High risk portfolios

Returns

Here we look at the returns of robo-advisers’ “high risk” portfolios. Again, all nine robo advisers feature with a 1-year track record, seven of the robo advisers have a 2 year track record.

On average, these portfolios returned 7.06% over the 1-year period, with performance ranging from 5.23% to 8.51%. In comparison, the FTSE 100 would have returned 6.09% over the period.

Over 2 years, average returns were 17.91%, with performance ranging from 11.83% to 21.62%. In comparison, investing in A FTSE 100 tracker would have returned 17.25% over the 2-year period.

Figure 1 - Returns on £5,000 invested up to the 30th September 2018

While we classify all of these portfolios as being “low-risk”, the asset classes within them differ significantly as shown in the below matrix, with equity allocations ranging from 99.6% to 69%.

Figure 2 - Robo adviser “high risk” asset allocation over the 12 months to 30th September 2018

Risk

To compare the risk taken to achieve returns, we have looked at the risk-adjusted return and inter-month drawdown across these portfolios. We measure risk-adjusted return using the Sharpe ratio. This can be interpreted as the return achieved for every unit of risk taken.

We measure the inter-month drawdown as 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.

Figure 3 - “High risk” portfolio returns, risk-adjusted return and inter-month drawdown


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