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The JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) was launched on 05/11/2016, and is a smart beta exchange traded fund designed to offer 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.
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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by J.P. Morgan. JPME has been able to amass assets over $344.23 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. Before fees and expenses, JPME 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
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 0.24% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.96%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
JPME's heaviest allocation is in the Healthcare sector, which is about 11.50% of the portfolio. Its Consumer Staples and Industrials round out the top three.