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Should JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE) Be on Your Investing Radar?

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Looking for broad exposure to the Small Cap Blend segment of the US equity market? You should consider the JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE - Free Report) , a passively managed exchange traded fund launched on 11/15/2016.

The fund is sponsored by J.P. Morgan. It has amassed assets over $324.36 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.


Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.29%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.45%.

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.

This ETF has heaviest allocation to the Information Technology sector--about 14% of the portfolio. Industrials and Financials round out the top three.

Looking at individual holdings, Axcelis Technologies Inc (ACLS - Free Report) accounts for about 0.38% of total assets, followed by Catalyst Pharmaceuticals (CPRX - Free Report) and Commercial Metals Co (CMC - Free Report) .

The top 10 holdings account for about 3.45% of total assets under management.

Performance and Risk

JPSE seeks to match the performance of the Russell 2000 Diversified Factor Index before fees and expenses. The JP Morgan Diversified Factor US Small 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.

The ETF has gained about 6.71% so far this year and is up about 0.87% in the last one year (as of 01/31/2023). In the past 52-week period, it has traded between $35.20 and $45.01.

The ETF has a beta of 1.13 and standard deviation of 30.29% for the trailing three-year period. With about 597 holdings, it effectively diversifies company-specific risk.


JPMorgan Diversified Return U.S. Small Cap Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, JPSE is a sufficient option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P Small-Cap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $53.89 billion in assets, iShares Core S&P Small-Cap ETF has $69.63 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.


While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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