Nutmeg partners with JP Morgan Asset Management in Smart Alpha portfolio launch

James McManus, Nutmeg

Europe’s largest digital wealth manager, Nutmeg, with GBP2.3 billion under management, is to launch a bespoke new range of five risk-rated ETF portfolios with JP Morgan Asset Management (JPMAM).

The new Smart Alpha portfolio range is designed to offer customers access to JPMAM’s market insights and research expertise through Nutmeg’s digital user capabilities.

The new portfolios will be run by the Multi-Asset Solutions team at JPMAM, and will offer a range of globally diversified ETFs, seeking to achieve returns through three elements: Long-term, strategic asset allocation set by JPMAM’s Multi-Asset Solutions specialists – a team with a 50-year history of investing for institutions and professionals worldwide; Tactical adjustments, around this long-term allocation, to capitalise on opportunities and manage risk at different stages of the market cycle and finally Smart security selection.

Alongside passive ETFs, the Smart Alpha portfolios will also include active equity ETFs which leverage the insights of JPMAM’s research analysts. These active equity ETFs will seek to achieve returns in excess of their respective benchmarks through active overweights and underweights. There will also be an ESG element to the portfolios.

Speaking at the launch, James McManus (pictured), chief investment officer, Nutmeg, said: “We wanted to build an ETF solution for our clients but didn’t want to limit ourselves to passive investment.” The new range is described by McManus as: “Sitting at the intersection of passive and active management.”

Also speaking at the launch, Edward Malcolm, head of UK ETF distribution, JP Morgan Asset Management, said: “This proposition sits between our multi-asset solutions team and the ETF team. Our ETFs are different from other ETF providers. Our ETF business in Europe was launched three years ago because the ETF is an attractive investment vehicle and has seen huge growth because it is cost efficient, transparent and diversified.” Malcolm confirmed that all of the JPAM ETFs have outperformed their benchmarks.

McManus said: “Our customers are seeking diversification from their investment providers and multiple wealth management relationships are common.”

The new portfolios will also use ETFs from outside the range offered by JPAM, with ETFs from iShares, Lyxor, SPDR and Deutsche Bank included where needed.

The ESG element will be on an integration basis, where JPMAM’s analysts will incorporate ESG information into their research into companies plus an exclusion element which will see certain sectors such as tobacco, thermal coal, weapons producers and controversial weapons excluded from the portfolios.

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

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