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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?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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

Managed by J.P. Morgan, JPME has amassed assets over $246.43 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. JPME, 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.24% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.27%.

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.

JPME's heaviest allocation is in the Information Technology sector, which is about 14.50% of the portfolio. Its Healthcare and Industrials round out the top three.

When you look at individual holdings, Coterra Energy Inc (CTRA) accounts for about 0.93% of the fund's total assets, followed by Marathon Oil Corp Common (MRO) and Devon Energy Corp Common (DVN).

The top 10 holdings account for about 5.41% of total assets under management.

Performance and Risk

So far this year, JPME has added roughly 28.97%, and is up about 33.68% in the last one year (as of 11/18/2021). During this past 52-week period, the fund has traded between $71.31 and $95.38.

The ETF has a beta of 1.06 and standard deviation of 23.31% for the trailing three-year period. With about 365 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 S&P MidCap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard MidCap ETF has $56.70 billion in assets, iShares Core S&P MidCap ETF has $68.71 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
 
Devon Energy Corporation (DVN): Free Stock Analysis Report
 
Marathon Oil Corporation (MRO): Free Stock Analysis Report
 
iShares Core S&P MidCap ETF (IJH): ETF Research Reports
 
Vanguard MidCap ETF (VO): ETF Research Reports
 
Coterra Energy Inc. (CTRA): Free Stock Analysis Report
 
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