No. of Recommendations: 12
JPMorgan Equity Premium Income ETF (JEPI) has $27B Assets under management 3 years after launch. JEPI buys some S&P 500 stocks with low volatility, and sells call options. The goal is 1.5% dividend yield plus 6.5% options premiums.
The outcome:
Higher Bear market returns: collect the premiums and hold the stocks.
Lower Bull market returns: collect the premiums and sell the stocks at the strike price.
This ETF has grown quickly. Some investors want less risk than the S&P 500. The usual advice is to mix in some bonds, but call options might be another way. Mixing in 40% bonds has a multiplier effect: both returns and volatility are decreased by about 40%. Using call options has an additive effect: bear market returns are increased by the fixed premium, and bull market returns are capped. (Some investors want more risk and take the other side of the trade: buying the call options.) JEPI had a good 2.5 year start:
Portfolio Analysis Results (Jan 2021 - Jun 2023)
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio Market Correlation
60:40 SPY BND $10,000 $10,838 3.27% 12.64% 16.50% -16.15% -20.16% 0.18 0.25 0.98
JEPI $10,000 $12,368 8.87% 12.27% 21.51% -3.53% -12.99% 0.62 1.03 0.89
https://www.portfoliovisualizer.com/backtest-portf...Portfolio Analysis Results (Jan 1987 - Jun 2023)
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio Market Correlation
60:40 SPY BND $10,000 $210,471 8.71% 9.57% 29.74% -20.19% -30.78% 0.62 0.91 0.97
SPY $10,000 $387,543 10.54% 15.32% 37.45% -37.02% -50.97% 0.54 0.78 0.99
The Most Successful ETF Launch of All Time Raises Questions, Jun 27, 2023
"JPMorgan Equity Premium Income ETF JEPI has been a phenomenon since launching in May 2020. By our estimates, it gathered about $27 billion in net inflows in its first three years of existence, easily making it the most successful exchange-traded fund debut in history"
https://www.morningstar.com/alternative-investment..."JEPI is a conservative equity solution comprised of two fundamental building blocks: a defensive equity portfolio of U.S. large cap stocks and a disciplined options overlay." (One-month, out-of-the-money call options
https://am.jpmorgan.com/content/dam/jpm-am-aem/ame... 