Back to top

Image: Bigstock

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

Read MoreHide Full Article

Designed to provide broad exposure to the Broad Emerging Market ETFs category of the market, the JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM - Free Report) is a smart beta exchange traded fund launched on 01/07/2015.

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

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

The fund is managed by J.P. Morgan. JPEM has been able to amass assets over $263.41 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. Before fees and expenses, JPEM seeks to match the performance of the FTSE Emerging Diversified Factor Index.

The JP Morgan Diversified Factor Emerging Markets Equity Index reflects the performance of emerging market securities representing a diversified set of factor characteristics which include Value, Price, Momentum, Earnings, Revisions and Quality characteristics.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.44%.

The fund has a 12-month trailing dividend yield of 4.28%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Taking into account individual holdings, Vale Sa Common Stock Brl (VALE3) accounts for about 1.72% of the fund's total assets, followed by Infosys Ltd Common Stock (INFY_D.) and Taiwan Semiconductor.

JPEM's top 10 holdings account for about 10.75% of its total assets under management.

Performance and Risk

Year-to-date, the JPMorgan Diversified Return Emerging Markets Equity ETF has gained about 0.96% so far, and is down about -6.30% over the last 12 months (as of 03/28/2023). JPEM has traded between $44.60 and $57.04 in this past 52-week period.

The fund has a beta of 0.70 and standard deviation of 16.71% for the trailing three-year period, which makes JPEM a medium risk choice in this particular space. With about 536 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 $68.16 billion in assets, Vanguard FTSE Emerging Markets ETF has $70.25 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

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.

Published in