JPMorgan Equity Premium Income ETF (JEPI) Review

With over $39 billion in assets under management, the JPMorgan Equity Premium Income ETF (JEPI) is the largest actively managed ETF on the market.

It shot to popularity after its strong performance during the 2022 bear market, where its covered call strategy helped cushion the blow as both stocks and bonds sold off under the pressure of rising rates and inflation.

But 2022 is in the past. The question now is whether JEPI's approach still holds weight and deserves a spot in your portfolio in 2025. Here's my take.

JEPI: What I Like

Objectively, there’s a lot to like about JEPI, and much of it reflects textbook active ETF best practices that more issuers should be emulating.

At 0.35%, the expense ratio isn’t dirt cheap but considering what JEPI delivers—active stock selection that doesn’t just hug the index, plus a derivatives overlay, it’s outstanding value. You’re not paying for closet indexing here.

JEPI’s strategy makes sense in aggregate. The equity sleeve screens for low-volatility, defensive names and avoids the concentration risk and high valuations that plague the top of the S&P 500.

But low-volatility stocks don’t generate much in options premiums. To solve that, JEPI writes index-level covered calls via equity-linked notes (ELNs). These are structured products that replicate the risk and return profile of a one-month, out-of-the-money covered call strategy on the S&P 500.

This gives JEPI the best of both worlds: the downside resilience of a low-vol equity portfolio and the richer premiums you can only get from writing calls on a more volatile index. It’s a clever design.

From May 21, 2020, to May 2, 2025, JEPI has trailed the SPDR S&P 500 ETF Trust (SPY) in total return, but it’s outperformed on a risk-adjusted basis, something most covered call ETFs fail to do. They typically cap upside without effectively softening drawdowns.

JEPI, by contrast, has done an admirable job of limiting downside, especially during the 2022 bear market when both stocks and bonds dropped.

And income? As the name suggests, it’s front and center. JEPI currently sports a 30-day SEC yield of 8.2%, making it a standout for income-focused investors.

Lastly, I appreciate the alignment of interests. Lead portfolio manager Hamilton Reiner has over $1 million invested in the fund, according to Morningstar. That kind of skin in the game is rare and reassuring.

JEPI: What I Dislike

No ETF is perfect, and JEPI has its fair share of drawbacks that investors should keep in mind.

First and foremost, tax efficiency isn’t great. The use of ELNs means most of JEPI’s monthly distributions are taxed as ordinary income, with only a small portion qualifying as qualified dividends.

That’s less favorable than many other covered call ETFs, which often distribute capital gains or return of capital, both of which tend to be more tax efficient. You can mitigate this issue by holding JEPI in a tax-sheltered account like a Roth IRA, but room in those accounts is limited.

The more insidious concern with ELNs is counterparty risk. These are structured products where JEPI receives a payoff based on the return of a covered call strategy on the S&P 500, but there's no exchange clearinghouse behind them.

Instead, they’re issued by banks or other financial institutions, and if one of those counterparties fails, JEPI could suffer losses. To manage this, JEPI caps ELN exposure at 15% of assets and spreads it across multiple large issuers, typically major banks but the risk is still there and should be acknowledged.

Lastly, if you’re looking for consistent, predictable income, JEPI may not be the best fit. The yield varies based on how much premium the options generate, which depends largely on market volatility.

If volatility falls, those payouts can shrink. This isn't a fixed-income substitute with a stable monthly payout, so don’t expect smooth distributions.

JEPI: My Verdict

JEPI gets an 8/10 from me. I really like the two-part strategy combining a low-volatility equity sleeve with a covered call overlay, the experienced team behind it, and the competitive 0.35% expense ratio for top notch active management.

I’m not a fan of the tax treatment of distributions, but I recognize it’s a trade-off for using ELNs. What gives me more pause is the embedded counterparty risk. I’m always cautious when the ETF wrapper is used to hold structured products traded over the counter, but if anyone has the experience and relationships to manage that risk, it’s JPMorgan.

All in, JEPI is probably best suited for income-focused investors who want to reduce risk and are holding it in a tax-sheltered account.