Is JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) a Strong ETF Right Now?
A smart beta exchange traded fund, the JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) debuted on 05/11/2016, and offers broad exposure to the Style Box - Mid Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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. JPME has been able to amass assets over $210.97 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. This particular fund, 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
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.
Operating expenses on an annual basis are 0.24% for JPME, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.87%.
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.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 15.50% of the portfolio. Healthcare and Information Technology round out the top three.
When you look at individual holdings, Jpmorgan Us Var 12/49 accounts for about 0.56% of the fund's total assets, followed by Dick's Sporting Goods (DKS) and Varian Medical Systems (VAR).
Its top 10 holdings account for approximately 4.87% of JPME's total assets under management.
Performance and Risk
So far this year, JPME has lost about -11.10%, and is down about -4.62% in the last one year (as of 09/25/2020). During this past 52-week period, the fund has traded between $42.43 and $71.93.
The ETF has a beta of 1.11 and standard deviation of 22.55% for the trailing three-year period. With about 417 holdings, it effectively diversifies company-specific risk.
Alternatives
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 $33.21 billion in assets, iShares Core SP MidCap ETF has $41.83 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.
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 U.S. Mid Cap Equity ETF (JPME): ETF Research Reports
DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
iShares Core SP MidCap ETF (IJH): ETF Research Reports
Vanguard MidCap ETF (VO): ETF Research Reports
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