Investors should consider JPMorgan’s Equity Premium Income Fund ETF to achieve more reliable gains in the current volatile market environment.
According to the company, the ETF uses S&P 500 options and proprietary data to generate monthly income for investors. The aim is to provide investors with income even when market uncertainty is high. The fund has been in existence since May 2020.
JPMorgan’s Bryon Lake is behind the ETF. He told CNBC’s “ETF Edge” this week that a defensive approach to investing is now critical, noting that the fund aims to invest in companies with quality balance sheets. He cited Hershey, Progressive and Bristol-Myers Squibb as key names because they have historically paid dividends between 2% and 3%.
But as of October 31, the ETF will pay a 14% monthly dividend. So, how does that math work?
“Remember, the premium that comes out of those options is determined by the volatility in the market. And if you look at this year, we’ve had volatility, so that’s pushed that premium up. That’s why we were able to harvest it.” said Lake, global head of ETF Solutions at JPMorgan Asset Management. “Historically, we’ve been aiming for a return of about 6% to 8% on this portfolio. … But because of the increased volatility this year, we’re going to continue.”
Lake added that his clients are always looking for income, whether bullish or bearish.
“Investors are saying, ‘I want to get out of stocks completely. I know this is an important part of my portfolio. Maybe I’ll own this portfolio where I can reap some income… a little protection against downsides, and that states allows me to navigate these tricky markets as well,” he said.
However, Lake acknowledged that things could go wrong.
“The volatility could go down, and so we would get a little less premium, and that return would go down with that,” he said.
The JPMorgan Equity Premium Income Fund ETF has outperformed the S&P 500 so far. But they are both still in the red. The ETF is down nearly 15%, while the S&P is down about 21%.