Making its debut on 01/07/2015, smart beta exchange traded fund JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) provides investors broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by J.P. Morgan. JPEM has been able to amass assets over $344.41 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund seeks to match the performance of the FTSE Emerging Diversified Factor Index before fees and expenses.
The FTSE Emerging Diversified Factor Index are selected from advanced and secondary emerging markets strictly in accordance with guidelines and mandated procedures and are selected from constituents of the FTSE Emerging Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.45%.
JPEM's 12-month trailing dividend yield is 2.86%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Naspers Ltd Common Stock accounts for about 2.11% of total assets, followed by China Mobile Ltd Common and Vale Sa Common Stock Brl.
JPEM's top 10 holdings account for about 13.22% of its total assets under management.
Performance and Risk
Year-to-date, the JPMorgan Diversified Return Emerging Markets Equity ETF has added roughly 10.59% so far, and it's up approximately 2.51% over the last 12 months (as of 07/29/2019). JPEM has traded between $49.44 and $56.56 in this past 52-week period.
The fund has a beta of 0.78 and standard deviation of 15% for the trailing three-year period, which makes JPEM a medium risk choice in this particular space. With about 578 holdings, it effectively diversifies company-specific risk.
JPMorgan Diversified Return Emerging Markets Equity ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $58.97 B in assets, Vanguard FTSE Emerging Markets ETF has $64.04 B. IEMG has an expense ratio of 0.14% and VWO charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
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