JEPQ vs. QYLD: A Case for Lower Costs and Superior Risk-Adjusted Returns

Investors seeking income-generating equity exposure often face a critical choice: prioritize yield at the expense of risk, or prioritize risk management while accepting lower returns. The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) and the Global X NASDAQ 100 Covered Call ETF (QYLD) represent two distinct approaches to this dilemma. While both aim to capitalize on the Nasdaq 100's growth potential, JEPQ's combination of lower costs, superior risk-adjusted returns, and comparable volatility positions it as a more compelling long-term strategy—despite its shorter track record.

Expense Ratios: A Structural Advantage for JEPQ

The most immediate differentiator between JEPQ and QYLD is their expense ratios. JEPQ charges just 0.35% annually, while QYLD's fee of 0.60% imposes a heavier burden over time. For example, a $100,000 investment in JEPQ would retain $2,500 more over a decade compared to QYLD, assuming identical performance—a critical edge in compounding returns.

This cost efficiency is not incidental. JEPQ's structure leverages JPMorgan's scale and index expertise, while QYLD's higher fee reflects its more complex covered-call strategy, which requires active management to execute.

Risk-Adjusted Performance: JEPQ's Clear Lead

The real test lies in how these ETFs balance returns with risk. Two metrics stand out:

Sortino Ratio: Reward per Unit of Downside Risk

The Sortino Ratio isolates downside volatility, making it ideal for income-focused investors. By June 2025, JEPQ's Sortino Ratio of 0.66 outperformed QYLD's 0.59, signaling better returns for the same level of downside risk. This gap widened over time, as JEPQ improved its risk-adjusted performance while QYLD stagnated.

Calmar Ratio: Sustaining Returns Through Drawdowns

The Calmar Ratio measures annualized returns relative to maximum drawdown—the peak-to-trough loss. Here, JEPQ again leads: its June 2025 Calmar Ratio of 0.37 versus QYLD's 0.32 reflects its ability to limit losses during market stress. For instance, JEPQ's maximum drawdown (-20.07%) was far less severe than QYLD's (-24.75%), even though both faced similar volatility levels.

Volatility and Drawdown Management: Comparable Risk, Better Outcomes

Critics might argue that JEPQ's shorter track record (launched in May . 2022 vs. QYLD's 2013 launch) limits its credibility. However, JEPQ's performance since inception demonstrates resilience:

• Volatility: Both ETFs exhibit similar daily standard deviations (13.94% for JEPQ vs. 13.66% for QYLD in April 2025), but JEPQ's drawdown control is superior.
• YTD Performance: As of June 2025, JEPQ's -1.88% return outperformed QYLD's -4.32%, despite the latter's higher dividend yield.

Long-term returns further underscore JEPQ's edge: its 51.4% three-year return dwarfs QYLD's 19.7%, even after adjusting for risk.

Dividend Yields: A Trade-Off, Not a Free Lunch

QYLD's 13.60% trailing yield (vs. JEPQ's 11.61%) is tempting, but it comes with trade-offs. The covered-call strategy that generates this income exposes investors to opportunity risk—forfeiting gains if the Nasdaq 100 rallies sharply. Meanwhile, JEPQ's yield is more organic, tied to the underlying equity performance of the Nasdaq 100, making it less susceptible to strategy-specific pitfalls.

Addressing the Track Record Concern

QYLD's decade-long history offers a longer sample of performance, but JEPQ's shorter tenure has already proven its mettle in varied conditions:

• Bear Markets: JEPQ outperformed during 2022's tech selloff.
• Recoveries: It rebounded strongly in early 2023, aligning with Nasdaq 100 momentum.

Critically, JEPQ's risk metrics have consistently outperformed QYLD's since launch, suggesting its strategy is robust even in its early years.

Investment Considerations

For income-focused portfolios, JEPQ offers a compelling value proposition:

1. Lower Costs: The expense ratio gap alone justifies its selection over QYLD.
2. Better Risk Control: Superior Sortino and Calmar ratios reduce the likelihood of permanent capital loss.
3. Growth Alignment: Its direct link to Nasdaq 100 equities avoids the yield-driven compromises of covered calls.

QYLD's higher yield may appeal to those needing immediate income, but its higher expense ratio and inferior risk profile erode long-term value.

Conclusion: JEPQ's Strategic Edge

In a world where cost efficiency and risk management are paramount, JEPQ emerges as the superior choice. Its lower fees, better risk-adjusted returns, and comparable volatility make it a more sustainable income-generating vehicle than QYLD. While no investment is without risk, JEPQ's performance since 2022—and its ability to outperform over multiple cycles—suggests it is well-positioned to reward investors seeking balanced exposure to tech growth without overpaying for it.

For portfolios prioritizing capital preservation alongside income, JEPQ is the clear strategic pick.

Data as of June 19, 2025. Past performance does not guarantee future results.