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A Smart Idea Among Europe ETFs

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A Smart Idea Among Europe ETFs
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Europe exchange-traded funds continue receiving well-deserved attention, as many of the region's equity markets are among this year's best-performing developed markets. Here in the U.S., there are plenty of Europe ETFs for investors to consider.

An alternative for investors looking for a fund that emphasizes fundamentals over the traditional cap-weighted methodology found on so many ETFs is the JPMorgan Diversified Return Europe Equity ETF (NYSE: JPEU). When JPEU debuted in December 2015, it was the fifth ETF from JPMorgan Chase & Co. (NYSE: JPM)'s JPMorgan Asset Management unit.

A Smart Idea Among Europe ETFs

At the end of the first quarter, the value of JPEU's investments was nearly $62.5 million, indicating the ETF has acquired a decent following in about a year and a half on the market, but also confirmation that there is plenty of room for growth.

JPEU follows “the FTSE Developed Europe Diversified Factor Index, which is rebalanced on a quarterly basis and was thoughtfully constructed based on J.P. Morgan's active insights and risk management expertise,” according to a statement issued by New York-based JPMorgan Asset Management.

JPEU's underlying index is based on a methodology that targets multiple factors, including low volatility, attractive relative valuation, positive momentum and smaller market capitalization, according to FTSE Russell.

JPEU's Unique Methodology

Said another way, JPEU is not the run-of-the-mill Europe ETF. Importantly, the ETF's performance is validating its unique methodology. JPEU is up 16 percent year-to-date and was one of roughly 100 ETFs hitting all-time highs Monday. In many cases, JPEU is beating rival diversified, cap-weighted Europe ETFs. At worst, it is performing mostly in line with its rivals from the cap-weighted Europe ETF space.

JPEU's geographic lineup is similar to other diversified Europe ETFs that are not dedicated Eurozone funds. The U.K. accounts for almost a quarter of the fund's weight and there is a more than 11 percent allocation to Swiss stocks. Germany, France, Italy and Spain – the Eurozone's four largest economies, combine for 38.5 percent of JPEU's lineup.

The ETF holds nearly 300 stocks, including some well-known U.S.-listed names such as SAP SE (ADR) (NYSE: SAP), Novartis AG (ADR) (NYSE: NVS), Total SA (ADR) (NYSE: TOT) and Eni SpA (ADR)(NYSE: E). JPEU is consumer heavy as staples and discretionary names combine for over 22 percent of the fund's weight. Financial services and industrial stocks also combine for over 22 percent of JPEU's roster.

JPEU charges 0.43 percent per year, or $43 on a $10,000 investment.

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