Animal Spirits Podcast - Talk Your Book: The Biggest Active ETF

Episode Date: April 13, 2026

On this episode of Animal Spirits: Talk Your Book, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by J.P. Morgan's Hamilton Reiner to discuss: creating income via options and how covered call strategies work. Check out J.P. Morgan's disclosures here - https://am.jpmorgan.com/us/en/asset-management/adv/disclosures/talkyourbookpodcastapril2026/ Find complete show notes on our blogs... Ben Carlson’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠A Wealth of Common Sense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Michael Batnick’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Irrelevant Investor⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Feel free to shoot us an email at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ with any feedback, questions, recommendations, or ideas for future topics of conversation. Check out the latest in financial blogger fashion at The Compound shop: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://idontshop.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by J.P. Morgan. Go to jp.morganassetmanagement.com to learn more about their whole suite of covered call option ETFs, option income ETFs. It's jp Morgan assetmanagement.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. On today's show,

a returning champion guest, this is probably his third time, fourth time coming on the show. Yes, something like that. Hamilton Rainer from J.P. Morgan. Still holds the crown for the largest active ETF in the game. JEPI. It's pretty impressed because it's been the largest active ETF for a few years now. It hasn't been dethroned.

I wonder what number two is. Probably Jep Q. But outside of, I wonder what number three is. It's just, it's interesting. We've talked about these covered call options strategies in the past. It's just interesting in a decade that has been fueled by speculation, right? Everything is speculation these days.

Prediction markets and gambling on sports and trading on your phone and zero-day options, that these are more conservative type of investments that have obviously taken mindshare. It's just an interesting dichotomy to me, that these aren't like the speculative fever, right? These are more, for lack of a better word, boring. I believe we spoke about this,

probably with Hamilton, but years and years ago, Josh and I were in a meeting with a wholesaler, probably 2013. And at that time, people were still very scared of stocks, very much in the aftermath of the GFC. Still, the cloud was still hanging over us. And this guy was pitching high yield bonds as a way to dip your toe in the water. A little bit more beta, not quite stocks, but closer to stocks than bonds, certainly. And needless to say, this is an obviously better solution for people that want equity exposure, but don't necessarily want all the, all the smoke of the downside, perfectly fine, not capturing all of the upside. If the S&P's up 30% in a year, I'm sure people would be just fine being up 26 or whatever it is.

Right. People understand this. There's a tradeoff for the income. Yeah, it's tradeoffs. That's right, Ben. I do think it's interesting that we've seen the popularity of these strategies that there's now offshoots. All right, if you like this but you want something different, here's another option.

Here it is on the NASDAQ. Here it is where the income will be automatically reinvested free the option income if you're not going to spend it. Here are some different ways to do this with different holdings. And so Hamilton gets into that with us today with some of their new funds that they're using on the S&P and more NASDAQ-like on options. And I think this things are going to continue to just evolve and have more options. Pun intended, I guess, there. There you go. Okay. So, we always love talking to Hamilton. And the last time we saw him, we mentioned, every time we go to

Future Proof, I see him at the concert. That's the only place I see him is he's rocking out to the concert right next to us. Anyway, great guy. Always love catching up with him. Here's our talk with Hamilton Rainer from Gapy Morgan. Hamilton, welcome back to the show. Glad to be back. Good to see you guys in Miami, thanks for having me. Great to see you too. I'm sorry we didn't get to spend more time together, but it's great seeing your face. We always see Hamilton at the music show.

That's where I always run into it in the crowd watching the music. Absolutely. One of the highlights. All right. So, JEPI is still the largest actively traded ETF? Gotta be, right? It's the largest active ETF in the world by AUM. And holy cow, coming up to the rear,

JEP Q is a monster too. Jep Q has $33 billion in assets of their management. We're recording Monday, March 30th. It has. And it makes sense, though, Michael, because if you think about it, when else can you hear growth in tech, income, and having expected less risk and volatility? Those three things are evergreen when to think about clients' portfolios. Usually an income-oriented investor is missing out on growth in tech.

