J.P. Morgan Asset Management (JPMAM) has launched JPMorgan Global Equity Premium Income UCITS ETF (ticker: JEPG) an actively managed outcome-oriented ETF strategy which seeks to offer investors consistent income: 7-9 per cent annualised, paid monthly, and appreciation potential with less volatility than JEPG’s respective benchmark.
The firm writes that JEPG combines equities with options to strike a balance among yield, capital growth and risk.
“JEPG’s long only equity portfolio has been built using JPMAM’s industry-leading expertise in active equity strategies which sit at the intersection of active and passive investment management and seek to enhance index returns by leveraging the depth and breadth of JPMAM’s fundamental proprietary research.
“Piera Elisa Grassi and Nicolas Farserotu, JEPG’s equity portfolio managers, have access to the insights of more than 90 research analysts, covering approximately 2,500 securities globally. The portfolio managers use these insights to take small overweight positions in names they find attractive and small underweights in names they find less attractive, relative to an index, to build a higher-quality, lower-beta portfolio, that’s well diversified across regions and sectors.
“An options strategy is then applied to JEPG where portfolio managers Hamilton Reiner, Judy Jansen and Matthew Bensen will sell index options – a combination of S&P500 and MSCI EAFE – against JEPG’s long-only equity portfolio and use the premiums to generate income.”
The firm writes that JPMAM’s structured equity solutions team, headed by Hamilton Reiner, currently manages some of the largest options strategies in the world, including JPMAM’s US-domiciled Equity Premium Income strategy, with assets under management of USD30 billion as of 30 November 2023.
By selling call options every week, JEPG seeks to adapt to changing market conditions, the firm explains, adding: “That means when, for example, volatility spikes, JEPG has the potential to provide higher income when investors most need the cushion against fluctuating prices”.
Travis Spence, Head of ETF Distribution in EMEA, says: “Investors continue to seek high levels of income, but they also want exposure to stock markets with less volatility. We have seen the rapid growth of our option overlay equity strategies in the past couple of years, and we are delighted to be bringing a global premium income version of our market-leading US-domiciled Equity Premium Income strategy to the UCITS ETF market.”
Spence outlines three ways in which he believes JEPG can help meet investor needs:
Income generation: JEPG offers a consistent stream of income from monthly payouts which can complement or substitute existing dividend yield strategies.
A conservative equity solution: JEPG’s underlying equity portfolio offers a lower beta, lower volatility equity portfolio. JEPG’s call overwriting approach means it will forgo some equity market upside as it seeks to continue generating 7-9 per cent income. If you have a negative macro view but still want some equity exposure, JPEG offers conservative exposure.
An alternative source of income to bonds: JEPG offers high income, comparable to high yield credit strategies, but does it with equity market related risks, not duration risk.
JEPG, which is listed on the London Stock Exchange and Borsa Italiana, will have a Total Expense Ratio of 35 basis points. The ETF will list on Deutsche Börse Xetra and SIX. JEPG offers investors access to the strategy’s distribution share class; JEGA offers investors access to the strategy’s accumulating share class.