Nutmeg launched in 2012. Since then, we’ve seen a lot of change — in the world and the investment industry. With the recent publication of our five-year track record, we look at our investment process and the returns we’ve delivered for our customers.
I joined Nutmeg over five years ago because I believed in its aim: to revolutionise wealth management through combining investment expertise, innovative technology and smart value.
Since then the business and investment team have grown significantly and we’ve recently announced some major milestones: we now manage over £1bn of investments for our customers, and our fully managed portfolios have a five-year performance track record.
In those five years, we’ve also seen a lot of change — in both the world around us and in the investment industry.
The Nutmeg approach to investing
When I designed our investment process back in 2012, my key aim was — and still is — to deliver a high-quality investment service that would match, or better, the service offered by high-net worth wealth managers, while being accessible to all.
Our investment strategy and process focuses on asset allocation as a primary driver of investment returns, rather than focusing on picking single securities that aim to ‘beat the market’.
As the likelihood of being able to pick a fund that, in the future, beats the market by stock picking is very low — only about a 1 in 30 chance according to a study by Standard & Poors1 — we choose to use exchange-traded funds (ETFs) to deliver returns from different markets and asset classes at a much lower cost.
Moreover, we’re focused on how much risk we’re taking at any one point in time by understanding the current economic and market picture and how portfolios would perform in different regimes; a global recession, for example.
The team behind the tech
Behind our technology, we’ve built a team of ten investment professionals who have backgrounds in macro-economic strategy, risk analysis, portfolio management and trading. By combining our smart technology with our investment expertise, we aim to respond quickly to a fast-changing world.
We monitor and analyse economic, political and financial market events daily. Based on our ongoing research and understanding of the risks and potential rewards, we regularly review and adjust the asset allocation of our fully managed portfolios, as and when required. And we ensure that when we trade, we achieve the best prices possible using advanced technology.
We’re focusing on managing risk. We’re keeping costs low to deliver better after-fee returns. We’re investing for the long term.
Timeline of the Nutmeg product offering
Navigating economic and political risk
Nutmeg started life as the global economy edged its way out of the credit crisis — a time of escalated uncertainty — so it hasn’t been all smooth sailing.
We’ve seen huge amounts of market volatility and investment challenges, including the Greek crisis, Chinese policy changes which resulted in its stock market crashing, the Scottish referendum, Brexit, and the 2016 US elections. Not to mention many other mini-shocks along the way.
However, our team’s conservative, long-term approach to asset allocation means the decisions we’ve made have allowed us to weather these challenges well.
Our five-year track record
For five years now, we’ve been building and managing globally diversified portfolios for our customers, and this is a good time to look at how we’re performing.
Because we’re managing portfolios for private individuals, we believe the best way to assess how we’re doing is by comparing our results to the returns delivered by premier wealth manager companies, who typically require a client to invest a minimum of £500,000 to £1m with them. We do this using data from Asset Risk Consultants (ARC) which compiles real client portfolio returns, after fees, from 81 top wealth managers in the UK. Data on more than 100,000 client portfolios is used.
Compared to the average returns delivered by wealth managers for high-net worth clients, Nutmeg’s fully managed portfolios have outperformed by between 3.3% and 10.3% net of costs over five years2.
To explore the returns for our risk-based fully managed portfolios and see how our results compare against the ARC index of our competitors, visit our track record page on our website.
What this means for you
We always encourage our customers to think of investing as being something for the long-term and, while our first five-year track record is an important milestone for us, five years is a relatively short time for an investment.
We’re looking forward to the challenges of investing in a changing world for the next five years and the five years after that.
As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past and simulated performance indicators are not a reliable indicator of future performance.
1. S&P Dow Jones, June 2015: “Does Past Performance Matter? The Persistence Scorecard”. If you had chosen an active fund that was better than average in 2011 (one of 1,407 funds) the likelihood that you were not in a fund still doing better than average was 94.0%. If you chose a fund in the top quartile, beating 75% of funds, only two remained top quartile after five years, or just 0.3%.
2. Comparative returns: Five year returns to 30 September 2017, for Nutmeg portfolio risk levels 4,6,8 and 10 compared to Asset Risk Consultants Private Client Indices (ARC PCI) for Cautious, Balanced Asset, Steady Growth and Equity Risk portfolios. ARC PCI returns are based on real after-fee client returns for more than 100,000 sterling-based portfolios, with a minimum size of £250,000, from 81 wealth managers. Nutmeg contributes client portfolio return data to the survey. Nutmeg returns included here are regarded as simulated as they do not represent a single client account or an average of customer returns. The data is calculated using actual Nutmeg trading data from client accounts, using actual trades carried out at market prices, and is based on an account size of £25,000. The returns are calculated after fees, calculated as the weighted average rate paid by Nutmeg clients of 0.82% per year including VAT prior to 1 February 2016, 0.72% between 1 February 2016 and 1 February 2017 and 0.64% thereafter. Dividends have been included on an accrual basis. Source of price data: Bloomberg, Macrobond AB.