The JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE) was launched on 11/15/2016, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by J.P. Morgan. It has amassed assets over $433.26 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

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

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

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

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 1.96%.

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, Echostar Corp Common (SATS) accounts for about 0.44% of total assets, followed by Aris Water Solutions Inc (ARIS) and Solaris Energy (SEI).

The top 10 holdings account for about 3.87% 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 -13.72% so far this year and is down about -5.70% in the last one year (as of 04/14/2025). In the past 52-week period, it has traded between $38.20 and $51.70.

The ETF has a beta of 1.05 and standard deviation of 21.21% for the trailing three-year period. With about 556 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 Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $58.32 billion in assets, iShares Core S&P Small-Cap ETF has $70.98 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 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

EchoStar Corporation (SATS) : Free Stock Analysis Report

iShares Russell 2000 ETF (IWM): ETF Research Reports

Aris Water Solutions, Inc. (ARIS) : Free Stock Analysis Report

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

Solaris Energy Infrastructure, Inc. (SEI) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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