FEPI Boosts Payouts Amid Surging Inflows

The covered call fund’s assets have more than doubled this year on tech bets.

RonDay
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Managing Editor
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Reviewed by: etf.com Staff
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Edited by: James Rubin

REX Shares is boosting the distribution rate of FEPI, its only exchange-traded fund, which has pulled in millions from investors since it launched in October with a strategy similar to JPMorgan’s popular JEPI. 

The $37.6 million REX FANG & Innovation Equity Premium Income ETF (FEPI) will distribute $1.20 a share to holders, a nearly 26% rate, the company announced yesterday. That’s up from previous distributions of $1.18 and $1.15.  

Boosting the payout comes as investors have more than doubled FEPI’s assets under management this year, adding $26.5 million to the fund that’s experienced next to zero in outflows, according to etf.com data. The far larger, $31 billion JPMorgan Equity Premium Income ETF (JEPI), which also follows a covered call strategy, has been boosting its dividend, from 29 cents a share in August to about 43 cents in December.  

A covered call ETF strategy intends to generate income for investors, in which they sell call options on a security they own in exchange for a premium. The premium received from selling the call option provides additional income for the investor.  

FEPI Holds Gaining Netflix Shares

Investing in volatile tech stocks may boost income, and FEPI’s top holdings include Palo Alto Networks Inc., Broadcom Inc. and Apple Inc. The fund also holds Netflix Inc., whose stock jumped today after reporting positive quarterly results. 

“The more volatile the underlying stocks, the more income you can generate by writing calls,” etf.com senior analyst Sumit Roy said. “That's good for FEPI.” 

While FEPI has gained 3.3% this month, the broader tech stock ETF Technology Select Sector SPDR Fund (XLK) has added 4.7%.  

“The trade-off is you give up some upside if the underlying stocks go up a lot, which they have been doing recently,” Roy said 

Covered call ETFs hold $56.1 billion in 263 U.S. traded funds, according to etf.com data. They’ve attracted $65 billion in net inflows over the past three years, Morningstar analysts wrote in a Jan. 22 note. 

Ron Day is Managing Editor at etf.com. He joined the company in October 2022 and previously served as editor and deputy managing editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. malti-poo named Emmy.