Making its debut on 05/11/2016, smart beta exchange traded fund JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME) provides investors 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund sponsor and index
The fund is managed by J.P. Morgan, and has been able to amass over $372.98 million, which makes 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 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 and other expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for JPME are 0.24%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.87%.
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.
For JPME, it has heaviest allocation in the Industrials sector –about 12% of the portfolio –while Healthcare and Consumer Staples round out the top three.
Looking at individual holdings, Tapestry Inc Common (TPR) accounts for about 0.55% of total assets, followed by Ciena Corp Common Stock (CIEN) and Lumentum Holdings Inc (LITE).
The top 10 holdings account for about 4.96% of total assets under management.
Performance and risk
Year-to-date, the JPMorgan Diversified Return U.S. Mid Cap Equity ETF has added roughly 6.41% so far, and is up about 7.16% over the last 12 months (as of 09/01/2025). JPME has traded between $89.28 $110.92 in this past 52-week period.
JPME has a beta of 0.93 and standard deviation of 16.09% for the trailing three-year period. With about 361 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 Mid-Cap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $87.41 billion in assets, iShares Core S&P Mid-Cap ETF has $99.7 billion. VO has an expense ratio of 0.04% and IJH changes 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.
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