Traditional versions of global equity funds, including exchange traded funds (ETFs), are predominantly cap-weighted, but the smart beta boom has sparked an evolving lineup of compelling, fundamentally-weighted funds for investors to consider.

That includes JPMorgan Diversified Return Global Equity ETF (JPGE). JPGE, which is nearly three and a half years old, tracks the FTSE Developed Diversified Factor Index. The ETF uses a multi-factor approach rooted in the value, size, momentum and low volatility factors, which can help investors avoid the burden of attempting to time a single investment factor.

“Owning any single factor on a stand-alone basis over time has the potential to deliver better risk-adjusted returns relative to the market,” according to Morningstar. “But factors are cyclical, each can go through long spells of underperformance. Value for example, which was a winning strategy after the dotcom crash in the early 2000’s, has underperformed for much of the past decade.”

As a global fund, JPGE holds U.S. stocks to the tune of 26.1%, but that is well below the average found in many cap-weighted global ETFs. For example, the cap-weighted MSCI ACWI Index allocates 50.5% of its weight to U.S. stocks.

With the U.S. bull market aging and valuations on U.S. equities viewed as lofty, JPGE's broader geographic exposure could prove advantageous to investors going forward. Actually, that geographic diversity is already benefiting investors. JPGE is up more than 22% year-to-date after hitting an all-time high Monday, putting the ETF ahead of the MSCI ACWI Index by more than 150 basis points.

JPGE allocates 23% of its weight to Japan, which is universally viewed as one of the least expensive major developed markets as measured by price-to-book and price-to-earnings ratios. Europe, another region that trades at a discount to the U.S., occupies nearly 23% of JPGE as well.

JPGE's smart beta approach helps minimize the fund's exposure to the U.K. and Switzerland, countries that loom large in cap-weighted global funds. Rather, the bulk of JPGE's Europe exposure is centered around Eurozone economies, which are the compelling values relative to other developed Europe destinations. There other perks associated with JPGE.

“Multi-factor ETFs aim to address this issue of factor cyclicality. By combining factors, multi-factor strategies offer a smoother ride through market cycles, reducing the risk of investors abandoning sound strategies at precisely the wrong time,” adds Morningstar.

Since coming to market, JPGE has outperformed an equivalent cap-weighted index as well as the MSCI World Index, according to issuer data. JPGE has an annual expense ratio of just 0.38%, which prices the ETF competitively with domestically-focused large-cap smart beta funds.

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