The JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) was launched on 01/07/2015, and is a smart beta exchange traded fund designed to offer 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.
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.
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, and has been able to amass over $369.79 M, which makes 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for JPEM are 0.45%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.67%.
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.
When you look at individual holdings, Lukoil Pjsc Common Stock (LKOH) accounts for about 1.62% of the fund's total assets, followed by China Mobile Ltd Common and Naspers Ltd Common Stock (NPN).
Its top 10 holdings account for approximately 13.38% of JPEM's total assets under management.
Performance and Risk
The ETF has added about 14.48% so far this year and was up about 15.07% in the last one year (as of 12/23/2019). In the past 52-week period, it has traded between $49.67 and $57.01.
JPEM has a beta of 0.78 and standard deviation of 14.30% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 543 holdings, it effectively diversifies company-specific risk.
JPMorgan Diversified Return Emerging Markets Equity ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (
VWO Quick Quote VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $61.15 B in assets, Vanguard FTSE Emerging Markets ETF has $67.17 B. IEMG has an expense ratio of 0.14% and VWO charges 0.12%.
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.