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

Launched on November 15, 2016, the JPMorgan Diversified Return U.S. Small Cap Equity ETF (JPSE) is a passively managed exchange traded fund designed to provide a 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 $558.13 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

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 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 1.47%.

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 12.5% of the portfolio. Information Technology and Real Estate round out the top three.

Looking at individual holdings, Compass Inc Common Stock (COMP) accounts for about 0.57% of total assets, followed by Century Aluminum Co (CENX) and Hecla Mining Co Common (HL).

The top 10 holdings account for about 4.09% 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 added about 10.23% so far this year and was up about 22.75% in the last one year (as of 02/27/2026). In the past 52-week period, it has traded between $38.20 and $55.20.

The ETF has a beta of 1.02 and standard deviation of 18.49% for the trailing three-year period. With about 544 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 good 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 Vanguard Small-Cap ETF (VB) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While Vanguard Small-Cap ETF has $74.59 billion in assets, iShares Core S&P Small-Cap ETF has $96.99 billion. VB has an expense ratio of 0.03% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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

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

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