How a Niche Fund Became the Biggest Active ETF

Observant1

Barron's recently published an article about JEPI titled How a Niche Fund Became the Biggest Active ETF.

"All in all, J.P. Morgan Premium Equity Income provides an attractive take on the covered-call strategy.
But investors still need to think carefully about whether this have-your-cake-and-eat-it-too strategy really deserves a place in their portfolios."

"Covered-call funds’ yields may be comparable to those of bond funds, but they don’t necessarily offer the same downside protection. In a bear market, the options premium should provide some cushion against losses,
but beyond these, the funds have all the downsides of a stock portfolio."

MSN link to article for those without a Barron's subscription:
https://www.msn.com/en-us/money/savingandinvesting/how-a-niche-fund-became-the-biggest-active-etf/ar-BB1m0IxK

Observant1

The JEPI fund managers also run JHEQX which has an inception date of 12/13/2013.
These two funds are not clones.
JEPI is "designed to provide current income while maintaining prospects for capital appreciation."
JHEQX is "designed to provide capital appreciation through a diversified equity portfolio,
while hedging overall market exposure."
With that said, here's a Portfolio Visualizer Backtest for JHEQX, RLBGX, VWENX, and VFIAX.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5276rWmbK9uD5mgRq56Fhw

FD1000

You did a good job providing evidence of why the SP500 is what most should hold.

Observant1

FD1000 said:

You did a good job providing evidence of why the SP500 is what most should hold.

Shouldn't an individual investor's circumstances and risk tolerance / risk capacity be considered?
While S&P 500 index funds are an excellent choice for US large cap exposure,
high-quality bonds should probably be included in many investor's portfolios for risk reduction.
I know you primarily invest in bonds and routinely avoid stocks based on prior posts.
One size does not fit all...

BaluBalu

JEPI’s precursor is JEPIX

Observant1

Thanks, BaluBalu!
Here's the Portfolio Visualizer Backtest with JEPIX replacing JHEQX.
The time period is relatively short - from Sep 2018 to Apr 2024.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5bYshExt5XmyluRKegSyN8

sma3

I think the hedged equity fund is JHQAX

Observant1

JPMorgan Hedged Equity Fund
JHQAX - Share Class A
JHEQX - Share Class I

I fixed the typo for JHEQX.
Thanks for bringing this to my attention!

WABAC

Switched in DIVO in place of RLBGX

Observant1

DIVO fares well against JEPIX and VWENX during this time period.

BaluBalu

If you are going to trade / use as a market timing tool, I would prefer DIVO (being the better one among the overwrite funds) but if you are going to buy and hold why would you prefer DIVO over SPY or its active variants? I am trying to learn the niche I may need to pay attention to. May be I should direct the Q to @WABAC.

WABAC

@BaluBalu, you may not need to pay attention to it at all.

I'm taking it for a spin in the IRA because of it's low standard deviation and low beta.

I'm not sure how long it will stay there. The debt/equity ratio is a little high for my taste. I saw your comments on that in one of the recent threads, and it got me to thinking . . .