The JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) made its debut on 01/07/2015, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader 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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by J.P. Morgan. It has amassed assets over $332.40 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. Before fees and expenses, JPEM seeks to match the performance of the FTSE Emerging Diversified Factor Index.
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.
Operating expenses on an annual basis are 0.45% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.87%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
When you look at individual holdings, Taiwan Semiconductor accounts for about 2.92% of the fund's total assets, followed by China Mobile Ltd Common and Vale Sa Common Stock Brl.
JPEM's top 10 holdings account for about 14.84% of its total assets under management.
Performance and Risk
The ETF return is roughly 10.30% so far this year and was up about 6.85% in the last one year (as of 06/27/2019). In the past 52-week period, it has traded between $49.44 and $56.42.
The ETF has a beta of 0.78 and standard deviation of 15.25% for the trailing three-year period, making it a medium risk choice in the space. With about 630 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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $59.01 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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