A new way to invest in some of the world’s most exciting growth stocks

For Australian investors, getting cost-effective exposure to some of the high-performing companies found on the Nasdaq index has typically proven difficult. Seeking to bridge this gap, the JPMorgan US 100Q Equity Premium Income Active ETF (ASX: JPEQ) provides access to many of the 100 largest names listed on the tech-centric US index – while also generating regular income.

What is JPEQ?

The JPMorgan US 100Q Equity Premium Income Active ETF is an investment solution that seeks to provide monthly distributable income and Nasdaq 100 exposure with less volatility. It has two building blocks: an underlying equity portfolio and an options overlay strategy.

The underlying portfolio is underpinned by investment fundamentals, paired with the scale and depth of our data-science-driven expertise. The process analyses several decades of historical insights from J.P. Morgan’s Equity research analysts and portfolio managers, which brings to bear millions of additional data points.

The analysis produced by this framework estimates earnings, cash flows, and confidence levels around those expectations for every security in the investable universe. This helps generate excess return and risk forecasts while illustrating the fundamental drivers of these predictions. 

The team then builds a portfolio of securities based on the potential long-term value of these earnings and cash flows. The end result is an underlying equity portfolio of approximately 60 to 90 Nasdaq-100 stocks, with an expected tracking error of 2%-3% versus the index.

The options overlay consists of selling out-of-the-money Nasdaq 100 Index-based call options that seek to generate distributable monthly income. This also lowers the beta of the overall strategy versus the Nasdaq 100 Index.

Which type of investor is JPEQ suited to?

This investment product is intended as a smaller allocation within a diversified retail investment portfolio. It is most suited to investors who can accept higher risk in seeking superior investment returns, and who seek daily access to their capital.

In some instances, clients may choose to combine JPEQ with its sister product, JPMorgan Equity Premium Income Active ETF (ASX: JEPI), currently the world’s largest active ETF. This combination can help investors reduce the tech underweight in JEPI and the tech overweight in JEPQ versus the S&P 500 Index.

A 40-60 blend of JPEQ and JEPI, respectively, provides sector exposure that is broadly in line with the S&P 500, but with less risk – of approximately 0.7 beta – and an attractive yield profile.

Exposure to Nasdaq 100, with consistent income but lower volatility