Is JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) A Hot ETF Right Now?

Launched on 01/07/2015, the JPMorgan (NYSE:JPM) Diversified Return Emerging Markets Equity ETF (JPEM) is a smart beta exchange traded fund offering 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.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

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

The fund is sponsored by J.P. Morgan. It has amassed assets over $220.54 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the FTSE Emerging Diversified Factor Index.

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.

Operating expenses on an annual basis are 0.47% for JPEM, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 4.69%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, China Mobile Ltd Common accounts for about 2.80% of total assets, followed by Taiwan Semiconductor and Vale Sa Common Stock Brl.

JPEM's top 10 holdings account for about 15.6% of its total assets under management.

Performance and Risk

So far this year, JPEM has lost about -7.94%, and is down about -4.35% in the last one year (as of 11/06/2018). During this past 52-week period, the fund has traded between $49.44 and $64.42.

The ETF has a beta of 0.92 and standard deviation of 16.48% for the trailing three-year period, making it a medium risk choice in the space. With about 628 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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $46.73 B in assets, Vanguard FTSE Emerging Markets ETF has $56.07 B. IEMG has an expense ratio of 0.14% and VWO charges 0.14%.

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.