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

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The JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM - Free Report) 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?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

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.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by J.P. Morgan. JPEM has been able to amass assets over $262.48 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. JPEM, 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 0.44% for this ETF, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 5.12%.

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 2.06% of the fund's total assets, followed by China Mobile Ltd Common and Taiwan Semiconductor.

JPEM's top 10 holdings account for about 13.32% of its total assets under management.

Performance and Risk

So far this year, JPEM has lost about -29.90%, and is down about -22.44% in the last one year (as of 03/26/2020). During this past 52-week period, the fund has traded between $36.19 and $58.24.

The fund has a beta of 0.80 and standard deviation of 20.67% for the trailing three-year period, which makes JPEM a medium risk choice in this particular space. With about 515 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 - Free Report) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $45.14 billion in assets, Vanguard FTSE Emerging Markets ETF has $50.48 billion. IEMG has an expense ratio of 0.14% 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.

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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