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Should JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE) Be on Your Investing Radar?

Zacks Equity Research
·4 min read

If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE), a passively managed exchange traded fund launched on 11/15/2016.

The fund is sponsored by J.P. Morgan. It has amassed assets over $206.44 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

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Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.29%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.29%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 13.70% of the portfolio. Industrials and Financials round out the top three.

Looking at individual holdings, Sm Energy Co Common (SM) accounts for about 0.55% of total assets, followed by Ranger Oil Corp Common (ROCC) and Antero Resources Corp (AR).

The top 10 holdings account for about 4.17% of total assets under management.

Performance and Risk

JPSE seeks to match the performance of the Russell 2000 Diversified Factor Index before fees and expenses. The JP Morgan Diversified Factor US Small 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.

The ETF has lost about -11.87% so far this year and is down about -4.85% in the last one year (as of 05/27/2022). In the past 52-week period, it has traded between $38.25 and $47.96.

The ETF has a beta of 1.12 and standard deviation of 28.70% for the trailing three-year period. With about 629 holdings, it effectively diversifies company-specific risk.

Alternatives

JPMorgan Diversified Return U.S. Small Cap Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, JPSE is a sufficient option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $53.41 billion in assets, iShares Core S&P SmallCap ETF has $64.60 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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. Small Cap Equity ETF (JPSE): ETF Research Reports
 
SM Energy Company (SM) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Antero Resources Corporation (AR) : Free Stock Analysis Report
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
Ranger Oil Corporation (ROCC) : Free Stock Analysis Report
 
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Zacks Investment Research