Robo Adviser Performance – 12 Months to 30th June 2018

Who are the robo advisers?

In our latest robo performance update, we analyse the performance of eight leading robo advisers which together represent over 75% of UK robo adviser assets today.

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Summary

Average returns

Low risk portfolios

Medium Risk Portfolios

High risk portfolios

How do they compare?

Robo-Advisor
Launch Date
Accounts
Minimum Investment
Cost £5,000 portfolio2
Evestor
Apr-17
GIA
ISA
SIPP
JISA
£1
£27
IG
Apr-17
GIA
ISA
SIPP
JISA
£500
£39
Moneyfarm
Feb-16
GIA
ISA
SIPP
JISA
£500
£50
Netwealth
May-16
GIA
ISA
SIPP
JISA
£50,0001
£50
Nutmeg
Oct-12
GIA
ISA
SIPP
JISA
£500
£53
Scalable Capital
Jul-16
GIA
ISA
SIPP
JISA
£10,000
£50
True Potential Investor
Mar-14
GIA
ISA
SIPP
JISA
£1
£58
Wealthify
Apr-16
GIA
ISA
SIPP
JISA
£1
£51.50

1. Netwealth have a minimum investment of £5,000 if investing via an existing customer.

2. Assumed to be a lump-sum investment into an ISA with no monthly savings plan. Calculated charges on deposits: assumed no investment growth and no impact of charges on investment.

 

What do their customers say?

Robo-Advisor
Number of reviews
Value (5)
Service (5)
Website (5)
Recommend
IG
6
4.2
4.3
3.8
83%
Moneyfarm
34
4.4
4.4
4.0
79%
Nutmeg
81
3.8
4.0
4.3
81%
Scalable Capital
5
3.6
4.0
4.2
80%
True Potential Investor
34
4.4
4.3
4.2
91%
Wealthify
33
4.0
4.3
4.3
91%
Evestor
<5 reviews
Netwealth
<5 reviews

Average returns

Averaging the performance of the eight robo advisers included in our analysis; high-risk portfolios returned 6.38% over the 12 months analysed, followed by 3.70% for medium risk and 0.80% for low risk portfolio.  In comparison, investing in a passive FTSE 100 tracker would have returned 8.40% over the same period and a leading cash ISA would have paid only 1.17%.

Returns on £5,000 invested from 1st July 2017 to 30th June 2018

* From 1st July 2017-30th June 2018.

** Returns shown after robo adviser fees. For the FTSE 100 we have used a total return index and subtracted a 0.25% platform fee and 0.06% investment fee.

 


 

Low risk portfolios

Returns

Here we look at the lowest risk portfolios of our eight robo advisers. On average, these portfolios returned 0.80% over the 12-month period, with performance ranging from -0.41% to 2.49%. In comparison, saving in a leading easy access cash ISA would have returned 1.17% over the period.

Returns on £5,000 invested from 1st July 2017 to 30th June 2018

It is worth noting that asset allocation varies across these portfolios. Whilst being the lowest risk, Evestor’s portfolio 1 has an equity allocation of 24%, in comparison to IG and Moneyfarm, whose lowest risk portfolios do not have any exposure to equities, and instead are almost solely comprised of bonds.

Risk

Looking at the risk taken to achieve returns, we have looked at the inter-month drawdowns across these portfolios. We measure this by the most a consumer would have lost if they’d invested at the end of the month where portfolios were at their highest and then withdrew at the end of a subsequent month they were at their lowest.  

Low risk portfolios
Drawdown
Return
Moneyfarm Portfolio 1
-£45.06
-0.41%
Wealthify Cautious
-£49.53
0.62%
IG 1 Conservative
-£60.23
-0.11%
Nutmeg Portfolio 2
-£67.86
1.21%
Netwealth Risk Level 2
-£74.29
0.89%
True Potential Defensive Portfolio
-£80.90
1.13%
Evestor Portfolio 1
-£90.81
2.49%
Scalable Capital VaR 5%
-£101.45
0.63%

Volatility - robo vs multi-asset fund

To the end investor it can be argued that there is not much difference between a robo portfolio and a multi-asset fund (aside from any advice element and possible tax implications) – both could be managed, globally diversified, rebalanced investment solutions. Robo advisers might argue that a robo customer gets a portfolio which correlates to their risk appetite and therefore does more to protect the investors’ assets.

