Credit: Shutterstock photoThe 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.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is sponsored by J.P. Morgan. It has amassed assets over $229.28 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. JPEM 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.47%.
It has a 12-month trailing dividend yield of 4.83%.
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.
When you look at individual holdings, China Mobile Ltd Common accounts for about 2.93% of the fund's total assets, followed by Taiwan Semiconductor and Vale Sa Common Stock Brl.
Its top 10 holdings account for approximately 15.4% of JPEM's total assets under management.
Performance and Risk
The ETF has lost about -10.61% so far this year and is down about -5.53% in the last one year (as of 12/10/2018). In the past 52-week period, it has traded between $49.44 and $64.42.
The ETF has a beta of 0.92 and standard deviation of 16.54% for the trailing three-year period, making it a medium risk choice in the space. With about 626 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 $49.19 B in assets, Vanguard FTSE Emerging Markets ETF has $55.19 B. IEMG has an expense ratio of 0.14% and VWO charges 0.14%.
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 .
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JPM- DVRSFD REM (JPEM): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
ISHARS-CR MS EM (IEMG): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
