Why JPSV's Competitors Outperform in Volatile Markets: A Strategic Shift for Investors

The small-cap value ETF space is undergoing a seismic shift, and JPMorgan's Active Small Cap Value ETF (JPSV) is feeling the tremors. As of early June 2025, JPSV has delivered a -5.9% year-to-date (YTD) return, underperforming not only the S&P 500 but also a slate of competing ETFs that are leveraging smarter strategies, lower costs, and tax-efficient structures. For investors, this is a wake-up call to reassess active management's role in volatile markets—and consider passive alternatives that are outpacing JPSV at a fraction of the cost.

The Case Against Active Management: JPSV's Struggles

JPSV's active approach—relying on human portfolio managers to pick small-cap value stocks—has faltered in 2025. Its -5.9% YTD return lags behind passive peers like the Avantis U.S. Small Cap Value ETF (AVUV) (-8.1%), the Vanguard Small-Cap Value ETF (VBR) (-3.9%), and even the Principal U.S. Small Cap ETF (PSC), which eked out a 0.1% gain. The problem isn't just underperformance; it's the expense ratio. JPSV charges 0.74%, nearly three times what VBR (0.07%) or AVUV (0.25%) charge. Active management's fees are proving costly in a market where small-cap value stocks are already volatile.

Why Competitors Are Winning: Strategy and Costs

The ETFs outperforming JPSV aren't just cheaper—they're smarter. Let's break down their advantages:

1. Lower Turnover = Tax Efficiency

Passive ETFs like VBR and AVUV have turnover rates below 10%, meaning they hold stocks longer and avoid frequent trading that triggers capital gains taxes. JPSV, by contrast, likely has higher turnover due to its active strategy, eroding returns for taxable accounts.

2. Factor-Based Strategies Dominate

• AVUV focuses on profitability and valuation metrics, avoiding overleveraged or low-margin companies.
• PSC combines quality and momentum, targeting firms with strong pricing power.
• XSVM (Invesco S&P SmallCap Value With Momentum ETF) blends value and momentum, capturing stocks poised to rebound. These hybrid approaches have cushioned losses in 2025.

3. Risk-Adjusted Returns Matter Most

While JPSV's Sharpe ratio (a measure of risk-adjusted return) ranks in the bottom quartile of ETFs, passive peers like RWJ (Invesco S&P SmallCap 600 Revenue ETF) and VBR offer better returns per unit of risk. Even in a down year, their steadier performance makes them more palatable for long-term investors.

The Write-Off for JPSV?

JPSV's underperformance isn't just about 2025—it's a trend. Its 5-year annualized return of 14.7% trails AVUV's 19.2% and RWJ's 19.5%. Active management's promise of “beating the market” is fading in an era where data-driven, low-cost ETFs can replicate—and outperform—human judgment.

Investment Advice: Pivot to Passive

For investors in small-cap value, the path forward is clear:
1. Ditch JPSV's high fees. Its 0.74% expense ratio is a drag in a category where 0.07% (VBR) or 0.25% (AVUV) are available.
2. Prioritize tax efficiency. Use ETFs with low turnover for taxable accounts.
3. Embrace factor-based strategies. AVUV's focus on profitability or XSVM's momentum/value blend offers better downside protection.

Conclusion: Active Management's Losing Streak

In 2025, the small-cap value ETF landscape is a stark reminder: passive strategies are winning. JPSV's active approach can't keep pace with lower-cost, factor-driven ETFs that minimize fees and taxes while maximizing diversification. For investors, the message is simple: cut the active management crutch and embrace the efficiency of passive alternatives. Your portfolio will thank you.