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JPMorgan Hedged Equity -JHQDX (JHQAX)



  • I've enjoyed the discussion on JHQAX by all, charts, analysis and opinions. All information added makes me even more satisfied that I own the fund. Comparing one alternative fund to another is very difficult since fund A and fund B's alt methods are usually apples and oranges and so might be the results. I would not compare this fund to a short fund or even a market neutral fund.

    @BaluBalu, if you do glean added information from the Bogglehead forum, can you please update this thread with that info?
  • edited December 2021
    carew388 said:

    Also JHDAX and JHTAX remain open, but I have no idea how they compare with JHDAX .

    carew, I assume you meant to say: "how they compare with JHQAX."

    Hopefully, the excerpt below from the M* Fund Analysis report of 9/2/2021 by Erol Alitovsky will be helpful:

    JHDAX and JHTAX "have the same objective of providing smoother returns by tempering downside and upside returns via a systematically implemented options strategy. The newer funds follow the same approach of the original Hedged Equity strategy, however, instead of purchasing options on the last business day of the quarter, Hedged Equity Fund 2 purchases three-month options on the last business day in January, April, July, and October, and Fund 3 trades its options on the last business day of February, May, August, and November.

    The team purchases put options 5% below the S&P 500's value. To offset the cost of the put option, the team first sells put options 20% out-of-the-money. This structure should generally protect the fund from thre-month losses in the 5-20% range; if markets fall less than 5%, the fund should fall in line with the market, and if the market falls more than 20%, the fund should incur the same incremental losses beyond negative 5%. The team also sells call options to generate enough option premium income to cover the remaining cost of the hedges. [...]

    Over the short term, the return profile of Fund 2 and 3 may vary from the original Hedged Equity fund depending on the price path of the S&P 500, but over the long run all three funds should have very similar risk/reward characteristics. Investors looking to make an allocation to this strategy would be wise to pair both Hedged Equity Fund 2 and 3 as this lowers market price path dependency, or the investment's sensitivity to short periods of market volatility.

    Reasonable fees coupled with JPMorgan's transparent process make these funds an interesting option."

    Good luck,

  • Thanks @Fred495. Am I wrong to think then that the smoothest ride, least variability, would be to own all 3 funds so that there is a continuous monthly purchase of 3-month options? Almost like maintaining a CD ladder. As you stated, the risk return profiles should all be the same over time, non-dependent of 3 month-sequence the options are purchased, so over time it probably doesn't mater which fund you are in.
  • @MikeM: "If you do glean added information from the Bogglehead forum, can you please update this thread with that info?"

    Certainly. I forgot about the thought of going there. I have never been to it but only heard others mention it. If you offhand know the link to that site, please share, which will prevent me from entering unscrupulous sites. Thanks.
  • @BaluBalu, never been to the Boglehead site and actually don't frequent any other but MFO.
  • Interesting and useful discussion.

    there are a lot of option hedged vehicles available. I have been satisfied with JHQAX and GATEX; both are close in preformance.

    Simplify Asset management has a number of relatively new option based ETFs that closely match these hedges.

    HEQT has a ladder of puts and call, aiming to ameliorate anything greater than a 5% loss in SP500, similar to JHQAX

    SPD and CYA are others to look at

    For the intellectually curious, I would recommend Harvey Bassman's blog

    He produces a very detailed analysis of the usefulness of options to hedge volatility and inflation. Most of it is over my head, but it will give you a lot to think about and many of the Simplify ETFs are based on these ideas
  • +1 sma3 I'm interested in SPD JEPI and NUSI as those etfs have sufficient volume at Fidelity to allow market purchases.
  • Thank you @catch22 for the useful comparison.
  • edited December 2021
    @msf, I was trying to decide which one of this series to buy: Series 2 or 3. Series 1 is closed to new investors. The fund landing page at the bottom says, "if you want an optimal investment experience, select the fund based on when you are ready to invest and purchase shares prior to the reset of the 3-month hedged period."

    I charted the three funds in the series starting April 1, 2021 (to give me nine months of data) and I did not observe that dictum play out. I wish I knew how to post a comparative chart here for you to see.

    Any thoughts?

  • @Balu Balu. If you go into M* and read the 4th paragraph of JHDAX (series 2), in the top analysis summary ,the writer advises buying both series 2 and 3 as it "Lowers market price path dependency or the investments sensitivity to short periods of market volatility". Hope this helps.
  • edited December 2021
    Thanks @fundly. I saw that but wanted to see if I should be more surgical. As the fund website says, "Choose the fund that aligns with your initial investment date," the three funds are supposed to hold the same securities and should differ only by the timing of when the hedges are placed. But my reading of the chart does not appear to support this. So, may be I am stuck with buying both and not wait until end of January when Series 2 would renew its hedges.

    In any case, if you hold this series, in what proportion do you hold them?
  • Do not own yet . Still perusing. I would imagine that buying about the same amounts of each would make sense. Would then buy each just before the hedges renew for that series.
  • Without giving it too much thought, the fund site comment might be suggesting that fund's behaviour due to its use of short term options is somewhat like that of leveraged/inverse funds that reset quarterly. That is, the risk/return profile is as advertised only through a full cycle. Buy shares in the middle of a cycle and all bets are off.
  • Thanks @msf. That makes sense.
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