By Ian Salisbury
With trouble in the Middle East and rising stock market volatility, it's a tailor-made moment for the market's favorite active exchange-traded fund. Is it delivering? The answer is yes -- but with some important caveats.
Launched in 2020, the JPMorgan Equity Premium Income ETF, often referred to by its ticker JEPI, has quickly become the largest active ETF with about $44 billion in assets. The fund's popularity is due in large part to its appealing goal: To generate "monthly distributable income and equity market exposure with less volatility," according to its website.
JEPI accomplishes this by holding a portfolio of 122 mostly blue-chip stocks like Johnson & Johnson, RTX (formerly Raytheon) and AbbVie. It then sells covered call options against the S&P 500. The strategy generates a lot of income, which can offset stock price declines -- hence the promise of lower volatility. JEPI boasts a yield of nearly 8%.
But the covered call strategy has a big downside too. When the stock market rockets ahead, the call options will be exercised by buyers, essentially capping the fund's potential upside.
This year, investors are more worried about volatility than missing out on gains. With a weakening economy and the war in Iran spiking oil prices, the VIX, a stock market volatility measure often referred to as the "fear gauge," has leapt to nearly 26 from less than 15 at the start of 2026.
JEPI is making good on its promise. Year-to-date the fund has delivered a total return loss of 0.4%, according to FactSet. While in the red, that's far better than the 4.1% decline for the S&P 500.
Still, the covered call approach is hardly investors' only option when it comes to playing stock market defense, and it's worth comparing how JEPI fares against some other common defensive strategies.
Investors may have fared better than JEPI by targeting some defensive sector funds. The State Street Utilities Select Sector SPDR is up nearly 8% this year, the consumer staples version has gained 5.2%.
Dividends are another option. The Schwab U.S. Dividend Equity ETF is up 11%, and the ProShares S&P 500 Dividend Aristocrats ETF, which targets companies with decades-long histories of making and raising payouts, is up 0.8%. Dividends aren't a fool-proof strategy, however. The Vanguard Dividend Appreciation ETF, Vanguard's biggest dividend offering, is down 2.7%.
Still, investors who want to own JEPI also need to consider the longer-term costs of the covered call strategy, which means giving up some of the market's gains in big up years. That's taken its toll over the past few years, when stocks have mostly rallied. Over the past five years, JEPI has delivered an average annual total return of 8.7%, compared to 12.4% for the broad market.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 20, 2026 13:17 ET (17:17 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
