The JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) offers broad exposure to emerging market stocks with JPMorgan’s multi-factor twist. JPEM tracks an index that combines risk-based portfolio construction with multi-factor security selection based on value, momentum, and quality. Factors are determined by characteristics like return on equity, risk-adjusted returns, profitability, and solvency. The methodology aims to diversify risk across sectors, regions, and individual securities.
Investors should note that, as of June 2020, JPEM does not include South Korea, which is lumped into developed market stocks. Unsuspecting investors who mix and match funds from different firms may find themselves either unintentionally overweight South Korea or missing out on the country entirely.
JPEM is reasonably priced for a smart-beta approach to emerging markets, though it’s still more expensive than ultra-low-cost plain vanilla rivals like the iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard FTSE Emerging Markets ETF (VWO), which lack fancy factors but offer similar exposure and great liquidity at a fraction of the price. There’s also competition to consider in the multi-factor space, including the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM) and the PIMCO RAFI Dynamic Multi-Factor Emerging Markets Equity ETF (MFEM).