Should JPMorgan Diversified Return U.S. Mid Cap Equity ETF Be on Your Investing Radar?

If you're interested in broad exposure to the Mid Cap Blend segment of the US equity market, look no further than the JPMorgan Diversified Return U.S. Mid Cap Equity ETF JPME, a passively managed exchange traded fund launched on 05/11/2016.

The fund is sponsored by J.P. Morgan. It has amassed assets over $420.30 million, making it one of the average sized ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

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 0.24%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.78%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 12.30% of the portfolio. Financials and Real Estate round out the top three.

Looking at individual holdings, Vistra Corp Common Stock VST accounts for about 0.65% of total assets, followed by Tenet Healthcare Corp THC and International Paper Co IP.

The top 10 holdings account for about 5.04% of total assets under management.

Performance and Risk

JPME seeks to match the performance of the Russell Midcap Diversified Factor Index before fees and expenses. 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.

The ETF has gained about 10.33% so far this year and it's up approximately 13.09% in the last one year (as of 07/31/2024). In the past 52-week period, it has traded between $79.30 and $100.65.

The ETF has a beta of 1.04 and standard deviation of 16.74% for the trailing three-year period. With about 366 holdings, it effectively diversifies company-specific risk.

Alternatives

JPMorgan Diversified Return U.S. Mid 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, JPME is a reasonable option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Mid-Cap ETF VO and the iShares Core S&P Mid-Cap ETF IJH track a similar index. While Vanguard Mid-Cap ETF has $65.69 billion in assets, iShares Core S&P Mid-Cap ETF has $88.19 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To read this article on Zacks.com click here.