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Nutmeg partners with JP Morgan to offer actively managed ETFs

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18/11/2020
Nutmeg has launched a partnership with JP Morgan giving customers access to a range of globally diversified Exchange Traded Funds (ETFs) but with an actively managed element of the portfolio.

The digital wealth manager which launched in 2012 and has notched up 100,000 customers, has teamed up with JP Morgan Asset Management to launch a ‘Smart Alpha portfolio’ range.

It will offer Nutmeg customers a new investment opportunity which sits between the multi-asset and ETF sectors. But they claim what makes this proposition different to others is the ‘smart alpha’ element – actively managed ETFs, not just passives.

Run by the JP Morgan multi-asset solutions team, Nutmeg customers will have a choice of five portfolios (based on low to high risk levels) each with 10-14 ETFs. But the team has the flexibility to “take advantage of market opportunities” at an individual stock level.

This is done via its ‘research enhanced index’ so while it may track the MSCI World Index, the team also uses bottom up stock picking to rank different countries into quintiles where they are rated on their forward looking performance. The worst stocks are placed in the bottom two quintiles while the team go overweight with those that are in the top two quintiles.

As such, Nutmeg and JP Morgan said their “tactical asset allocation” allows them to “generate alpha from the building blocks”.

There is also an ESG element to the investment with companies also being ranked on this.

JP Morgan has an ETF universe of 70 but five are via third parties. It added that those in the portfolio will predominantly be held by JP Morgan.

The management fee for the Smart Alpha portfolios is 0.75% up to 100,000, and 0.35% above that. The average underlying fund cost is 0.19% and the cost of market spread is 0.07%.

James McManus, chief investment officer at Nutmeg, said: “At Nutmeg, our mission has always been to open up the previously exclusive world of wealth management, by bringing innovative, technology-led solutions to more people in order to help them achieve their financial goals. The Smart Alpha portfolio range sits at the intersection of passive and active management. It builds on our core investment principles and aims to deliver superior returns by giving customers the best of both worlds: a multi-asset portfolio that combines the diversification of a passive approach with active, ESG-integrated, research-driven security selection.”

Edward Malcolm, head of UK ETF distribution at JP Morgan Asset Management, said: “We are delighted to be partnering with Nutmeg to offer their clients a suite of risk-rated portfolios which combine active and passive ETFs. These portfolios, in partnership with Nutmeg’s technology capabilities, have been designed to complement and enhance the investment opportunities available to Nutmeg customers.”

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