The Goldman Sachs Nasdaq-100 Premium Income ETF (GPIQ) is trouncing the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) in terms of total return, the most important metric in ETF analysis.
Data shows that the GPIQ ETF has had a total return of 3.06% this year, while the JEPQ has dropped by 2.20%. The pureplay Invesco QQQ ETF (QQQ) has returned 3.30%, beating two funds that promise capital appreciation and higher dividends.
What are the GPIQ and JEPQ ETFs?
JEPQ and GPIQ ETFs are popular funds in the emerging field of covered call funds. They have accumulated over $26 billion and $880 million in assets, respectively.
The two funds aim to expose investors to the biggest companies in the technology space in the United States and pay monthly dividends.
These funds employ a strategy known as covered call, where they invest n in these companies and then sells their call options. By selling these call options, they generate a monthly premium, which they distribute in the form of a dividend.
JEPQ has an expense ratio of 0.35% and a dividend yield of 11.6%, while GPIQ has an annual fee of 0.29% and a yield of 10%. While these yields change occasionally, they constantly remain above 10%.
A 10% dividend yield is a big one since it means that a $10,000 investment will generate at least $1,000 annually. This return excludes the stock appreciation.
JEPQ and GPIQ use a similar approach, but execute it differently. GPIQ uses a dynamic covered call strategy, where it sels at-the-money ATM call options on 25% to 75% of the portfolio. It uses this approach to maximize the premium it receives.
On the other hand, JEPQ ETF uses equity-linked notes or ELNs to implement the covered call strategy. ELNs are complex derivatives that are less transparent. It then sells out-of-the-money call options on about 20% of the portfolio.
The other important difference between the two is that JEPQ is less volatile, with a Sharpe ratio of 0.37 compared to GPIQ’s 0.62.
Read more: Is it safe to invest in the 10% yielding JEPQ ETF in 2025?
Better buy between GPIQ and JEPQ
A closer look at the two funds shows that they have a close correlation since they track the same assets and apply the same approach.
However, while GPIQ is more volatile, it has some benefits. In the first place, it has a lower expense ratio of 0.29% compared to 0.35%, giving a 0.06% spread. While this is a small deviation, it can add up over time.
Further, history shows that GPIQ, which is the underdog, beats JEPQ in terms of performance despite its lower yield. GPIQ’s total return this year was 3.06%, better than JEPQ’s minus 2.2%.
The same happened in the last twelve months as the GPIQ rose by 15.4% compared to JEPQ’s 9.09%. These numbers mean that a similar investment in GPIQ would have a better return than JEPQ.
To be clear: past performance is not always a good indicator of what will happen in the future. However, to be safe, it always makes sense to invest in an asset that has a history of doing well, which, in this case, GPIQ wins.
However, GPIQ and JEPQ should not be used to replace Nasdaq 100 Index ETFs like QQQ since they have a performance history. Instead, analysts note that they should be used to complement them. In this, one can invest 80% of their funds in QQQ and the remaining 20 % in these covered call ETFs.
Read more: Here’s why the QQQ ETF, which tracks the Nasdaq 100 Index, is rising
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