That is true. That is true. There are, so we've covered this the previous time. that we've had you on, there is no free launch, silver bullet. These things have tradeoffs. You are going to be probably, not probably, definitionally, leaving some some on the table in a rip-waring bull market. But the idea is that when you're in a drawdown, you're going to suffer less of the drawdown. And it's early in the year, but not that early. It's, we're through the first quarter. There's a couple of components to that. Obviously, the option is premium health

buffer that a little bit. And Ben may not want to hear it, but I'll go there anyways. The active management of our stock selection has actually helped. So Ben, I'm sorry, but active management can't help in both up and down markets. What are you coming at me for? I heard that you were a, I heard you were a Boglehead. Oh, he sure is. Died in the wall. 80%. What are the stocks working this year? So you're like a high quality, low vol, like what is the, what is the, if you had to, you know, put it down to a factor, what is helping this year? Yeah, so I wouldn't call it a factor. I'd say it's a little fast in stock selection, but what's helping is JEPI, by design, you know, was designed to be one of the more conservative

ways of getting income as well as a conservative equity. So how to think about that loan portfolio. Number one is very well diversified. We cap every name at about 2%. So we're going to be underweight the mega span. The second thing is, is that we want to be well diversified across sectors. And we know that, you know, whether it be communications or. tech have actually become a huge part of the S&P, we cap every sector at about 17.5%. So the diversification across sectors and across names has actually been a nice tailwind. So 2022 was, correct me if I'm wrong, I feel like 2022 was the year of JEPI because it launched a Cambrian explosion of these derivative-based products inside of ETF.

So the option overlays, all sorts of different strategies. But in 2022, not only did you protect the downside via the options in a down market, but it was the stock selection in 2022. It sounds like the stock selection is similarly adding alpha in 26. What is the methodology behind this good old fashioned stock picking? You're right. I mean, 2022, the stock selection and the sector allocations and being a more balanced allocation, not being as much in the megas, was absolutely a tailwind. When I think about what we do,

we actually are lucky enough, Michael, to have boots on the ground across the world. We have 80 analysts. They all speak the same language when it comes to stock selection, a $200 million research budget. And when you have that opportunity to have access to management

and to do the actual analysis, picking stocks that will give you a little bit more of the upside, maybe a little less the downside. Now, when I think about stock selection, One of the things that's important to me is it's not just how much you buy. Excuse me, it's not what you buy, but it's how much. Actually, stock selection is only 50% of the alpha.

It's how much of it you buy. The weighting of it is also incredibly important. And so the strategies like Jeff D and Jeff Q actually balanced not to stock selection, but portfolio construction. I have a question for you about your process, because I don't know what the right answer is. Are you a guy that says, listen, the process is the process. This is what we do, all discipline. Or do you say, no, the process can evolve over time?

Our stock selection can evolve, type of stocks we own. How are you? Are you like, no, it's set in stone, or do you say, no, no, we're pretty flexible here? A couple things I would say, Ben, I would say that there is a process. But the process is not that it's this way or the highway. It learns. It grows. It develops.

As you get new information, I forget who we can attribute the quote to. I know you guys always know who said the quote, but when the information changes, I reserve the right to change my opinion. Was that Keynes? Yes, allegedly. I think it was allegedly Keynes. But the fact is, we have a process where we look at cash flows, you know, in a normalized rolled out three years, then forecast out 30 years of cash flows.

And then we're trying to say, what is this company worth today? So is that a process? Yes. Are we going to change it based on information or new sources or other things that we can glean? Absolutely. But you need to root yourself in something to create perspective. You just can't come in every day and say, what did I read on Reddit or speaking alpha? And they say, that's going to be my favorite name of the day.

That's where actually people chop themselves up and I think it destroyed. There is no shortage of different option-oriented strategies. In fact, there's a glut. It's overwhelming. How should investors who are listening to this think about observing or diligently you versus a competitor? What questions should they be asking? couple things to that, Michael. The first thing I would say is we philosophically believe it's not just

about income. It's about total or term where income is a portion of it. You see these gaudy numbers in which there's huge, enormous distributions monthly or annually. And what you end up seeing is people have massive NAV erosion. And clients, even if they got the income, oftentimes forget, and they see their NAVs go from 100 to 80 to 60. And that's not actually a good thing from. an overall portfolio perspective. So you don't like NAV erosion. The second thing is, I'll come back to something that Ben alluded to, and that is, you should almost ignore the income.

