GPIX ETF: How is Goldman Sachs’ JEPI alternative fairing?

The Goldman Sachs S&P 500 Core Premium Income (GPIX) ETF is doing well in 2023 as it beats the popular JPMorgan Equity Premium ETF (JEPI). Its total return this year stands at 12% compared to JEPI’s 6.24%. Its performance is a few basis points lower than the SPDR S&P 500 (SPY) ETF, which has risen by over 15%.

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JEPI vs GPIX vs SPY

Still, the GPIX ETF has seen lackuster demand among investors as it only holds $143 million in assets even though its next expense ratio of 0.29% is lower than JEPI’s 0.35%. Data by ETF.com shows that it has added assets in each month this year. 

GPIX ETF inflows

GPIX is an actively managed fund with a close resemblance to JEPI. The fund invests in all companies in the S&P 500 index and then uses call options to generate returns. Holders benefit when the S&P 500 index is rising by capturing these gains and the accompanying dividends.

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It also generates returns through the call options, which give it a right but not the obligation to buy the index. As such, in periods when the S&P 500 index is rising, the fund makes money through dividends, market return, and its call option.

When the S&P 500 index is falling, the ETF loses money but the losses are offset by the call options premium. The same happens when the index is flat in that the fund still generates returns.

GPIX and JEPI, therefore, have underperformed the SPY ETF because of its sustained rally helped by technology companies. This trend could continue in the foreseeable future as some analysts have continued to boost their outlooks. Tom Lee believes that the S&P 500 index could jump to $15,000 by 2030.

GPIX and JEPI are beloved because of their higher yields. JEPI yields over 7% while GPIX has a dividend yield of over 4%. However, if the bullish estimates of the S&P 500 index materializes, it means that they will continue to underperform the market in the long term.

As I wrote this week on Realty Income, investors who constantly focus on yield, instead of the total return constantly underperform the market. This explains why REITs and MLPs, which always have a higher yield always lag behind the market.

Therefore, I suspect that JEPI and GPIX will generate weaker returns than the SPY, VOO, and IVV, which track the S&P 500 index. Similarly, the Goldman Sachs Nasdaq 100 Core Premium Income ETF (GPIQ) and JPMorgan Nasdaq Equity Premium income JEPQ will lag behind the Nasdaq 100 index.