Historically, investors looking for reliable income could purchase a bond and collect the interest. They could buy a handful of blue-chip stocks and cash in the dividend checks. Investors definitely still derive consistent income this way, but the search for high-income investments has evolved. For only the past five years or so, synthetic income products have seen exponential growth alongside interest in alternative income strategies. Total assets under management (AUM) for synthetic income funds has increased from $3.4 billion in 2020 to over $200 billion as of May 22, 2026.¹

Synthetic income products overlay a derivative on top of an underlying asset in aim of generating income in a way it wouldn’t naturally if invested in directly. It’s like buying a home, which itself is a valuable asset, then renting out a room to potentially generate income.² The home itself doesn’t generate monthly income, but the “rental overlay” may create a new potential source of income where none existed before, though not without risk. What was once shelter can potentially be turned into a paycheck.

The synthetic income overlay comes in many forms, but is usually some type of derivative, like an options selling strategy. By using options to generate income, the fund adjusts capital gains exposure or downside risk in exchange for the potential of consistent, high income.³ These overlays can more or less be applied to any traditional underlying asset, from a single stock to a broad market index, though the two options are taxed very differently.* Synthetic income funds also include fixed income, cryptocurrency, commodities, and multi-asset.

Autocallable notes are one type of synthetic income product that have seen explosive growth over the last decade.⁴ An autocallable note is an equity market-linked investment designed to provide high income and return of principal at a set maturity date (or earlier) if specific market conditions are met. 

Historically, autocallables were largely inaccessible to everyday investors. Today, autocallables are available in ETF wrappers, which represents a potential market opportunity to smooth cash flow, lower concentration risk, and provide potentially high-yield income, even in some cases when markets are volatile.

TrueShares offers two autocallable ETFs, the S&P Autocallable High Income ETF (PAYH) and the S&P Autocallable Defensive Income ETF (PAYM), that seek to generate high monthly income while reducing downside risk. PAYH is based on the performance of the S&P 500 Futures 35% Intraday VT 4% Decrement Index. PAYM is based on the performance of the S&P 500 Futures 20% Intraday VT 2% Decrement Index.

Both TrueShares autocallable income ETFs seek to provide consistent high income in a way that didn’t used to be as accessible as it is today.

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*Synthetic income products based on individual equities are taxed as short-term capital gains whereas those based on an index are taxed differently (60% of the gain is treated as long-term and 40% as short-term, regardless of the holding period).⁴ This is provided for informational purposes only and should not be considered tax advice. Please consult your tax advisor for further assistance.

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1. https://www.etfaction.com/synthetic-income-etfs-hit-200b-weekly-inflows-top-2-15-billion-as-yield-demand-surges/
2. https://www.etfaction.com/channel-intro-synthetic-income-etfs/ 
3. https://www.etfaction.com/investment-primer-the-non-traditional-synthetic-income-composite/ 
4. https://www.wsj.com/finance/investing/markets-are-lulling-themselves-into-a-false-sense-of-security-4e7f48eb 

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Definitions:

Derivative: A derivative is a kind of financial contract between two or more parties, the value of which fluctuates based on the price of one or more underlying assets.

Principal barrier: the level the reference index needs to be above on the maturity date of an autocallable note or fund in order for the principal to be returned in full.

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Fund Disclosures:

These products employ a complex investment strategy involving derivatives and structured-product like payout profiles and may not be suitable for all investors.

The funds seek high income, but predictable income is not a guarantee and actual income may decline in certain market conditions. A decline in the index or failure to meet certain performance thresholds may reduce or eliminate monthly income.  There is no assurance that the Funds’ investment strategy, including their use of derivatives, contingent downside features, or income-generation techniques, will be successful. The strategy may not achieve its objectives, may not perform as expected in different market environments, and could result in investment losses. The funds are new with no operating history.

An investment in TrueShares S&P Autocallable High Income ETF and TrueShares S&P Autocallable Defensive Income ETF is subject to numerous risks, including possible loss of principal. The ETF is subject to the following principal risks: Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk associated with ETFs; Equity Market Risk; Management Risk; Market Capitalization Risk; Market Risk; New Fund Risk. A full description of risks is in the prospectus.