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

The JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) 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.

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.

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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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Because the fund has amassed over $310.76 million, this makes it one of the average sized ETFs in the Broad Emerging Market ETFs. JPEM is managed by J.P. Morgan. This particular fund, before fees and expenses, 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for JPEM are 0.44%, which makes it on par with most peer products in the space.

JPEM's 12-month trailing dividend yield is 4.40%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Infosys Ltd Common Stock (INFY_D.) accounts for about 1.51% of the fund's total assets, followed by Taiwan Semiconductor and Petroleo Brasileiro Sa (PETR4).

Its top 10 holdings account for approximately 10.19% of JPEM's total assets under management.

Performance and Risk

The ETF has added about 2.63% and is up roughly 8.98% so far this year and in the past one year (as of 04/22/2024), respectively. JPEM has traded between $47.68 and $54.90 during this last 52-week period.

The fund has a beta of 0.72 and standard deviation of 13.50% for the trailing three-year period, which makes JPEM a medium risk choice in this particular space. With about 574 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) 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 $73.95 billion in assets, Vanguard FTSE Emerging Markets ETF has $74.15 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.

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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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Zacks Investment Research