The average medium risk robo adviser portfolio returns 11% over a 3 year period

In January 2018 consumer research business Boring Money set up test accounts with 15 platforms and robo advisers, investing £500 in ready-made ‘medium risk’ portfolios or own brand multi-asset funds.

The selected portfolios were those which had closest to 60% in equities in Q1 2018.

  • Over a three year period the top performer –net of fees – has grown to £605, an increase of 21%
  • Moneyfarm, Vanguard and Nutmeg were the top performing portfolios net of charges
  • After fees, the average balance across all robo accounts in 2021 was £552 – an increase of 11% over a three-year period. For comparison, over the same period the FTSE 100 was down by 14%
  • If we consider medium risk portfolio returns over both a 12 month and 3 year period, Vanguard, Nutmeg and AJ Bell Youinvest have performed consistently well

 

Performance of medium risk portfolios over a three year period

Note: Fidelity and Barclays include a fixed fee component which impacts net performance on smaller amounts

Boring Money CEO Holly Mackay comments, “As robo advisers experience continued growth, longer track records are shifting the focus from who has the snappiest app to a more fundamental performance decision.

“Over the past three years my £500 investment has made me £86 more with one provider than another.  This sort of difference is material – and currently largely impossbile to see if you are a retail customer shopping around for a ready-made solution.”

 

What’s in a name – medium risk portfolios have diverged over three years

Over three years, these medium risk portfolios have also diverged in asset allocations. The average % in shares of all providers in the medium risk bracket is 56% today. But in the portfolios, Moneyfarm’s equity allocation has shifted up to 79% and Wealthify’ s has fallen to 43%.

If Boring Money had invested in Moneyfarm’s risk profile 5, for example, which is now closer to a 60% equity allocation, the notional balance after fees would have been £562.

 

Fixed fees impact smaller pots

A number of the providers have elements of fixed fees which make the charges disproportionately high for these small test accounts. Both Barclays and Fidelity have fixed fees or minimum monthly fees which disproportionately our smaller test accounts.

Boring Money modelled the same portfolios net of charges and based on a £50,000 portfolio, to illustrate the net position on these larger balances.

 

Passive portfolios with high US equity allocations have done best

When performance net of fees is looked at for larger £50,000 accounts, Santander, True Potential Investor and Hargreaves Lansdown performed the worst over a three-year period.

In addition to charges and equity allocations, the proportionate weighting to the US has been a key factor. The top three performers all had more than 40% of their overall share allocations in the US markets.

Mackay concludes: “This exercise shows the benefits of diversification offered by robo advisers. It’s also a reminder for investors to check what lies under the bonnet every so often, as the % in shares can change dramatically from one year to the next. 

“After three years it’s also looking positive for the passive providers. The active portfolios we hold have not done better net of charges, even in such volatile markets.”

 

- ENDS -

Notes to editors:

  1. The accounts were opened in January 2018. The balances were taken in mid-January 2021 to determine the three-year performance net of charges.

  2. The asset allocations of these ‘medium risk’ portfolios as of mid January are:

Platform

Fund

Asset Allocation

AJ Bell

VT AJ Bell Balanced I Acc

56.45%

Barclays

Barclays Wealth Gbl Mkts 3 R A

50.00%

Bestinvest

Tilney Growth Portfolio

67.12%

Charles Stanley

CS Multi Asset 3

47.00%

Fidelity

Multi Asset Allocator Growth Fund

56.11%

HL

Multi-manager Balanced

60.32%

IG

Growth Portfolio

45.79%

Nutmeg

Portfolio 5 ESG

46.76%

Moneyfarm

Aggressive Portfolio 6/7

78.91%

Santander

Santander Multi-Index 4

72.54%

True Potential

Balanced Blended Portfolio

59.96%

Wealthify

Ambitious Portfolio

43.40%

Wealthsimple

Balanced Portfolio

50.00%

Vanguard

Vanguard LS 60

60.00%

 

 

For further information, please contact:

Mikhail Ismail, Head of Marketing

mikhail@boringmoney.co.uk

07875197759

 

About Boring Money

Boring Money is an independent research and publishing house which provides information, tips and Best Buy tools to savers and investors. It recently raised £900,000 through crowdfunding, with more than 12,000 weekly readers and investors supporting and engaging with the company. The business conducts regular research with industry providers and UK consumers to track the developing DIY investment market from both the customer and provider perspective. Boring Money holds test accounts with over 25 investment platform providers and also holds regular focus groups and interviews with consumers to ensure regular input and feedback from the user perspective.

Founder Holly Mackay has worked in the investment industry for 20 years and is supported by a team of 12 researchers, analysts and marketing execs. Boring Money is not regulated to give personal financial advice, nor is it regulated by the industry watchdog.

 

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