(Bloomberg) — Goldman Sachs Group Inc. is the latest exchange-traded fund issuer attempting to take market share from JPMorgan Chase & Co.’s breakout active strategy lineup.
The actively managed Goldman Sachs S&P 500 Core Premium Income ETF (ticker GPIX) and the Goldman Sachs Nasdaq-100 Core Premium Income ETF (GPIQ) both begin trading Thursday, according to a press release. GPIX and GPIQ track the S&P 500 and the tech-heavy Nasdaq 100, respectively, while also selling call options tied to their benchmarks for additional yield. Each fund charges 29 basis points.
Goldman joins a roster that includes BlackRock Inc. and Morgan Stanley in launching lookalike funds to JPMorgan’s successful active ETFs. GPIX and GPIQ resemble the $29 billion JPMorgan Equity Premium Income ETF (JEPI) and the $6 billion JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), which also track US stocks combined with call-writing strategies.
JEPI and JEPQ are leading year-to-date active inflows in the $7 trillion ETF market thanks to the premise of downside protection combined with steady payout streams, inspiring a wave of copycat funds in the process.
Despite the stiff competition, Goldman Sachs Asset Management’s Michael Crinieri said there’s plenty of space in the category against a backdrop of volatile financial markets and a still-hawkish Federal Reserve.
“We think it’s early days for these types of strategies,” Crinieri, the global head of ETF, said in a phone interview. “With this type of strategy, you can think about it in a couple ways. The target yield helps reduces the volatility of your equity exposure, delivering outperformance in a down market, but still allowing for participation in an up market.”
That’s been the case with JEPI in particular, which dropped just 3.5% on a total return basis in 2022, versus an 18% plunge for the S&P 500. While it’s lagged the benchmark so far this year, it’s outperformed over the past three months as the Fed’s higher-for-longer messaging rattles equities and fixed-income alike.
Roughly $12.6 billion has flooded into JEPI so far in 2023, on track to eclipse last year’s nearly $13 billion haul, which shattered the record for active ETF inflows set by Cathie Wood’s Ark Innovation ETF (ARKK) in 2020. JEPQ has also attracted about $5 billion year-to-date, the second-most of any active ETF this year.
That runaway success has issuers lining up to capture even a portion of that asset growth, according to Bloomberg Intelligence.
“Once every half-decade, there’s something akin to a craze in ETFs,” Bloomberg Intelligence senior ETF analyst Eric Balchunas said. “It’s hitting that older investors who in part want equity exposure but they’re playing preventative defense.”
Roughly 28% of this year’s ETF launches involve derivatives in some capacity, the highest percentage in at least a decade, according to a Bloomberg Intelligence report.
“This category is more than one issuer’s assets. The category is large and growing, it is important to ask where this growth has come from?” Brendan McCarthy, head of ETF distribution at GSAM, said in a phone interview. “These assets have come from income-seeking investors, many of whom are moving out of broad beta exposures and dividend funds and into the premium income category.”