U.S. Markets closed

Is JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) a Strong ETF Right Now?

Sweta Killa

Designed to provide broad exposure to the Broad Emerging Market ETFs category of the market, the JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) is a smart beta exchange traded fund launched on 01/07/2015.

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.

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.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

JPEM is managed by J.P. Morgan, and this fund has amassed over $296.45 M, which makes it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.47% for JPEM, making it on par with most peer products in the space.

JPEM's 12-month trailing dividend yield is 2.66%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Taiwan Semiconductor accounts for about 3.03% of total assets, followed by China Mobile Ltd Common and Reliance Industries Ltd.

JPEM's top 10 holdings account for about 15.51% of its total assets under management.

Performance and Risk

The ETF has gained about 6.28% so far this year and is down about -7.15% in the last one year (as of 03/26/2019). In the past 52-week period, it has traded between $49.44 and $60.62.

The ETF has a beta of 0.81 and standard deviation of 15.81% for the trailing three-year period, making it a medium risk choice in the space. With about 634 holdings, it effectively diversifies company-specific risk.

Alternatives

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 $58.79 B in assets, Vanguard FTSE Emerging Markets ETF has $62.84 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.

Bottom Line

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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
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
 
To read this article on Zacks.com click here.
 
Zacks Investment Research