00:00Instead of a segue, I'm just going to jump right into the weeds here because, of course, I want to
00:04talk about JEPI, I want to talk about JEPQ, household names, at least among the households represented here.
00:11And it's interesting. I mean, you think about what you're doing, premium income. Increasingly, it's been mentioned in the same
00:17breath as buffer ETFs.
00:20And I want to hear from you how those two categories are differentiated. What is the pitch for premium income,
00:27what you're doing over at JPMorgan versus, say, a buffer strategy?
00:31So the first thing I would say is the biggest challenge we all have is that we're at unprecedented levels
00:37of cash in individuals' portfolios.
00:39And excess cash is just the enemy. We're at, like, 70-year highs. So that's the first thing.
00:44And getting that cash to work is one of the most important things any of us could do.
00:48And when I think about a premium income strategy, it's designed to give you three things.
00:51It's designed to give you dividends, options, premium, some of the upside, and less risk in beta than the overall
00:57market.
00:58The underlying index may be the S&P, may be the NASDAQ. We have some global products.
01:03That's the first thing when it comes to premium income.
01:06But one of the things I would highlight is less risk, less volatility, less beta.
01:10Now, with a buffer strategy, it's much more of a, let's call it, strategy that gives you equity market exposure
01:16but with guardrails.
01:17Or protection.
01:19And we have something that's similar in our hello strategy because what we do is we actually create three different
01:25hedge windows.
01:26But one of them is about giving you income as a big chunk of your total return, premium income.
01:32The other one is about giving you the equities with some downside protection in place.
01:37So they both can fit into your portfolio with that more defensive nature.
01:41But one is designed to give you income.
01:43The other one is designed to give you, let's call it, the guardrails around equities.
01:45Right. Fair point there.
01:47And, I mean, to that point, you think about buffer ETFs.
01:50They're often mentioned, you know, as bond alternatives.
01:52And that's something that Bloomberg Intelligence has done a lot of work on as well.
01:57What about premium income?
01:58I mean, is that something that also fits into that broader category or is this truly equity exposure?
02:05So I'm not sure I would call buffers or a hedge equity product a bond alternative.
02:11I'd say that it's designed to provide one of the features that bonds does, which is downside protection.
02:16As you know, bonds don't always zig when equities zag.
02:18And a buffer strategy or a hedge equity strategy will.
02:22What's really nice about a premium income strategy is it does give you the income that, in many cases, people
02:28associate with fixed income.
02:29And it does it with less risk and less volatility and less beta in the equity market.
02:33It also does it without duration risk and without credit risk.
02:36So a premium income strategy is not meant to replace your fixed income.
02:39It's meant to replace a portion of your equity and a portion of your fixed income, giving you a better
02:43total return from a portfolio construction perspective.
02:47So sometimes when these cover call ETFs are brought up, Matt Tuttle, who is obviously an ETF issuer also, he
02:53had an interesting point.
02:54He said capping upside while retaining full downside exposure is the wrong way to do this.
02:59After a sell-off, you give away the recovery precisely when you need it most.
03:04Put credit spreads, collect a similar premium, but without that issue.
03:09What do you think of that?
03:10Like, in terms of the downside, that income gives you a little, but, you know, maybe not all.
03:15And how much can you catch of the upside when it comes back?
03:18So a couple of things I would say.
03:19If you lose less when the market sells off, you don't need to make as much money when the market
03:22goes up.
03:23If you look back to 2022, Jeffy was actually down only three and a half when the market was down
03:2818.
03:29So you didn't need to make as much back in 23 and 24.
03:31And then just in the first quarter, a strategy like Jeffy was actually up with the market down.
03:36And so I'm not sure if it's as simple as saying it's the index that's capped to the upside and
03:42not giving you any downside protection.
03:43Being JP Morgan, we're an active shop.
03:45So the active stock selection plus the options premium helps us lose less of the downside.
03:50And so when I think about credit or credit spreads, there's nothing wrong with credit.
03:55I happen to like credit.
03:56But the problem is you expose yourself to spreads.
03:59In addition, you're probably not going to make more than the yield.
