Launched on 01/07/2015, the JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) is a smart beta exchange traded fund offering 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
JPEM is managed by J.P. Morgan, and this fund has amassed over $272.27 million, 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.
Annual operating expenses for JPEM are 0.44%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.93%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Naspers Ltd Common Stock (NPN) accounts for about 2.15% of the fund's total assets, followed by Taiwan Semiconductor and Reliance Industries Ltd (RELI_D.).
Its top 10 holdings account for approximately 14.25% of JPEM's total assets under management.
Performance and Risk
The ETF has lost about -13.51% and is down about -3.46% so far this year and in the past one year (as of 08/24/2020), respectively. JPEM has traded between $36.19 and $58.24 during this last 52-week period.
The ETF has a beta of 0.92 and standard deviation of 22.43% for the trailing three-year period, making it a medium risk choice in the space. With about 504 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 A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $54.18 billion in assets, Vanguard FTSE Emerging Markets ETF has $61.50 billion. IEMG has an expense ratio of 0.13% and VWO charges 0.10%.
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
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
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