If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE), a passively managed exchange traded fund launched on 11/15/2016.
The fund is sponsored by J.P. Morgan. It has amassed assets over $396.66 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
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 1.63%.
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.
This ETF has heaviest allocation to the Information Technology sector--about 14.10% of the portfolio. Industrials and Financials round out the top three.
Looking at individual holdings, Catalyst Pharmaceuticals (CPRX) accounts for about 0.35% of total assets, followed by Casella Waste Systems (CWST) and Harmonic Inc Common (HLIT).
The top 10 holdings account for about 3.35% 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 return is roughly 1.05% so far this year and is down about -4.48% in the last one year (as of 06/06/2023). In the past 52-week period, it has traded between $35.20 and $43.54.
The ETF has a beta of 1.14 and standard deviation of 23.10% for the trailing three-year period. With about 579 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) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $50.51 billion in assets, iShares Core S&P Small-Cap ETF has $65.08 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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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