04:02These strategies give you not just the options premium, they give you some of the upside.
04:07And I think sometimes that's lost on people.
04:09Now, there are some strategies, and you've talked about them quite a bit, Eric, this idea that you can have
04:1520, 30, 40 percent.
04:17And in those cases, you probably are mortgaging a little bit of your future to get that premium today.
04:22But with something more modest, like JEPI 7 to 9 or JEPQ 9 to 11 through a cycle, you're actually
04:28getting a three-prong approach to a return.
04:30Some dividends, some options premium, and some of the upside.
04:32And most importantly, less risk.
04:34To look at this relative to the index, it's just not apples to apples.
04:38We don't use leverage.
04:39We don't believe in leverage.
04:40And so I'm not sure that's the apples to apples comparison.
04:43You have to think about it on a risk-adjusted basis.
04:44So I always thought JEPI really made its mark in 2022.
04:48This is a rough year for the markets.
04:49But since then, the markets have gone up, and they go up and up and up, and it's like defying
04:54gravity all the time.
04:54Now, you just heard about these IPOs coming out.
04:56They're going to give the market probably another kick.
04:58You don't do any of that.
05:00Now, you're trying to offer something that's a little more conservative.
05:02How much harder is it to try to sell something like this strategy in a market where it's getting frothier
05:09and frothier with AI?
05:10So one of the things that we share with investors is we talk about what to expect.
05:16And I think that's something unique from our lens.
05:18We don't lead with an income level.
05:20We don't lead with a return perspective.
05:21We lead with the people, the process, and the philosophy.
05:24And so with a strategy like JEPI, let's use a name like NVIDIA.
05:28When you get exposure to any of the large indices, you get anywhere from 8% to 14% in
05:34NVIDIA.
05:34We're going to be very different intentionally in JEPI, that we're going to cap every name.
05:40We're going to cap every sector.
05:42And by doing that, you're starting off with something that looks a lot different than all of those indices that
05:48have great exposures.
05:49And so do I think it's hard?
05:52I think it's all hard.
05:54But at the same time, people are talking with their pocketbooks and wallets.
05:59And JEPI and JEPQ in the derivative income category, I think, are one in two year-to-date.
06:03So they're kind of understanding what to expect from these strategies.
06:06And I do want to talk about some of the knockoffs, the copycats that JEPI has inspired.
06:12One of them comes from Goldman.
06:14The ticker there is GPIX.
06:15It's the Goldman Sachs S&P 500 premium income ETF.
06:19It launched in late 2023.
06:21You take a look at total returns, JEPI versus GPIX, and GPIX has meaningfully pulled away.
06:27You see a similar dynamic when it comes to their NASDAQ 100 premium income versus JEPQ as well.
06:34And I wonder how much you're paying attention to that.
06:38How do you explain that sort of differential, and how do you close that gap?
06:42So a couple things I would say.
06:43There's nothing else like JEP in the industry.
06:45That point, you know, that 35% to 40% less risk compared to the market, I'm not sure that
06:50the Goldman strategy that you mentioned is actually comparable.
06:53But I'm absolutely looking at the entire landscape.
06:56And I think the entire landscape, I think it was BlackRock or somebody else said the landscape can go 2
07:01or 3 or 4x what it is today.
07:02And I don't doubt that.
07:04You know what I mean?
07:04When you think about the aging of Americans, when you think about where these strategies fit into portfolios, there's still
07:09a lot of room to grow.
07:10I look at the entire categories, but it's a good time for me also to bring up Rocky and RockQ,
07:15where they're a lot more like some of the other more benchmark aware strategies, where Rocky is going to look
07:21a lot more like the S&P 500 with an options overlay.
07:25We're doing something a little unique there as far as doing as a call spread.
07:28So if you have a ripping market, we'll re-participate with 100% above a certain point.
07:33And Rocky, which is on the NASDAQ 100.
07:35And the two of those strategies that are just over two months in duration, I think they're over 550 million
07:41already.
07:42So they're really getting a lot of traction as people want perhaps a different flavor from J.P. Morgan.
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