Launched on 05/11/2016, the JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME – Free Report) 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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $414.08 million, this makes it one of the average sized ETFs in the Style Box – Mid Cap Blend. JPME is managed by J.P. Morgan. Before fees and expenses, this particular fund seeks to match the performance of the Russell Midcap Diversified Factor Index.
The JP Morgan Diversified Factor US Mid 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.
Cost & Other Expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.24% for this ETF, which makes it on par with most peer products in the space.
JPME’s 12-month trailing dividend yield is 1.75%.
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.
JPME’s heaviest allocation is in the Industrials sector, which is about 11.70% of the portfolio. Its Financials and Healthcare round out the top three.
Taking into account individual holdings, Applovin Corp Common (APP – Free Report) accounts for about 1.47% of the fund’s total assets, followed by Vistra Corp Common Stock (VST – Free Report) and Synchrony Financial (SYF – Free Report) .
The top 10 holdings account for about 6.25% of total assets under management.
Performance and Risk
Year-to-date, the JPMorgan Diversified Return U.S. Mid Cap Equity ETF has added roughly 14.62% so far, and it’s up approximately 14.94% over the last 12 months (as of 12/26/2024). JPME has traded between $89.62 and $110.92 in this past 52-week period.
The fund has a beta of 1.04 and standard deviation of 16.70% for the trailing three-year period. With about 352 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 Mid-Cap ETF (VO – Free Report) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF (IJH – Free Report) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $72.86 billion in assets, iShares Core S&P Mid-Cap ETF has $95.57 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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