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Is JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) a Strong ETF Right Now?

Sweta Killa
·4-min read

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?

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

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Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $228.49 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, JPME 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

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.

Annual operating expenses for this ETF are 0.24%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.07%.

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 Consumer Discretionary sector --about 15.60% of the portfolio --while Healthcare and Information Technology round out the top three.

Taking into account individual holdings, Lululemon Athletica Inc (LULU) accounts for about 0.60% of the fund's total assets, followed by Cadence Design Systems (CDNS) and West Pharmaceutical (WST).

JPME's top 10 holdings account for about 5.46% 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 -21.49% so far, and is down about -15.52% over the last 12 months (as of 06/15/2020). 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 21.67% for the trailing three-year period. With about 418 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 $29.96 billion in assets, iShares Core SP MidCap ETF has $42.16 billion. VO has an expense ratio of 0.04% and IJH charges 0.06%.

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
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
Cadence Design Systems, Inc. (CDNS) : Free Stock Analysis Report
 
West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
 
iShares Core SP MidCap ETF (IJH): ETF Research Reports
 
Vanguard MidCap ETF (VO): ETF Research Reports
 
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