I started researching and analyzing covered call ETFs to see what was new and innovative but after coming across 140 different variants of nearly the same thing I stopped. It then occurred to me to simplify my search and look at things through the lens of the Pareto Distribution.
In a nutshell the Pareto principle states that 80% of wealth ends up with 20% of entities. I decided to upload the covered call ETF list I had which had values for AUM (Assets Under Management) to test my theory and AI didn’t disappoint.
AI Response:
Great question — this is exactly the right way to think about this space.
Short answer: yes, the Pareto principle holds very strongly for the covered-call / derivative-income ETF universe you showed — even more strongly than 80/20.
Below is a clear, data-driven explanation using the AUM figures visible in your images (no assumptions beyond what you uploaded).
Step 1: What universe are we analyzing?
From your screenshots, we have ~40 option-income / covered-call ETFs, ranging from tiny niche funds (~$130M AUM) to giants (>$40B AUM).
This is a good, representative universe.
Step 2: Identify the “top 20%”
20% of ~40 funds ≈ 8 funds
Let’s list the largest by AUM from your images:
Top AUM Funds (approximate, from images)
| Rank | ETF | AUM |
|---|---|---|
| 1 | JEPI | $42.6B |
| 2 | JEPQ | $34.0B |
| 3 | QYLD | $8.25B |
| 4 | QQQI | $8.05B |
| 5 | SPYI | $7.26B |
| 6 | DIVO | $6.11B |
| 7 | XYLD | $3.13B |
| 8 | GPIX | $2.89B |
Top 8 funds AUM ≈ $112.3B
Step 3: Total AUM of the full set
If you add all remaining funds in your images (most between $150M–$1.3B), the entire universe comes out to roughly:
Total AUM ≈ $135–140B
(This is conservative and consistent with the screenshots.)
Step 4: Pareto test
Now the key ratio:
- Top 20% of funds (≈8 ETFs): ~$112B
- Total universe: ~$135–140B
Result:
~80–83% of all assets are concentrated in ~20% of the ETFs
✅ The Pareto Principle holds almost perfectly — arguably even more extreme than 80/20.
Step 5: What this tells you (important insight)
This concentration is not accidental.
It reflects:
- Investor preference for simplicity and trust
- Brand strength (JPMorgan, Global X, NEOS)
- Funds that:
- Have survived multiple market regimes
- Offer more stable income
- Avoid “yield at all costs” designs
Notice what dominates the top:
- JEPI / JEPQ
- QYLD / XYLD
- SPYI / QQQI
- DIVO
These are not the highest-yielding funds — they are the most durable.
Step 6: What the bottom 80% tells you
The remaining ~80% of funds:
- Split only ~17–20% of AUM
- Are mostly:
- New launches
- Niche strategies (0DTE, crypto, AI, single-sector)
- Yield-maximizers with higher decay risk
This is classic financial natural selection.
Bottom Line (Plain English)
Yes — the Pareto Principle absolutely applies here.
A small handful of funds control the overwhelming majority of capital, and those funds tend to be the least aggressive, most institutionally acceptable designs.
If you’re thinking like a retired or near-retired investor, this is a powerful signal:
- The crowd isn’t stupid
- Capital clusters around survivability, not yield headlines
My Thoughts
The wisdom of the crowd here works for me. I am going to stick with the top covered call ETFs and skip all the new niche stuff for now. I already own a few of these ETFs and some not on the top 8 but certainly in the top 20. It’s also important to pay attention to how these covered call ETFs distribute their earnings because it will impact your tax bill significantly. You can read a comparison between JEPI and SPYI here.
Share The Wealth
Are you surprised by the Pareto distribution showing up in covered call ETFS?