The physical restrictions of the coronavirus pandemic have hammered home to us all just how much we need digital services when real life is on hold. From online education to distance dating, technology has stepped in to plug the gap left by the need for social distancing.
But while we’ve seen an explosion of online services in recent months, many of the most forward thinking businesses have for years increasingly embraced technological innovation in order to better cater to their clients’ needs. Some of these are in sectors with a heritage of personal service and human expertise stretching back centuries, such as banking and investment.
One of the best examples of breaking the traditional hands-on mould in the financial sector is the emergence, over the past decade or so, of digital wealth management.
In the past, wealth management tended to be expensive, and feel opaque and sometimes clunky – not to mention often intimidating to those less familiar with that world. But, by presenting a range of low-cost portfolios on user-friendly online platforms, its digital counterparts have opened up investment to a much broader market. This includes people who would steer well clear of conventional wealth managers, along with others who simply prefer the ease of investing through a digital platform.
Nutmeg is at the forefront of digital wealth management services. It runs a successful range of diversified portfolios using exchange traded funds (ETFs) and now has eight years of operations under its belt, along with more than 100,000 customers on its books.
But a good business never stands still. So a natural next step for Nutmeg was to explore how to enhance its investment offering through its core expertise in technology and digital investment.
The solution has turned out to be an innovative partnership between Nutmeg and JP Morgan Asset Management – one of the biggest and most respected names in active asset management, with a 150-year pedigree and world-class expertise in security selection based on its specialist market insights and research.
That pairing of digital and ETF expertise with active security-picking skills has led to the creation of Nutmeg’s Smart Alpha portfolios powered by JP Morgan Asset Management. This is a pioneering range of five investment portfolios, differentiated by the amount of risk (through equity exposure) each one offers.
They’re designed to appeal to more sophisticated investors who want easy online access to the added value that human input, in the shape of research-driven stock selection, can bring to the party.
In effect, investors in the Smart Alpha portfolios are getting the best of both worlds. They benefit from broad diversification and low costs through conventional, digitally run market-tracking ETFs, but their portfolios have the potential to outperform those markets through the addition of active ETFs. These harness JP Morgan Asset Management’s research capacity in order to tilt towards particular securities as markets and economic climates change.
So investors are looking at three potential sources of return. The
long-term strategic allocation of assets (which will differ for each Smart Alpha portfolio according to its risk/return profile) is overlaid with tactical tweaks by the JP Morgan Asset Management team to take advantage of market opportunities, and protect against potential risks, as they arise. In addition, smart security selection provides a further route to boost returns over and above the benchmark’s performance.
Of course, investors are increasingly anxious to know precisely what types of enterprise their money is supporting. So it’s important to note that the added dimension of active management has environmental, social and governance (ESG) principles firmly embedded within it. That means the JP Morgan Asset Management experts manage those equity ETFs to actively avoid unsustainable sectors and include environmental, social and governance considerations in their decision-making.
Could one of the Smart Alpha portfolios work as a core holding in your overall ISA investment, or perhaps for your child’s Junior ISA? Certainly, that combination of broad passive and actively managed elements, underpinned by the JP Morgan Asset Management team’s skill, experience and ESG-integrated approach in a single online package, is a pretty compelling one.
For discerning investors who value clarity, transparency and a great digital experience, but who also want potential for the kind of outperformance that actively managed investments with the benefit of human insight are able to deliver, Nutmeg Smart Alpha portfolios really could open up a new investment experience.