JEGP/JEPG launch - A UK equivalent to JEPI

[will89]

I have noticed that JP Morgan have quietly introduced European equivalents to JEPI and thought some here might be interested as I can't find much coverage anywhere at all.

As a bit of background, JEPI is an active US ETF with an S&P500 benchmark that uses a mix of equity holdings and covered calls to churn out a target income of around 8% and in theory offer lower volatility than the market.
It has been hugely popular, I believe the most popular US ETF of the last few years, at some points yielding over 12%. Distributions are monthly, but slightly uneven. The strategy in theory does well in volatile markets, and much less well in strong bull markets.

The European equivalents are benchmarking MSCI World. 0.35% TER. Still very low AUM (around 30m). Better explanation than I can offer is here: https://www.etfstream.com/articles/jp-morgan-am-launches-global-equity-version-of-usd30bn-premium-income-etf

For those who run a Ltd Co/FIC, I think it could be highly appealing. As far as I'm aware the dividends are all paid as 'cash', so no double taxation issues within a company, but please tell me if I'm wrong! I'm planning to buy a chunk for our FIC , I think it's a great fit that ticks all the right boxes. Any discussion would be very welcome because it feels a bit too good to be true for that structure!

JPM link: https://am.jpmorgan.com/gb/en/asset-management/adv/funds/etfs/jpm-global-equity-premium-income-etf/

[will89]

Obviously realised after a few minutes that I've been reading other posts too much and got JEMI in my head, the huge US ETF that I mean is JEPI, not JEMI! If someone could change the post title that would be great!

Moderator Message:
Fixed for you.
In future please use the report button "!".
Gryff

[richfool]

Will89, You might want to check the tickers you are quoting.

JEMI is JP Morgan Global Emerging Markets IT.
JEPG I can find no record of.
JEGP I can find, no problem, as you say: JPMorgan ETFs Global Equity Premium Income UCITS ETF USD Dist (JEGP)

[BullDog]

Thanks. On the face of it, JEGP looks rather interesting. I couldn't find it listed on HL. Do you know if there's a GBP share class, distributing in GBP?

[will89]

Thanks. On the face of it, JEGP looks rather interesting. I couldn't find it listed on HL. Do you know if there's a GBP share class, distributing in GBP?

There's 2 London listings, JEGP is a GBP share class, JEPG is a USD share class. It seems that the GBP class does also distribute its dividends in USD.

Here's JEGP on HL - https://www.hl.co.uk/shares/shares-search-results/j/jpmorgan-global-equity-premium-income-ucits

[will89]

Will89, You might want to check the tickers you are quoting.

JEMI is JP Morgan Global Emerging Markets IT.
JEPG I can find no record of.
JEGP I can find, no problem, as you say: JPMorgan ETFs Global Equity Premium Income UCITS ETF USD Dist (JEGP)

Thanks, sorry! I realised my error around the time you wrote this reply! JP Morgan do say that JEPG is London listed and USD denominated, I can find it on IBKR but nowhere like HL, the GBP denominated JEGP is more widely available.

[richfool]

Thanks for the clarification, Will.

Hmm, so it's an active ETF. Isn't that something of a contradiction, - an active tracker?!

I note the reference to equity instead of duration risk:
JPMAM said JEPG can “complement or substitute” existing yield-paying strategies, offer a conservative equity exposure and act as an alternative source of income to high-yield bonds with equity instead of duration risk.

It sounds a bit like the previous mandate of MATE (JP Morgan Multi-Assets trust), prior to its assimilation into JGGI), - which had an objective of reducing portfolio volatility.

[Lootman]

There is no free lunch here. I have in the past sold covered calls (or cash-secured puts) to boost the income on a portfolio of shares.

You can get 12% a year or so in income from doing this since at-the-money calls typically cost about 1% a month by value. But you also forego capital gains that go beyond the strike price, meaning that you either have that stock called away from you below what it is worth OR you have to buy back that short options position at a loss.

So if you pay more tax on gains than on income you might like the idea. And it would have the effect of slightly reducing your exposure to losses in a bear market. But over the long-term it should crimp returns compared to just holding the underlying basket of shares.

[will89]

There is no free lunch here. I have in the past sold covered calls (or cash-secured puts) to boost the income on a portfolio of shares.

You can get 12% a year or so in income from doing this since at-the-money calls typically cost about 1% a month by value. But you also forego capital gains that go beyond the strike price, meaning that you either have that stock called away from you below what it is worth OR you have to buy back that short options position at a loss.

So if you pay more tax on gains than on income you might like the idea. And it would have the effect of slightly reducing your exposure to losses in a bear market. But over the long-term it should crimp returns compared to just holding the underlying basket of shares.

This is why it stood out to me for an FIC, dividends are tax free but gains are taxed. I've always believed that the perfect holding would be a world index that cannibalised itself each year by selling a high % of NAV and distributing it all as dividends, there are a few options like JGGI that do this to a small extent, but JEGP seems like a very very good new high income option.

[will89]

I've just seen that Blackrock are getting in on the act too, WINC launched in late March.
https://www.blackrock.com/uk/individual/products/335083/ishares-world-equity-high-income-ucits-etf

[LucasMorro]

This is a really interesting proposition, especially for asset managers and Co/FIC LLCs. Understanding how you will be taxed is important, and your link to JPMorgan can provide more information about the fund. I also recommend discussing this with your financial advisor to ensure this fund fits your investment goals and strategy.