JP Morgan unveils options-enhanced global equities ETF in Europe

Dec 7th, 2023 | By | Category: Equities

JP Morgan Asset Management has launched a new actively managed ETF in Europe providing global equities exposure while seeking enhanced income and lower volatility through an options writing overlay.

Travis Spence, Head of EMEA ETF Distribution at JP Morgan Asset Management.

Travis Spence, Head of ETF Distribution in EMEA at JP Morgan Asset Management.

The JPMorgan Global Equity Premium Income UCITS ETF has been listed on London Stock Exchange in US dollars (Ticker: JEPG LN) and pound sterling (JEGP LN) as well as on Deutsche Börse Xetra in euros (JGPI GY).

Further listings on Borsa Italiana and SIX Swiss Exchange are expected shortly.

According to JP Morgan, JEPG aims to strike a balance between income (it targets an annualized yield of 7% to 9%, paid monthly), some capital growth potential, and less volatility than the benchmark MSCI World Index.

JEPG’s long-only equity portfolio is designed to deliver an ‘enhanced’ index return by leveraging the depth and breadth of JP Morgan’s fundamental equity research platform which consists of more than 90 analysts collectively covering around 2,500 securities globally. The ETF’s portfolio managers use these insights to take small overweight positions in names they find attractive and small underweight positions in names they find less attractive, relative to the benchmark, to build a higher-quality, lower-beta portfolio, that’s well-diversified across regions and sectors.

JEPG’s options sleeve entails opportunistically selling call options on mainstream equity indices such as the S&P 500 or MSCI EAFE to generate income from those option premiums. JP Morgan’s structured equity solutions team currently manages some of the largest options strategies in the world including those enacted for the US-listed JPMorgan Equity Premium Income ETF (JEPI US), a similar US equity option-income strategy that has grown to $30 billion in assets under management since debuting in May 2020.

JEPG will review its options positions weekly, allowing the fund to quickly adapt to changing market conditions. That means when, for example, volatility spikes, the ETF has the potential to provide higher income when investors most need the cushion against fluctuating prices.

JEPG’s call-writing approach does mean that it will forgo some equity market upside as it seeks to continue generating a high annualized income; however, the approach is likely to appeal to investors with a negative macro view who still want some equity exposure.

For yield-hungry investors, the strategy offers an alternative source of income to bonds at levels that are comparable to high yield credit strategies but with equity market-related risks rather than duration risk.

Commenting on the new listing, Travis Spence, Head of ETF Distribution in EMEA at JP Morgan Asset Management, said: “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.”

JEPG comes with an expense ratio of 0.35%.

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