Nutmeg Plans to Launch Thematic Investments Portfolios
The Rise of Thematic Investing
Thematic investing has gained significant prominence over the past decade, driven by investors seeking higher returns and positive impact for their money. Sectors such as environment, society, governance (ESG), and technological transformation have become key focus areas for many investment portfolios. According to Morningstar data, by December 2021, £850 billion had been invested globally in equity-based thematic funds.
Nutmeg’s Innovative Approach
Nutmeg, a low-cost digital asset manager, is capitalizing on the growing trend of thematic investing by launching thematic investment portfolios. With over £5 billion of assets under management on behalf of 230,000 investors, Nutmeg aims to provide retail investors with access to long-term structural growth trends without compromising on risk.
Future-Focused Themes
The new portfolio types offered by Nutmeg focus on three “future-focused” themes:
- Technological Innovation
- Resource Transformation
- Evolving Consumer
These themes aim to capture the potential of technological advancements, sustainable resource management, and changing consumer preferences.
A Diversified Portfolio
Nutmeg portfolios are primarily composed of low-cost exchange-traded funds. The manager takes a management fee of 0.75% on assets up to £100,000. This makes Nutmeg competitive across all wealth levels, offering investors access to diversified investment options.
The Challenges and Opportunities
While thematic investing presents exciting opportunities for investors, it also comes with its share of challenges. Financial industry insiders are divided on the merits of thematic investing. Some believe it offers a source of diversified returns, while others argue that the themes may have reached their peak.
The performance of attractive themes during 2022 outperformed the least attractive themes by 9.4% and the MSCI World by 4.6%. However, it is important to consider both the potential benefits and risks associated with investing in thematic portfolios.
Industry Competition
Nutmeg is not the only player in the thematic investing space. Moneyfarm, another robo-advisor, also offers thematic investment products. Traditional asset managers, such as Janus Henderson, have also recognized the appeal of thematic investing and have started offering thematic equity investment solutions.
The Verdict on Thematic Investing
Thematic investing is a dynamic and constantly evolving approach to investment. Analysts have emphasized its ability to capture structural assets and steadily gain share from sectoral and geographical flows. However, it is important for investors to conduct thorough research and consider the potential risks and rewards of investing in themed portfolios.
Summary
Nutmeg, a low-cost digital asset manager, is set to launch thematic investment portfolios, tapping into the growing trend of thematic investing. These portfolios offer retail investors access to future-focused themes such as technological innovation, resource transformation, and evolving consumer preferences. With £850 billion invested in equity-based thematic funds globally, Nutmeg aims to provide investors with long-term structural growth opportunities without compromising on risk. Thematic investing presents both opportunities and challenges, with industry insiders expressing divided opinions on its merits. However, the performance of attractive themes has demonstrated resilience and outperformance compared to traditional investment approaches. Investors should carefully consider the potential benefits and risks associated with investing in themed portfolios.
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Low-cost digital asset manager Nutmeg plans to launch thematic investments portfolios, hoping to take advantage of a growing trend among younger savers for investment style.
Thematic investing in sectors such as environment, society and governance (ESG) and technological transformation have gained greater prominence over the past decade, driven by investors seeking both higher returns and positive impact for their money.
According to Morningstar data, by December 2021, £850 billion had been invested globally in equity-based thematic funds, although this has since fallen to £550 billion in September 2023 due to a combination of market movements and outflows.
“We all have an idea of what the future of the world will look like and we want to give investors a way to achieve their financial goals and also lean into themes of interest,” said James McManus, Nutmeg’s chief investment officer.
“These portfolios are designed to allow retail investors to access long-term structural growth trends without having to compromise on risk,” he said, acknowledging that the investments will offer exposure to mid- and large-cap public companies that they aim to capitalize on these trends, rather than the smaller private companies that often drive innovation.
Nutmeg, purchased by JP Morgan in 2021 in a deal worth around £700m, it has over £5bn of assets under management on behalf of 230,000 investors. It has struggled to reach profitability as it grows, posting an operating loss of £30m for 2022, compared to £20m in 2021.
The new portfolio types, the first product launched since the acquisition, offer investors the ability to choose up to 20% exposure as part of a more diversified portfolio towards “future-focused” themes. These are: “technological innovation”, “resource transformation” and “evolving consumer”.
Nutmeg portfolios are almost entirely made up of low-cost exchange-traded funds. The manager, which McManus describes as competitive with private banks “across all wealth levels”, takes a management fee of 0.75% on assets up to £100,000.
The company is part of a new wave of so-called “robo advisors” offering digital wealth management products to investors with smaller funds, including companies like Moneyfarm and Wealthify.
Moneyfarm also offers thematic investment products and traditional asset managers are getting into this trend. Janus Henderson offers “thematic equity investment solutions” on its website to capture interest in healthcare, technology and sustainability.
Financial industry insiders are divided on the merits of thematic investing. Some believe it offers a source of diversified returns; others that the themes have reached their peak at the point when retail investors can access them.
“The themes’ dynamic attractiveness has proven resilient to challenging times for markets and different from traditional investment approaches,” a Citibank quantitative analyst said in a March 2023 note.
“During 2022, the quintile of most attractive themes outperformed the least attractive themes by 9.4%; it also outperformed the MSCI World by 4.6%.”
Julien Sevaux, chief executive of asset manager Eighteen48 Partners, said he was “not too keen on thematic investing”. “It is invariable that an equity manager deals with issues such as the aging population [or] renewables will try to tailor the portfolio to the themes instead of doing a great bottom-up analysis.”
“Thematic investing is clearly prone to hype cycles,” Morgan Stanley analysts wrote in a note in February this year, adding that they nevertheless believe “thematic investing will see continued inflows of structural assets, steadily taking share from sectoral and geographical flows”. .
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