A smart beta exchange traded fund, the JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) debuted on 01/07/2015, and offers broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $310.98 M, this makes it one of the average sized ETFs in the Broad Emerging Market ETFs. JPEM is managed by J.P. Morgan. 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.45%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.77%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Looking at individual holdings, Taiwan Semiconductor accounts for about 3.22% of total assets, followed by China Mobile Ltd Common and Hon Hai Precision.
JPEM's top 10 holdings account for about 15.5% of its total assets under management.
Performance and Risk
So far this year, JPEM has added about 2.21%, and is down about -9.84% in the last one year (as of 05/14/2019). During this past 52-week period, the fund has traded between $49.44 and $59.13.
The fund has a beta of 0.80 and standard deviation of 15.58% for the trailing three-year period, which makes JPEM a medium risk choice in this particular space. With about 632 holdings, it effectively diversifies company-specific risk.
JPMorgan Diversified Return Emerging Markets Equity ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $56.26 B in assets, Vanguard FTSE Emerging Markets ETF has $60.75 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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