Why? All of these strategies are going to give you income. You first need to start with what kind of stocks do you want to own? With a strategy like JEPI, you're looking for higher quality names with predictable earnings. With a strategy like Jep Q, you're looking for more of a growth in tech footprint. But when you think about some of these other strategies, if you just, look at the income. You may buy a stock you don't like,

but because of the income you buy it, if you look at some of these other strategies that I would say, you know, some folks say you need a PhD to understand what they do, a lot of financial engineering. You don't need to be complex to make money.

You don't need to be complex to invest. I mean, it kind of goes back to what is one of the age-old philosophies that I have. If I can't explain it to somebody, I probably shouldn't be investing in it. So with our strategies, you understand what you're buying, the type of stocks, you're understanding how the income is generated. You're understanding that at a place like JPMorgan, we have not just portfolio managers and analysts.

It takes a village to manage strategies like this, middle office, back office, clearance, custody, cloud management, cash management, corporate actions, trading, pricing, cap markets. I mean, you need that village. As you guys know, stocks don't die. stocks see they are taken over, they go bankrupt or they live forever. Options die. You need that team of people in order to do these things well. And so I would say it's not about that big, gaudy income number. It's about really creating that balance of total return and income, Michael. Those are some of the things I would say.

I'm curious. So you have the biggest active ETF. I don't know if they give you like a belt to wear around the office for that. But there's all these other, Michael mentioned there's been an explosion in these products. do all these other option income seeking funds, do they, is it a drop in the bucket in the options market? Or could these funds actually change the market in some ways? Is there any difference because all these funds are seeking this income? Or is it just like, no, no, no, you don't even realize how big the options market is. This is nothing.

It's a good point, Ben. And the first thing I would say is, is that the S&P 500, the granddaddy of all options, actually trades over $3.5 trillion per day. What? And one of the pushback. One of the pushbacks I'll get, and Michael's going to push back, is like, how about those zero dates? Well, let's just say that's half. It's still $1.75 trillion per day.

These are some of the most liquid, if not the most liquid equities in the world. So I would say if you're using S&P 500 index options as the options, they truly are, you know, a small fraction of the overall market. The NASDAQ also trades an enormous amount, not nearly. as much of the S&P, but a significant number, at least $600, $650 billion a day. And once again, those options are a, and that's notional for both S&P and Aethic. Those options and those strategies are still a tiny fraction. Where it could come into play is in some of the single names, because the fact is that there's only so big you could be, whether it be position limits or the actual number of options that trade on individual names. I would say the big guys,

you know, the mag seven plus three, or wherever you want to call them, the Fabulous 10, probably can withstand the amount of options that are trading. But as you go farther and farther down, it probably comes a little bit more challenging at some point then. So I was going to ask about the retail crowd getting into the option game in a big, big, big way. And I don't know if they're primarily using individual stocks or if they're using the indexes or both or whatever.

But one of the things about Jepi, correct me if I'm wrong, that makes you different from a lot of the competitors, is that you are not writing option overlays at the index level. You're actually doing it at the stock level. So talk about that dynamic. So actually, in JEPI, we are doing options at the index level, not on individual names.

Just kidding. Okay. But the reason we do that is something that's important. And that is you don't want to be having your winners taken away and left with your losers. Let's go back to November. What happened? I think Google is up about 15%

and Nvidia was down 15%. If you sold options on both of them, you would have been capped out in your Google and eaten all the downside on Nvidia. But if you do options at the index level, you get all the alpha of Google, as well as all the alpha with Nvidia, but you don't get capped out on your winners

and left with your losers. It's just not a good investment process. So what's next? So you have JEPI, which is high quality, S&P 500-ish, JEPQ. I believe tried and true is what you say in a podcast, Ben.

