Launched on 05/11/2016, the JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
JPME is managed by J.P. Morgan, and this fund has amassed over $232.80 million, which makes it one of the average sized ETFs in the Style Box - Mid Cap Blend. JPME, before fees and expenses, seeks to match the performance of the Russell Midcap Diversified Factor Index.
The Russell Midcap Diversified Factor Index comprises of mid cap US equity securities selected from the Russell Midcap Index. The Index is diversified across the following sectors: financials, technology, consumer services, health care, industrials, consumer goods, energy/ materials and telecommunication/utilities.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.24%.
JPME's 12-month trailing dividend yield is 1.76%.
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.
For JPME, it has heaviest allocation in the Healthcare sector --about 14.70% of the portfolio --while Consumer Discretionary and Information Technology round out the top three.
Looking at individual holdings, Teradyne Inc Common (TER) accounts for about 0.50% of total assets, followed by Resmed Inc Common Stock (RMD) and Best Buy Co Inc Common (BBY).
JPME's top 10 holdings account for about 4.59% of its total assets under management.
Performance and Risk
Year-to-date, the JPMorgan Diversified Return U.S. Mid Cap Equity ETF has lost about -6.10% so far, and is up roughly 2.52% over the last 12 months (as of 08/12/2020). JPME has traded between $42.43 and $71.93 in this past 52-week period.
The fund has a beta of 1.14 and standard deviation of 22.36% for the trailing three-year period. With about 419 holdings, it effectively diversifies company-specific risk.
JPMorgan Diversified Return U.S. Mid Cap Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard MidCap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core SP MidCap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard MidCap ETF has $34.21 billion in assets, iShares Core SP MidCap ETF has $45.64 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Blend.
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 U.S. Mid Cap Equity ETF (JPME): ETF Research Reports
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
ResMed Inc. (RMD) : Free Stock Analysis Report
Teradyne, Inc. (TER) : Free Stock Analysis Report
iShares Core SP MidCap ETF (IJH): ETF Research Reports
Vanguard MidCap ETF (VO): ETF Research Reports
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