Balance income, total return and risk with JEPI
Today’s income investors face a tough choice – hold cash and core bonds paying low rates or extend into higher-yielding markets with more risk and less liquidity. The actively managed JPMorgan Equity Premium Income ETF (JEPI) seeks to resolve the dilemma by pursuing consistent monthly income and appreciation potential, with lower volatility than the U.S. stock market.
Income remains in high demand, but short supply
We're faced with a unique time where income has rarely been so scarce. Despite inflation accelerating recently, many view the pick-up as transitory, which has kept interest rates staunchly low. With that, clients are still desperately seeking income, and particularly in ways that do not mean taking on too much volatility or too little liquidity.
At the same time, asset classes that investors typically look to for income – like high yield, emerging market debt and preferred stocks – simply aren’t cutting it from a yield perspective in client portfolios. Therefore, investors will need to get more innovative in meeting income needs without exceeding risk tolerances.
A conservative equity ETF seeking income as the outcome
JEPI brings the same people, process and philosophy from an established mutual fund to a low-cost, liquid ETF offering daily transparency and tax efficiency. The strategy combines equities with options to strike a balance among yield, capital growth and risk. JEPI seeks to deliver a significant portion of the returns associated with the S&P 500 Index with less volatility, in addition to monthly income.
Here’s how it works: We use fundamental bottom-up research to build a higher-quality, lower-beta portfolio of U.S. large cap equities with less volatile earnings and share prices. We then sell index options against that long-only portfolio and use the premiums to generate income. The result is a conservative equity income strategy designed to reduce downside exposure by forgoing some upside participation.
With JEPI, investors receive:
- Fully active, broadly diversified solution: Leverages 20+ research analysts and an over 30-year proprietary process to find attractive stocks across sectors.
- Innovative income: Avoids the duration risks of higher-yielding bonds and the quality risks of higher-yielding stocks.
- Unique options strategy: Sells call options every week to adapt to changing market conditions. When volatility spikes, for example, JEPI has the potential to provide higher income when investors most need the cushion against fluctuating prices.
- 100% payouts: Distributes all income from dividends and options premiums, which are treated as coupons rather than gains so that capital isn’t returned to shareholders.
JPMorgan Equity Premium Income ETF at a glance
|Strategy Combines defensive U.S. large cap equity portfolio with options
overlay to pursue income and growth
Four ways to build stronger portfolios with JEPI
- Add to income portfolios to pursue consistent, attractive yields regardless of what happens with interest rates or equity dividends.
- Replace high yield bonds with a strategy offering greater liquidity, no duration risk and higher income potential in exchange for more beta.
- Deploy excess cash for investors looking to ease back into stocks with about one-third less volatility.
- De-risk equity portfolios by locking in gains from dividend strategies and reinvesting the proceeds in our more conservative alternative.
With rates low and volatility high, now’s the time to be creative and active in your search for yield. Discover how JEPI can help you solve for income without sacrificing quality, liquidity or long-term growth potential.
JEPI RISK SUMMARY: The price of equity securities may fluctuate rapidly or unpredictably due to factors affecting individual companies, as well as changes in economic or political conditions. These price movements may result in loss of your investment.
Investments in Equity-Linked Notes (ELNs) are subject to liquidity risk, which may make ELNs difficult to sell and value. Lack of liquidity may also cause the value of the ELN to decline. Since ELNs are in note form, they are subject to certain debt securities risks, such as credit or counterparty risk. Should the prices of the underlying instruments move in an unexpected manner, the Fund may not achieve the anticipated benefits of an investment in an ELN, and may realize losses, which could be significant and could include the Fund's entire principal investment.