Okay. Blue Chip, is that fair? Is it Blue Chip fair or not? Oh, I'll take Blue Chip. Oh, I love Blue Chip. All right. So what's next after Jeppy and Jepp Q? About nine months ago, actually, you know, about eight months ago, we launched a strategy for young folks like yourselves. It's a call-over-right strategy, but instead of paying you out the distributions, we only pay out the dividends, but we keep the options premium inside the strategy. Because imagine if I give you the distribution, only for you to give it back to me. It may create a taxable event. Why would you ever do that? So we have a strategy that reinvest the options premium so it doesn't distribute it.

That's number one. So we're the only firm that we're aware of that has the ability to pay out its income as a coupon, 1099. That's Jep B and Jep Q. We believe we're one of the few, if not the only ones, that can actually reinvest your options premium. And then just a few weeks back, we launched two strategies that we hope will defer a portion of the distributions. One on the S&P 500 called Rocky. We like the ticker, ROCY. And then another one based on the NASDAQ, ROCQ.

And being both music guys, you guys could appreciate, we will rock Q does not stink as far as a tagline. I like it. The commercial rights itself. So how does the, before we get into these new strategies, how does the reinvesting option? How does that work in practice? So that's just, it's more tax efficient. And you say, listen, I'm going to reinvest my dividends anyway, so or my income anyway. How does that work in practice? The fact is, many people own income warranted strategies, whether it be stocks, mutual funds, ETFs, and only to give back these strategies, the money as part of a dividend and reinvestment, right? DRIPS are one of the greatest things ever to actually continuously compound your wealth. But so if you have the ability to pay your bills and don't need that monthly

distribution, but you like the risk profile of a call overwrite strategy, why would I make the distribution only for you to give it back to me? So Joy T, a little joy to your portfolio, is about paying out the dividends because the IRS makes me pay out dividends, but instead of paying out the option it's premium, let it just accumulate inside the strategy, compound and work for you. I don't think Keynes actually had that compounding eighth wonder of the world. I think everybody else besides Keynes has been attributed that compounding is the eighth wonder of the world. We'll give it to Einstein.

Okay. So now explains to us. Or Buffett. That's true. So now explain to us the new strategies. What's the difference with Rocky and Rocky Q? So Rocky is going to be a modestly active long portfolio, benchmark to S&P 500. doing S&P 500 index options.

Rock Q is going to be a modestly active long portfolio, benchmarks in NASDAQ 100, doing NASDAQ options. And our goal would be to defer some of the taxes associated with that distribution. So one of the ways of thinking about it, if an investor would prefer to defer, they should kick the tires on Rocky and Rock Q instead of JEPE and JEPQ. If they want 1099 income, pay as you go, then JEPB and JEPQ. But there is one big point to your question, Ben, and that is Jepi is going to be that more defensive,

higher quality portfolio, whereas Rocky is going to be something that looks a lot like the S&P 500. Okay, so you have like your sort of high quality min vol with Jepi, blue chip, and then more S&P, and that so you have like your, I guess, I don't know if it's volatility or risk levels, but you have your options now. options within options. Right. Basically, we believe that adding a call of right strategy to a portfolio manages you to have multiple ways of winning, right?

If you think about a call of right strategy, if markets go up, Michael said it best when we start off the call, we're not going to be able to keep up, but you still don't capture a healthy amount of risk-adjusted return. And I know, you know, it's not about sharp ratio return, but being up significant, but with less risk. And then with, and that's what we would anticipate. pay. A better, you know, better risk just returns to the upside. To the downside, stock selection

options premium should help value out a little bit. But in that range bound market, you're still going at the dividends and the options premium. So those strategies complement a well-balanced portfolio, carving out 5, 10, 15, 20 percent from a traditional balance portfolio. The question that becomes, do you want your income to be 1099 coupon, JEP, JEPQ? Will you like it to be reinvested in a, in a pretty smart way, Joy T, or do you like to potentially defer some of the taxes in a strategy like Rocky and Rock Q? So it is, it is what we're trying to give is choices as to how you get those monthly distributions or not in case of Joy T. This is a very, this is a sort of a ridiculous question given the pun that you're fishing in, but the size of this ETF is considerable.