We wanted to explore this further and have looked at a comparison below between Nutmeg Portfolio 2, Scalable Capital VaR 5% and the popular Vanguard LifeStrategy 20% over a two-year period. The two robo portfolios were chosen due to their asset allocation, with both robos and LifeStrategy 20% having around 80% invested in bonds.

The chart below illustrates how Nutmeg Portfolio 2, as well as Scalable Capital VaR 5% are both less volatile than Vanguard LifeStrategy 20%. A £5,00 investment would have returned 2.74% with Nutmeg over the period in comparison to 2.37% with Vanguard LifeStrategy, however, Nutmeg’s journey was noticeably smoother. The intermonth drawdown (see explanation above) for Nutmeg is -£67.86 in comparison to -£148.31 for Vanguard LifeStrategy 20%, with  Scalable Capital splitting them with a drawdown of -£101.45.

Returns on £5,000 invested from 1st September 2016 to 30th June 2018

 


 

Medium risk portfolios 

Returns

Next we look at the ‘medium risk’ portfolios of the eight robo advisers included in our analysis. These robo portfolios map closest to a 50% equities/50% cash asset allocation. On average, these portfolios returned 3.65% over the 12-month period, with performance ranging from 1.88% to 5.27%. In comparison, saving in a leading easy access cash ISA would have returned 1.17%.

Returns on £5,000 invested from 1st July 2017 to 30th June 2018

Risk

To compare the risk taken to achieve returns, we have looked at the inter-month drawdown across these portfolios. We measure this by the most a consumer would have lost if they’d invested at the end of the month where portfolios were at their highest and then withdrew at the end of a subsequent month they were at their lowest.

Medium risk portfolios
Drawdown
Return
Netwealth Risk Level 4
-£136.26
3.27%
Nutmeg Portfolio 5
-£153.60
3.95%
Moneyfarm Portfolio 4
-£156.55
3.04%
Scalable Capital VaR 13%
-£160.00
1.88%
IG 3 Balanced
-£161.32
4.92%
Wealthify Ambitious
-£174.96
4.04%
True Potential Balanced Portfolio
-£181.40
3.21%
Evestor Portfolio 2
-£216.36
5.27%


 

High risk portfolios

Returns

Lastly, we look at the highest risk portfolios of the eight robo advisers included in our analysis. On average, these portfolios returned 6.38% over the 12-month period, with performance ranging from 4.15% to 7.92%. In comparison, saving in a leading easy access cash ISA would have returned 1.17%. However, investing in the FTSE 100 would have returned 8.40%.

Returns on £5,000 invested from 1st July 2017 to 30th June 2018

Risk

To compare the risk taken to achieve returns, we have looked at the inter-month drawdown across these portfolios. We measure this by the most a consumer would have lost if they’d invested at the end of the month where portfolios were at their highest and then withdrew at the end of a subsequent month they were at their lowest. We have included the FTSE 100 in the table below for comparison.

High risk portfolios
Drawdown
Return
IG 5 Aggressive
-£216.52
7.46%
Scalable Capital VaR 25%
-£218.50
4.15%
Wealthify Adventurous
-£224.84
5.12%
True Potential Aggressive Portfolio
-£227.71
7.24%
Netwealth Risk Level 7
-£229.25
6.75%
Moneyfarm Portfolio 6
-£229.73
5.67%
Evestor Portfolio 3
-£277.91
6.70%
Nutmeg Portfolio 10
-£282.92
7.92%
FTSE 100
-£364.19
8.40%

Risk – asset allocation

The FCA’s Platform Market Study interim findings highlighted the difficulty consumers have in comparing the risk levels of model portfolios according to their risk labels e.g. cautious, balanced, aggressive. We acknowledge that this differs with robo advisers, as a risk questionnaire is used to map a portfolio to the investor’s risk appetite. Our recent DIY Digital Wealth and Robo report found that some investors ‘game’ risk questionnaires in order to be given the portfolio they want.

Across robo advisers, the equity allocation within highest risk portfolio differs and is rarely 100% equities. Out of the providers included in our analysis, only Nutmeg’s portfolio 10 is almost 100% equity.

The matrix below illustrates the asset allocations of the highest risk portfolios of seven of the eight robo advisers over the twelve month period.