JPMorgan Nasdaq Equity Premium Income ETF
JEPQ is an active equity ETF that seeks to deliver an attractive distributable yield while also delivering a significant portion of the returns associated with the fund’s primary benchmark, the Nasdaq-100 Index®, with less volatility.
From the fund’s website:
- Designed to provide current income while maintaining prospects for capital appreciation.
- Generates income through a combination of selling options and investing in U.S. large cap growth stocks, seeking to deliver a monthly income stream from associated option premiums and stock dividends
- Seeks to deliver a significant portion of the returns associated with the Nasdaq 100 Index with less volatility
- Constructs a long equity portfolio through a proprietary data science driven investment approach designed to drive portfolio allocations while maximizing risk-adjusted expected returns
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Highlights:
Fund started 05/03/2022
Expense Ratio: 0.35%
Current Yield: TBD
Payment Dates: Monthly
Dividend Growth: N/A
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Taxes:
The fund utilizes a covered call strategy, receives dividends and may have short and long-term capital gains. The fund can also issue Net Investment Income. The fund issues a managed distribution so the distribution may include any or all of these distribution methods and the taxes would be determined based on the mix of the above. This specific breakdown information is not provided at this time since the fund just started and has not made any distributions yet.
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Investments held in the fund:
80 holdings
Top 10 are 54.74% of the fund
AAPL APPLE INC 10.10%
MSFT MICROSOFT CORP 9.00%
GOOG ALPHABET INC 6.65%
AMZN AMAZON.COM INC 5.26%
NDX_2JPNDX0002 4.22%
NDX_1JPNDX0001 4.22%
NDX_3JPNDX0003 4.20%
NDX_4JPNDX0004 4.20%
TSLA TESLA INC 3.68%
FB META PLATFORMS 3.21%
Note: NDX is in reference to the Nasdaq 100 Index – these holdings are the ELNs that the fund uses to generate current income
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What is an Equity-Linked Note (ELN)?
An equity-linked note (ELN) is an investment product that combines a fixed-income investment with additional potential returns that are tied to the performance of equities. Equity-linked notes are usually structured to return the initial investment with a variable interest portion that depends on the performance of the linked equity. ELNs can be structured in many different ways, but the vanilla version works like a strip bond combined with a call option on a specific security, a basket of securities or an index like the S&P 500 or DJIA. In the case of a note linked to an equity index, the security would typically be called an equity index-linked note. (Source: Investopedia)
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Sector Breakdown:
Sectors / Weight
Communication Services 13.2%
Consumer Discretionary 13.1%
Consumer Staples 4.9%
Healthcare 5.3%
Industrials 3.1%
Information Technology 41.4%
N/A 17.5%
Other 16.8%
Real Estate 0.4%
Utilities 1.5%
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This is a new fund but the managers of the fund have long histories in the industry.
Hamilton Reiner – 35 years in the industry, 13 years with J.P.Morgan
Eric Moreau – 9 years in the industry, 9 years with J.P.Morgan
Andrew Stern – 14 years In the industry, 14 years with J.P.Morgan
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Commentary:
This brand new actively managed ETF was just launched on 5/3/2022. It is run by the same company as the very popular JEPI. JEPQ holds positions based on the NASDAQ 100 Index as opposed to JEPI which holds S&P500 companies.
JEPQ is run by the same portfolio manager as JEPI and is intended to have a similar investment methodology. JEPQ has an expense ratio of 0.35% which is the same as JEPI. The fund holds positions in the NASDAQ companies and uses ELNs to generate current income. Since this is a similar methodology as JEPI, my expectation is that the distribution and yield will be similar, but no distribution announcements have been made at this time.
This ETF is very concentrated, with only 80 holdings right now.
Since the fund is brand new, there is no history to judge its performance on, but looking at JEPI and the mutual fund equivalent JEPIX, the company has a solid history of running these types of ETFs. I am very interested in watching this fund and once a distribution announcement is made I will seriously consider investing in this ETF.
Disclosure: I do not own this fund