It's over $40 billion. And I would imagine, based on the market environment that flows are accelerating, if I had to guess. There are some names in the portfolio that are not, now it's a very diversified portfolio. So it's not cap weighted. It's not like the S&P. You know, you've got the largest position as of this recording is 1.8% of the assets. So maybe this is a dumb question, but it's too late. I'm talking about it.

I'm already down the road. Is there any worry about you guys getting too big about like, like, is there any worry about the scale and you pushing around some of these underlying names, especially at the option level, at the index level, or I guess we covered that already, never mind. I'm paranoid. I worry about everything. And what I would say is when you think about the well-diversified nature of the portfolio with 1.8% being the cap, think about that relative to virtually any strategy in the industry that's benchmarked to the S&P 500, Ben, that have big, chunky weightings in so many different names, that diversification, I think, is a tailwind and a benefit. From an option for effective, we did

cover that, you know, over $3.5 trillion notional per day. Yeah, I think you're good there. 2026. It's been an interesting year, as they all are. Are you seeing flows accelerating? We have seen some flows into the entire suite. JEPB and JEPQ continue to see investors. I think a lot of that is there's multiple ways of winning. I love stocks. I've been a stock jockey my entire career and an option shock my entire career. But they're blunt. Stocks go up. Do you make money? Stocks go down. You don't. When you put a strategy like this into your portfolio, there's multiple ways of winning. A strategy like Jepi held its own in 2021. It held its own again in 2022. And this year, it's doing what you would expect, hanging in pretty darn well. If we can help you

perhaps not eat all the downside, you don't need to make as much money when the mark goes up. I know you guys talk a lot about investing for the long term. I believe investing for the long term. But one of the greatest ways of compounding wealth over time is losing less. And if we can help people stay invested and lose less over time, we think we're in a good spot. I was actually looking at this before we got on. It's kind of crazy to think since 2009, there's only been two down years on the S&P. 2018 was a bad year.

It was down almost 20%. And then that was 2022. And then 2018 was down like 4%. So we haven't really, investors have had it a little bit. too easy, actually. We haven't had a lot of down years. You know, the first decade of the century was a lot of down years, but this cycle has been relatively easy, even though there's been drawdowns along the way. So we haven't had many, many down years even for the options to protect again. So I guess you're set for that situation. I'm curious if, I know it's hard to get look through

on ETF investors. It's a little harder than mutual funds, but do you get the sense that the income in these strategies gives you a more consistent investor base? Do people, buy and hold these funds more because they're receiving that regular income? I think that's part of it. I think the other part is the people witness days in which the market sells off and we hang in pretty well on most of them. That's number one. Number two, when I think about these strategies, Ben, going back to your first point,

it's not meant to be one for one with the equity market. It's meant to be a portion of your equity and a portion of your fixed income. And if you think about a strategy like Jepi as an example, if you take, you know, $5 on stocks and $5 from bonds. It's not that I don't like bonds, but I'd rather on Jeppie and stocks than bonds. And these strategies help you be more efficient

as far as your portfolio construction. So if you want to put me in a head-to-head with stocks, with any of my optionary strategy, I would take stocks. Two things. One, the ride matters. I mean, you brought up, you know,

2008, and you brought up 2022. I mean, I'm old enough to remember the late 90s, the early 2000s, the GFC. There have been, I mean, people forget the summer of 2011, when the U.S. debt got downgraded, people freaked out when the market went down 14% in a two-week period. Just because the year finished flat or up does not mean you have to look into the abyss.

I mean, just think about it. Nothing happened last April. I bet you guys were both pretty darn busy last April because the S&P and the Bixstore flat in April. So I think managing that ride, it's easy in the rearview mirror a little harder as you live through it. You mentioned like taking a little from stocks and a little from bonds. What's a fair way to benchmark these kinds of strategies? Is there an option benchmark that you use? Do you say, no, no, no, it's more like a 70, 30 portfolio or something like that.

