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jhqax closing to new investors

A couple of months ago jhqax was mentioned in a thread about alternatives to low bond yields. If you go to M*star their analyst reports shows that it it closing on Mar. 12 but you have to be a premium member to access the whole story and I am not.


  • edited February 2021
    5.25% front-load. Nope. This method sounds too complicated for ME. (I had to edit this down just a bit. Straight from the Morningstar report.)
    ...will close to new investors starting March 12, 2021. The fund will no longer be able to receive subscriptions from new investors from that date; however, existing investors will continue to have the ability to make additional investments or to reinvest distributions. Assets under management have swelled to $15.6 billion as of Jan. 31, 2021, following a rush of inflows in 2020. Soft-closing the fund is a prudent decision aimed at preserving the strategy’s ability to effectively execute options trading, and further reinforces its Morningstar Analyst Rating of Silver for the cheapest share classes.

    Attractive fees, a transparent and consistent process, and an experienced manager elevate JPMorgan Hedged Equity ahead of its peers... Morningstar Analyst Rating of Silver.

    ...aims to provide smoother equity returns by a systematically implemented options strategy. (T)he team purchases puts 5% below the S&P 500’s value. To offset the cost of the puts, the team first sells puts 20% out-of-the-money protect the fund from quarterly 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 remaining cost of the hedges. The systematic options overlay structure has led to a dependable outcome even in the most volatile markets, such as in the first quarter of 2020, when it contained losses to less than 5%.

    Hamilton Reiner is the lead manager and architect of the strategy. Reiner joined JPMorgan in 2009 and has over three decades of equity and options trading experience.

    Assets have grown at a staggering rate, but the strategy should be able absorb the influx relatively easily as it uses liquid securities. In the past three years through August 2020, assets have grown from just over $1 billion to nearly $9.7 billion thanks to solid performance and low fees. Institutional and retirement share classes, in particular, are a lot cheaper than the options-based Morningstar Category average. These low fees coupled with JPMorgan’s transparent process make it an interesting option.

    This fund uses a well-defined and thoughtful approach to options trading. Its transparent and repeatable process should deliver predictable results over the long term. The strategy earns an Above Average Process rating.

    The strategy aims to provide a smoother ride to equity investing by purchasing 5% out-of-the-money put options and selling 20% out-of-the-money put options over a U.S. equity portfolio. This structure, called a put-spread, is designed to protect capital when markets sell off 5%-20% in a given quarter but also has a lower cost compared with outright put protection. However, since the short option position is so far out-of-the-money, management also sells a call option to cover the price of the long put position. The call options are usually sold 3.5%-5.5% out-of-the-money, depending on the amount of income needed to cover the cost of the long put, but periods of heightened volatility can move that target higher. The level at which the call strikes are written will determine the strategy’s upside cap for the quarter.

    The team intends to generate a small level of alpha in the equity portfolio by slightly overweighting attractively priced stocks and slightly underweighting expensive stocks based on fundamental analysis. Since the constitution of the equity portfolio closely replicates the S&P 500, the use of the index options is not problematic from a hedging perspective.

    The core long equity portfolio should track the S&P 500 closely as it constrains tracking error to 1.5% annually. It aims to outperform that index by tweaking the individual stock exposure within a 1-percentage-point range using a dividend discount model that ranks stocks from most attractive to least attractive based on forecast earnings and company-specific growth catalysts. The team creates a well-diversified portfolio that mitigates risk associated with individual holdings, with the resulting portfolio holding around 200 stocks. Sector weightings resemble the S&P 500 with modest underweightings in real estate and consumer staples and a small overweighting in consumer discretionary.

    The team constructs a zero-cost option overlay at the beginning of each calendar quarter and resets it at the end of the quarter. Call premiums received should improve with persistently high market volatility and higher interest rates, thus improving the strategy’s upside in such a market environment. This was the case at the beginning of 2020’s second quarter when the call options had a strike price closer to 7% out-of-the-money following a period of extremely high volatility. However, in periods of serious market stress (such as Black Monday in 1987, where the S&P 500 dropped 23% in a single day), the short out-of-the-money put leg of the spread may expose the fund to additional losses.

    An experienced and dedicated manager and access to JPMorgan’s ample resources earn this strategy an Above Average People rating.

    The core team tasked with managing this strategy is small, but concerns about its size are assuaged by the options overlay’s systematic implementation and access to a strong support team. Lead portfolio manager and strategy architect Hamilton Reiner joined the firm in 2009 and has extensive experience trading derivatives, with a career dating back more than three decades. Prior to joining JPMorgan, Reiner held senior positions at Barclays Capital, Lehman Brothers, and Deutsche Bank, and he spent the first 10 years of his career at O’Connor and Associates, an options specialist firm. It was announced last year that Reiner would be responsible for leading JPMorgan’s U.S. structured equity team, although this new responsibility should not interfere with his portfolio management duties on the option-based strategies. Raffaele Zingone, the other named portfolio manager, joined the firm in 1991 and is responsible for the equity portfolio implementation. He directs JPMorgan's deep bench of 26 equity analysts, who average 20 years of industry experience.

