1) JPMorgan Chase Enters Agreement to Acquire Digital Wealth Manager – Nutmeg
JP Morgan | 6/17/2021
Because… When Bloomberg reported last December the Wall Street powerhouse’s search for M&A ideas, we commented that “a fintech leader or an overseas asset manager” could benefit JPM. The acquisition of Nutmeg, one of the U.K.’s biggest robo-advisors, turned out to have the traits of both. JPM has become an active acquirer lately. After buying 55ip, another fintech company specialized in the delivery of tax-smart investment strategies, JP Morgan Asset Management announced earlier this week the acquisition of Campbell Global, a forest management and timberland investing company with $5.3 billion in assets under management. The deal could help JPM expand alternatives offerings while maintaining an ESG focus. With the S&P 500 Index generating a 40% one-year return as of May, investors are enjoying their ride on a long bull market. However, the streak will eventually end in the future. It is wise for asset managers to take preemptive measures to prepare for a market downturn. Expansion into alternative asset classes could provide a cushion when traditional asset classes experience a market collapse.
2) Janus Henderson Expands Active ETF Offering with U.S. Real Estate ETF
Janus Henderson | 6/23/2021
Because… Besides Janus Henderson’s launch of U.S. Real Estate ETF (JRE), American Century and Goldman Sachs both filed for an actively managed real estate ETF in June. According to Morningstar data, assets in U.S.-listed Real Estate ETFs reached $71.2 billion as of May 2021, up 24.7% from year-end 2020 and 41.0% from a year ago. The asset category garnered $4.0 billion this year through May, a considerable improvement from net outflows of $642 million in 2020. JRE comes with a fee structure unique in the ETF space. It charges 0.65% for the first $250 million, which drops to 0.60% for the next $750 million and 0.50% for assets over $1 billion. The category is currently dominated by passive ETFs, with a mere $155 million in three active ETFs. Invesco Active U.S. Real Estate ETF, the largest with $123.7 million as of June 23, 2021, boasts the lowest fee of 0.35%. The $16.3 million ALPS Active REIT ETF and the $14.8 million Fidelity Real Estate Investment ETF, which were both rolled out in February, are priced at 0.68% and 0.59%, respectively.
Natixis | 6/23/2021
Because… The Natixis survey shows that U.S. investors have the highest long-term return expectations at 17.5%. It is not surprising that many people remain very optimistic despite the ongoing presence of the pandemic. According to the Callan Periodic Table of Investment Returns, which tracks annual returns for nine asset classes, four out of five equity categories generated double-digit returns in 2020, with Small Cap Equity posting the highest return of 19.96%. Similarly, six out of nine asset classes registered double-digit returns in 2019, ranging from 31.49% for Large Cap Equity to 14.32% for High Yield Bond. Such strong market performance gives investors a reason to feel hopeful. Average investors are usually not savvy enough to examine economic impact and perform fundamental analysis to gauge the market direction and determine stock valuations, which are even hard for industry experts. Individual investors tend to be led by media reports and tips from friends and family members. Therefore, asset managers should assume the responsibility of helping the investing public adjust their expectation.