The JP Morgan Equity Premium Income ETF (symbol JEPI) is one the most popular covered call ETFs in the market right now. Interestingly, JP Morgan launched a mutual fund version of the fund a couple years before launching the ETF, which is the similarly-named JP Morgan Equity Premium Income Fund (symbol JEPIX). Many investors compare JEPI vs JEPIX to see if the differences are material and/or which one should be used in a portfolio.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
When comparing JEPI vs JEPIX, it is clear that the holdings and performance is nearly identical. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).
That being said, I generally advise against using covered call strategies (except in very limited scenarios). My rationale and details can be found in my review of JEPI.
The Longer Answer
Investors should evaluate several factors before deciding whether to use JEPIX or JEPI.
Historical Performance: JEPIX vs JEPI
JEPIX was launched back in 2018 and JEPI was launched a few years later on May 20, 2020. Since that time, performance has been nearly identical: 13.32% for JEPI vs 13.00% for JEPIX (annualized). Even the cumulative difference in performance over that time period is less than 1.5%! Looking at the chart of JEPIX vs JEPI below, it is obvious that the risk and return is identical even if the holdings are not.
Interestingly, the .32% difference in annualized performance is similar to the .25% difference in fund expenses.
Differences Between JEPIX and JEPI
The geographic exposures, sector weights, market cap coverage so on are nearly identical. There are some commentary on the internet indicating differences, but that is incorrect.
Geography; JEPI vs JEPIX
Both funds own 100% US stocks, so I won’t delve into geographic or country differences here.
Market Cap: JEPI vs JEPIX
The market cap exposure of the underlying portfolios are nearly identical.
| JEPI | JEPIX | |
| Large Cap | 83% | 82% |
| Mid Cap | 16% | 18% |
| Small Cap | 0% | 0% |
Sector Exposure: JEPI vs JEPIX
The underlying sector exposure of the two funds is nearly identical. Of course, each fund is also writing index calls against these exposures, so any differences may be magnified a small amount. But overall, the funds are quite similar.
| JEPI | JEPIX | |
| Basic Materials | 3.78% | 3.79% |
| Consumer Cyclical | 8.97% | 9.28% |
| Financial Services | 12.53% | 12.37% |
| Real Estate | 3.62% | 3.69% |
| Communication Services | 5.26% | 4.96% |
| Energy | 3.05% | 2.78% |
| Industrials | 13.46% | 13.63% |
| Technology | 17.12% | 17.46% |
| Consumer Defensive | 13.09% | 13.04% |
| Healthcare | 14.23% | 13.45% |
| Utilities | 4.90% | 5.53% |
Factors to Consider
Expenses
Some investors may point out that the expense ratios between JEPI and JEPIX differ. This is true, but it is also reflected in the net performance chart above as the majority of the performance difference is due to fees. At a certain level, differences in expense ratios do not matter. A small absolute difference (in basis points) is essentially meaningless (even if it appears large on a percentage basis) and is often smaller than the bid-ask spread (see transaction costs below). Expenses do matter, but I would not sweat small differences (as they’ll show up in net performance anyways).
Transaction Costs
ETFs are free to trade at many brokers and custodians. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, JP Morgan does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at JP Morgan, it may b free to trade JEPIX or JEPI. However, only JEPI is free to trade in non-JP Morgan accounts.
There is a bid-ask spread when trading ETFs, but this spread is typically less than .02% for JEPI and individual investor trades will not generally be large enough to “move” the market. In the case of JEPI, individual investors should not have a problem trading.
Tax Efficiency & Capital Gain Distributions
ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post).
I noticed some posts on the internet saying that JEPI is more tax-efficient than JEPIX, but this incorrect and neither JEPI not JEPIX has ever made a capital gain distribution. Some may interpret this as the funds being tax-efficient. However, it is really the opposite. The funds’ strategy of covered calls converts a lot of capital gain returns into income returns and the funds do not pay capital gains because much of it is converted to income! Therefore, I would neither JEPI nor JEPIX is tax-efficient.
Tax Loss Harvesting
My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.
However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards JEPIX. If all ETFs, I might lean more towards JEPI.
On this topic, investors should probably avoid using JEPI and JEPIX as tax loss harvesting substitutes for one another since they could be considered “substantially identical” which would trigger a wash sale.
Tradability
JEPIX does have a stated minimum initial purchase of $1 million, but these types of minimums are often lowered depending on an investors brokerage platform. Nonetheless, this may be a factor for some investors looking to initiate a position. The minimum purchase size for JEPI is typically one share, although fractional shares are becoming more common.
Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.
Final Thoughts: JEPIX vs JEPI
If an investor has made up their mind to invest in one of these funds, they should consider the above factors when deciding whether the mutual fund JEPIX or the ETF JEPI is best for their personal situation. That being said, I do not recommend investors use covered call strategies (except in very, very limited cases).
