J.P. Morgan Equity Premium Income ETF (JEPI) VS S&P 500 (SPY) Analysis

In this analysis, we review the performance of the J.P. Morgan Equity Premium Income ETF (JEPI) from its inception on May 21, 2020, to the present, benchmarking it against the performance of the S&P 500 (SPY) ETF.

Performance:

On an annual basis, the S&P 500 (SPY) has delivered stronger returns compared to JEPI, with mean and median returns of 13.46% and 16.9%, respectively, versus JEPI's 10.29% and 10.1%. However, these higher returns from the S&P 500 come with significantly greater volatility—17% compared to JEPI’s 9.15%. This increased volatility in the S&P 500 implies greater uncertainty in its return outcomes, making JEPI's performance more stable, albeit with lower returns.

Risk:

JEPI demonstrates a considerably lower maximum drawdown compared to the S&P 500 (-13.71% versus -24.5%) and also recovers from drawdowns more quickly, taking 421 days to recover versus the S&P 500’s 709 days. Combined with its lower standard deviation, JEPI appears to be a less risky investment than the S&P 500.

Risk-Adjusted Returns:

JEPI has also outperformed the S&P 500 in terms of risk-adjusted returns during the analyzed period. It boasts a higher Sharpe ratio of 1.11 compared to the S&P 500's 0.96, indicating that JEPI has provided approximately 0.15% more return for every unit of risk taken. Additionally, JEPI has generated an average annualized alpha of 3.37%. However, it is worth noting that JEPI’s alpha seems to be in decline over time, as suggested by the rolling alpha chart.

Conclusion:

Given its relatively short track record, JEPI has delivered better risk-adjusted returns than the S&P 500, suggesting that it could be a more attractive investment if historical trends persist. That said, the choice between these two ETFs should depend on the investor’s risk tolerance. Investors who seek higher returns and are willing to accept greater risk might prefer the SPY ETF, while those looking for more stable returns with lower risk may find JEPI to be a better fit.

Full Report:

Full statistical report available for download in the additional information down below.