    Reiner has more than $1 million invested alongside investors, signaling a strong alignment of interest between management and shareholders. Zingone has between $500,000 and $1 million invested in the fund.
    Parent |
    Above Average Jun 2, 2020

    J.P. Morgan Asset Management’s strong investment culture, which shows through its long-tenured, well-aligned portfolio managers and deep analytical resources, supports a renewed Above Average Parent rating.

    Across asset classes and regions, the firm's diverse lineup features many Morningstar Medalists, such as its highly regarded U.S. equity income strategy that’s available globally. There's been some turnover in the multi-asset team recently, but it remains deeply resourced and experienced. Manager retention and tenure rates, and degree of alignment for U.S. mutual funds compare favorably among the competition. Managers' compensation emphasizes fund ownership over stock ownership, which is distinctive for a public company.

    The firm continues to streamline its lineup and integrate its resources further. For instance, in late 2019, the multi-asset solutions division combined with the passive capabilities. The firm hasn’t launched trendy offerings as it’s mostly expanded its passive business lately, but acquisition-related redundancies and more hazardous launches in the past weigh on its success ratio, which measures the percentage of funds that have both survived and outperformed peers. Fees are regularly reviewed downward globally; they're relatively cheaper in the U.S. than abroad. Also, the firm is building its ESG capabilities and supports distinctive initiatives on diversity.

    This strategy has consistently met performance expectations.

    Since its December 2013 inception, the strategy has returned 7.8% annualized through August 2020, beating the options-based category average by nearly 4.7 percentage points annualized. It has also outperformed on a risk-adjusted basis. Its Sharpe ratio of 1.0 since January 2014 trounces the category average of 0.3.

    The options overlay is designed to protect capital when the S&P 500 drops 5%-20% in a given quarter. This means investors will be exposed to losses if the S&P 500 loses less than 5% in a three-month period. However, this hasn’t stopped the strategy from achieving its goal of lower volatility relative to the S&P 500. Since December 2013, it has had a 6.7% monthly standard deviation compared with the S&P 500's 13.8%. Moreover, the maximum drawdown (based on monthly data) has been limited to negative 7.9% relative to the S&P 500’s negative 19.6%.

    Investors should note that the intraquarter experience will vary given that option pricing is dynamic until expiration. Options’ values are marked to market daily, which often results in intraquarter deviations from the quarter-end return. For example, the strategy was down nearly 19% at one point in the first quarter of 2020 but ended the period down 4.9%.

    It’s critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category’s second-cheapest quintile. Based on our assessment of the fund’s People, Process and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Bronze.
  • edited February 2021
    Crash, JHQAX is offered LOAD WAIVED and NTF at Fido and ETrade (and at some other brokerages, I'm guessing).
  • edited February 2021
    +1. That's good info. Thank you. Still not my cup of meat. Someone else may benefit.
  • I'm not a fan of most "alternative" funds.
    They are often opaque and expensive while their investment strategies can be overly complex.
    JHQAX seems to be better than many "alternative" funds.
  • +1 aikiron ntf at Schwab and Fidelity. I owned this fund at Schwab and just opened position in my Fidelity taxable and IRA accounts($1,000 minimum) Much better fund than GATEX .
  • edited February 2021
    Here is the SEC filing concerning the closure announced on 2/17/21:
  • edited April 2021
    Interesting to note that there is a 2nd, newer version of this fund - ticker JHDAX - from JP Morgan that has different Option contract rollover dates than the original fund.

    It is currently available at Fido with $1K min (NTF, Load-waived).
  • The fund holds the options for three months. As you wrote, the second fund operates the same way but the holding dates are shifted by one month. Since a three month cycle can start in one of three months, the obvious question is: why stop at just two funds?

    And anyone asking this question would be right. JP Morgan started not one newer version but two on the same date. JHDAX and JHTAX.

    Whoever thought this up must have had those Xerox machines working overtime.

    I wonder how often the call options it sells actually get exercised. These limit upside potential as with a traditional collar.
  • edited April 2021
    As a conservative and a retired investor, I want some exposure to equities in my portfolio and was recently looking at balanced funds with a M* risk rating of "Below Average" and a standard deviation of < 8 or 9%.

    Two highly rated funds stood out in this category: VWINX and VSCGX. However, when I compared their risk/reward profile to JHQAX, I was surprised to see that the latter fund had significantly higher 3 and 5 year total returns. While these three funds had similar standard deviations that varied in a range from 7.6 to 7.8%, JHQAX, however, displayed superior Sharpe and Sortino Ratios. I was also impressed that during the market crash last year, JHQAX only lost 3.8% and 1.4% in February and March, respectively. VWINX, on the other hand, lost 2.5% and 6.3%.

    While JHQAX may limit upside potential, but at this stage of my life I am more concerned about capital preservation and prefer to err on the side of caution. And, the M* analyst's comment that "Attractive fees, a transparent and consistent process, and an experienced manager elevate JPMorgan Hedged Equity ahead of its peers..." was also quite persuasive in my decision to invest in JHQAX.

    So far, so good.

  • @fred495 : Thank you for chiming in. I recently started with a minimum deposit & within a few weeks added to the fund . I will DCA when market cooperates.
    Stay Safe, Derf
  • edited April 2021
    Derf said:

    I will DCA when market cooperates.

    Oh man, how long have some of us been waiting now? Seems like forever. The Fed will not let these markets fall. Not even a bit.
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