JPMorgan Income ETF (JPIE): JEPI's cousin is beating BND, TLT

Active ETFs are doing well this year as investors chase their above-average yields. I have written about popular active funds like the JPMorgan Equity Premium Income ETF (JEPI), JPMorgan Nasdaq Equity Premium (JEPQ), and YieldMax TSLA Option Income Strategy ETF (TSLY) before. 

JPMorgan Income ETF (JPIE)

The JPMorgan Income ETF (JPIE) is a distant cousin to funds like JEPI and JEPQ. JPMorgan’s goal is to give investors exposure to the bond market in a relatively safe way. 

The fund has more than $660 million in total assets under management (AUM), making it much smaller than JEPI, which has over $29 billion in assets. It also has a smaller yield of 6.5%, lower than JEPI’s 11%.

JPIE fund has a stake in 1,400 corporate and government bonds. 29.1% of its portfolio is in agency mortgage-backed securities followed by asset-backed securities. Most importantly, it has a substantial share in junk bond, which account for more than 20% of its fund. In terms of credit ratings, most of the funds are AAA followed by BB and BBB. 

High-yield bonds are risky, especially in the ongoing period of high-interest rates. As I wrote recently, leading economic data like credit and personal loan defaults are rising while deposits in banks are falling. The yield curve inversion is also narrowing. Therefore, the JPMorgan Income ETF would be at risk in case of major defaults.

The most notable thing about JPIE is that it is outperforming its key bond peers. For example, the iShares 20+ Year Treasury Bond ETF (TLT) has dropped to the lowest level since 2014. This fund tracks longer-term US bonds that have sold off recently as US deficits soared.

It is also outperforming the Vanguard Total Bond Market ETF (BND), which invests in US dollar-denominated investment-grade bond market. It excludes inflation-protected and tax-exempt bonds. The BND ETF has dropped by more than 5.7% from the highest point this year.

JPIE vs JEPI, BND and SPY ETFs

The case for JPIE ETF

To be clear, there is a lot that we don’t know about JPIE ETF since it was started in 2022. This means that it has not been stress-tested by going through a major recession or a black swan event like COVID-19.

What is clear, though, is that the fund outperformed BND, VGLT, and TLT ETFs during the 2022 stock market crash. It has also outperformed these funds as the Federal Reserve hiked interest rates hiked interest rates to the highest level in more than two decades.

Most importantly, the fund is less volatile than the BND and TLT ETFs. It is also less volatile than JEPI and JEPQ, which is a good thing.

To be clear. I still prefer investing in quality equity ETFs like the SPDR S&P 500, Invesco QQQ, MOAT, and COWZ funds. However, I believe that having a small allocation to JPIE, especially when you use concepts like 60/40 makes sense. The 60/40 approach involves allocating 60% of your funds to stocks and 40% to bonds.