First, it does not use a widely followed index or ETF as the underlying portfolio. The fund portfolio uses a proprietary stock selection algorithm.
The JEPI literature says the fund: “Constructs a diversified, low volatility equity portfolio through a proprietary research process designed to identify over and undervalued stocks with attractive risk/return characteristics, and “[seeks] to deliver a significant portion of the returns associated with the S&P 500 Index with less volatility, in addition to monthly income.”
The portfolio holds 97 stocks with relatively equal weightings. For example, the top 45 stocks carry position weights between 1.2% and 1.57%. Here are the top 10 stock symbols: Intuit (INTU), Microsoft (MSFT), Accenture Plc (ACN), Target (TGT), Amazon (AMZN), Google (GOOGL), Eli Lilly (LLY), PPG Industries (PPG), UPS (UPS), and Trane Technologies Plc (TT).
This top 10 represents quite a diverse group of stocks, and the rest of the holdings have a similar spread across the market sectors. The stock holdings account for 85% of the total JEPI portfolio. The remainder of the portfolio accounts for the fund's unique strategy to provide covered call returns.
The 15% (max of 20% allowed) consists of Equity Linked Notes (ELNs), “derivative instruments that are specially designed to combine the economic characteristics of the S&P500 Index and written call options in a single note form.” The ELNs provide cash flow from written call options to pay JEPI dividends.
All-in-all, JEPI, which launched at the end of May 2020, uses both a stock portfolio strategy and covered call strategy quite different from its peers. I am intrigued. Let's look at the historical returns.
- Since inception, the fund total return was 28.6%.
- The one-year return as of June 21, 2021, was 26.4%.
- Year-to-date through June 8 gives an 10.6% total return.
- The fund pays monthly dividends with a current yield of 8.0%.
In a rising market, JEPI impresses. The yield is excellent, and the total return numbers are outstanding for a covered call strategy. I think you will be pleased to own JEPI in your portfolio.