What do you think is a fair way for investors to benchmark against these strategies? I think the starting point is risk for risk. When I think about what you folks do, your goal is to maximize your client's returns using the risk that they have allocated to you. So if you're going to invest in these strategies, you're going to have to keep your client's portfolios risk the same. So it means taking a little bit of stocks, a little bit from bonds. Since each one has a slightly different risk profile, that's how I would think about it.

There are some coal override indices. I say they're kind of imperfect. You know, they do options once a month. They do add the money option in some cases. But I think the best way of thinking about this is if you're going to add something to your portfolio, like anything else in life, does it add value? Does it increase your toll return? Does it increase your sharp ratio?

Does it increase your upcapture? Does it decrease your down capture? And if the answer to that is yes, then you're being very efficient in your client's risk budget, if you will. That's how I think about these type of strategies. They're not meant to replace your equities because they have less beta. They're not meant to replace your fixed income because they do have equity market beta. They're meant to complement your well-established portfolio construction. So to me, that's where I wanted to go in terms of how advisors are thinking about this,

where it goes in the portfolio. This is obviously more like an equity than a bond. I would say that if you are using this as a fixed income substitute, you're going to have some really mad clients if and when there was an actual bare market. Would you agree? without a doubt, which is why when we think about this, we think about it, as I said earlier, that risk for risk. Now, there are some parts of fixed income that it is similar, not exactly but similar. Credit, emerging market debt, that part of fixed income that actually has equity

market beta. But it is not a bond substitute. Bonds are bonds and stocks are stocks. And from a risk perspective, these strategies sit somewhere in between the two, Michael. How do you see clients using these? Do you see, do you really see people say, hey, you know what, I'm going to take 5% for my bonds and 5% of my stocks? It's going to be an offset or something like that. Or do you see that like, is it almost like an alternative or a middle ground? Or are you saying, no, people just have their expectations for what this can do. And it's just flowing in the portfolio. Like, what's the portfolio management usage of this fund?

I think there's three ways, Ben, we see people use in the portfolio. Number one, as an anchor tenant for an income warranty client. Income as well as things that's evergreen. People love income. and if you can actually start with a high-quality group of stocks that are expected to have less risk and less beta and throw off a healthy amount of income, it's a good anchor tenant.

Or if you have a client that's like, I want to own something a little growthier and a little tech year with a healthy amount of income and expected out less risk and beta, once again, that anchor tenant to an income mortgage portfolio. And you guys know there are lots of people that built income-focused portfolios. So we're seeing people use it as an income anchor tenant.

We also see some people using it as a conservative equity. With all that's going on in the world, all the uncertainty, these strategies are going to be equities but have less risk in beta. But one of the interesting things around this strategy is when volatility goes up, we're expected to give you more income and more potential upside. So volatility is a tailwind. And you're seeing it today. And volatility has rear its ugly head.

our strategies should benefit looking forward. But when you look at a traditional portfolio, what happens when volatility is higher? Spreads are probably wider and stocks are probably down. These strategies create a nice complement to those more challenging environments when the VIX goes up in your standard portfolio. And then lastly, we do see a lot of people

taking their existing portfolio, peeling off some stocks and peeling off some bonds to buy these strategies. The question is, how much in each? Well, it also depends upon your starting point. If you're very overweight equities, it would be more equities than fixed income. If you're underweight equities, it would be more fixed income and cash than equities. But if you're perfectly bound, it's going to be that risk for risk that we talked about.

And when you do that, you actually see the benefits of complementing a traditional asset allocation with strategies like this. All right. People want to learn more about JetB or JEPQ or your new funds. Where do we send them? If they want to learn more about Jep B, Jep Q, Rocky, Rock Q or Joy T. JPMorgan Ascentmanagement.com. All right.

Thank you, Hamilton. Appreciate it as always. Thanks for having me, guys. Appreciate it. Okay, thanks to Hamilton. As always, remember to check out JPMorgan Ascentmanagement.com to learn about all the funds we mentioned on the show today. And then email us, Animal Spirits at Accompawnd News.com.

Personal emails, personal responses. We'll see you next time.