The JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) was launched on 05/11/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box – Mid Cap Blend 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
JPME is managed by J.P. Morgan, and this fund has amassed over $284.17 million, which makes it one of the average sized ETFs in the Style Box – Mid Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Russell Midcap Diversified Factor Index.
The JP Morgan Diversified Factor US Mid Cap Equity Index utilizes a rules-based approach that combines risk-based portfolio construction with multi-factor security selection, including value, quality and momentum factors.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses for this ETF are 0.24%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.75%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
JPME’s heaviest allocation is in the Information Technology sector, which is about 13.20% of the portfolio. Its Industrials and Healthcare round out the top three.
When you look at individual holdings, Enphase Energy Inc (ENPH) accounts for about 0.58% of the fund’s total assets, followed by Arthur J Gallagher & Co (AJG) and Quanta Services Inc (PWR).
JPME’s top 10 holdings account for about 4.7% of its total assets under management.
Performance and Risk
The ETF has lost about -8.52% and is down about -6.01% so far this year and in the past one year (as of 12/12/2022), respectively. JPME has traded between $76.41 and $95.75 during this last 52-week period.
JPME has a beta of 1.04 and standard deviation of 25.33% for the trailing three-year period. With about 378 holdings, it effectively diversifies company-specific risk.
Alternatives
JPMorgan Diversified Return U.S. Mid Cap Equity ETF is a reasonable option for investors seeking to outperform the Style Box – Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard MidCap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core S&P MidCap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard MidCap ETF has $50.71 billion in assets, iShares Core S&P MidCap ETF has $64.31 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box – Mid Cap Blend.
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
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