Investors Pivot to JEPQ as Returns Outpace JEPI
With JEPQ doubling JEPI’s year-to-date returns, investors are shifting toward the Nasdaq-focused income fund.
The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) is closing in on its older sibling, the JPMorgan Equity Premium Income ETF (JEPI), after a year of heavy inflows and stronger performance.
Since January, JEPQ has pulled in $9.6 billion, more than double the $4.4 billion that JEPI has gathered. JEPI remains the largest actively managed ETF in the U.S. with $41 billion in assets, but JEPQ has climbed to $32.2 billion, making it the fourth-largest active ETF.
JEPI has risen modestly from $37 billion in AUM at the start of the year, while JEPQ has surged from $20.8 billion.
Performance and Strategy
JEPQ has benefited from both strong inflows and better performance. On a total return basis, JEPQ is up 16% this year, more than double JEPI’s 7.7% gain.
Both are still trailing their benchmarks, though JEPQ is lagging less. JEPI’s 7.7% return compares with an 18.6% gain for the S&P 500; JEPQ’s 15.6% rise stands against a 23.5% increase for the Nasdaq-100.
Both funds are part of the rapidly expanding category of option-overlay ETFs that generate cash by selling calls. These strategies trade away part of their upside in exchange for option premiums that can be paid out to shareholders.
JEPI implements a covered-call approach on the S&P 500 using equity-linked notes (ELNs), which can account for up to 20% of the portfolio. The remainder is invested in a basket of low-volatility, value-leaning U.S. stocks, with ESG screens sometimes influencing security selection.
JEPQ applies a similar structure to the Nasdaq-100, using ELNs to replicate a Nasdaq-based covered call strategy and distributing the resulting premiums monthly.
Yields Remain the Big Draw
Yield is a major draw for these ETFs. JEPI currently advertises a 30-day SEC yield of 8.2%, while JEPQ is at 11.5%. Investors have been willing to tolerate benchmark underperformance in exchange for those high monthly payouts, though the trade-off shows up clearly when looking at inception-to-date returns.
Since launching in May 2022, JEPQ has gained 75%, trailing the 101% return of the Invesco QQQ Trust (QQQ). JEPI, which debuted in May 2020, has returned 85%, well behind the 151% gain for the Vanguard S&P 500 ETF (VOO).
Despite the underperformance, demand for steady payouts has kept the flows coming.
