior peak by December 10, 2025. It gained in both of its full calendar years: 8.88% in 2024 and 6.63% in 2025, according to the prospectus. Its trailing yield was 7.39% as of October 27, 2026, paid monthly. Regular payouts could mean selling fewer shares in a weak market, but distributions aren't guaranteed. Option income is also usually taxed as ordinary income. The cost is 0.29% a year, or $30 on $10,000 in the first year under the SEC's standard example. The tradeoff shows in growth: in 2025 the S&P 500 returned 17.88%. Past results don't predict future results. A plan should look at the whole portfolio, not one fund.
Who it may suit — and who should look elsewhere
May suit
- Retirees wanting monthly income from US dividend stocks plus option premiums; the trailing yield was 7.39% as of October 27, 2026.
- Investors who want an equal-weighted spread across about 189 stocks. No single holding was much above 1% as of June 30, 2026.
- Income investors watching costs: the 0.29% expense ratio is below the 0.39% average for similar funds.
Look elsewhere if
- Investors seeking full stock-market growth: from launch through 2025 it returned 9.07% a year, versus 24.17% for the S&P 500.
- Taxable-account investors hoping for qualified dividends, since option premium income is usually taxed as ordinary income.
- Anyone wanting a long track record: it launched in October 2023 and wasn't around for the 2008, 2020 or 2022 bear markets.
Close alternatives
Matched by holdings overlap from the latest N-PORT reports.
| Fund | Overlap | Cost | Net assets | 1 yr | 3 yr |
|---|---|---|---|---|---|
| PAPI this fund | — | 0.29% | $399.8M | +17.5% | +13.1% |
| FVD First Trust Value Line Dividend Index Fund · different strategy | 34% | 0.6% | $8.04B | +11.1% | +14.2% |
| SDY SPDR S&P Dividend ETF · different strategy | 31% | 0.35% | $21.39B | +21.8% | +15.5% |
| JPUS JPMorgan Diversified Return Use Equity · different strategy | 30% | 0.18% | $457.6M | +16.3% | +19.0% |
| KNGZ First Trust S&P 500 Diversified Dividend Ar… · different strategy | 28% | 0.5% | $62.1M | +23.6% | +22.3% |
| CFO VictoryShares US 500 Enhanced Volatility Wt… · different strategy | 26% | 0.37% | $412.4M | +11.2% | +14.9% |
| CFA VictoryShares US 500 Volatility Wtd ETF · different strategy | 26% | 0.35% | $533.5M | +11.2% | +17.3% |
| HEJD VictoryShares Hedged Equity Income ETF | 26% | 0.55% | $36.5M | +1.8% | — |
Questions investors ask
Does PAPI pay monthly dividends?
Yes. PAPI pays distributions monthly, and its stated objective is consistent monthly income. Over the 12 months to October 27, 2026, it paid $2.07 per share, a trailing yield of 7.39%. The money comes from two sources: dividends from its stocks and premiums from selling call options on the S&P 500. The prospectus warns that distributions aren't guaranteed. Payouts can change if companies cut dividends or option premiums shrink.
Is PAPI good for retirement income?
It is built for income, with clear tradeoffs. It paid a 7.39% trailing yield monthly as of October 27, 2026, and charges 0.29% a year. Selling call options limits its gains, though. In 2025 it returned 6.63%, versus 17.88% for the S&P 500. Its history is short. It launched in October 2023, and its deepest drop, 14.3%, took about eight months to recover. Option income is also usually taxed as ordinary income.
What's the difference between PAPI and HEJD?
Both pair a stock portfolio with an options strategy, and about 26% of their holdings overlap. PAPI is cheaper, with a 0.29% expense ratio versus 0.55% for the VictoryShares Hedged Equity Income ETF. It is also much larger: about $400 million in net assets as of June 30, 2026, versus about $36 million for HEJD as of December 31, 2025. One-year price returns to October 27, 2026 were 17.5% for PAPI and 1.8% for HEJD. Their option approaches may differ, so they are worth comparing prospectus by prospectus.
Why does PAPI lag the S&P 500?
Mostly because it sells call options. Selling them earns income now but gives up gains above each option's strike price, and those options are written on the S&P 500 itself. The stock side also differs from the index. It holds equal-weighted dividend payers across sectors, not the large growth companies that dominate the S&P 500. Through 2025, PAPI returned 9.07% a year since launch, versus 24.17% for the S&P 500 and 18.39% for the Russell 1000 Value Index.
How are PAPI's distributions taxed?
Partly at ordinary income rates. Income from selling options is usually taxed as ordinary income rather than as qualified dividends, which get lower rates. That can matter for a high yield like PAPI's 7.39% as of October 27, 2026. The prospectus says the managers may use tax strategies to make distributions more tax-efficient. One example is selling losing stocks to offset gains from the options. Holding the fund in an IRA or 401(k) avoids the yearly tax question entirely.