The last year or so has seen a number of entrants into the robo-advising arena. One of the first that emerged was Nutmeg, which launched in 2011. Nutmeg initially offered either a stocks and shares ISA or general investment account, but has since diversified into personal pensions. Regardless of whether you choose a stocks and shares ISA, a general investment account or a personal pension, your investments will either be in a fully managed portfolio or a fixed allocation portfolio.
With a fully managed portfolio, Nutmeg continually monitors portfolios, making adjustments to make sure they stay closely aligned to the level of risk they were intended to represent. An example Nutmeg gives of a situation where they adjusted portfolios is the Brexit vote, when they removed holdings in small UK companies and increased holdings of long term government bonds and gold. There are 10 different fully managed portfolios, varying in levels of risk exposure.
In January 2017 Nutmeg introduced fixed allocation portfolios. This essentially means that Nutmeg will not touch the portfolio once the portfolio is created. Nutmeg offer 5 types of fixed allocation portfolios, which again differ in terms of risk exposure. Nutmeg won’t change the strategy or investment selections throughout the life cycle of the investment. Any dividends received are automatically reinvested. The only occasion where Nutmeg will intervene is if the portfolio strays too far from the risk profile it was set up to represent, as some funds go up in value over time, whilst others go down in value. In this scenario Nutmeg will rebalance the portfolio, buying and selling assets to ensure the portfolio stays within the intended investment strategy.
Because fixed allocation portfolios require much less manpower, this is reflected in the fees. For investments of up to £100,000, Nutmeg charges 0.75% for a fully managed portfolio and 0.45% for a fixed allocation portfolio, falling to 0.35% and 0.25% respectively for any investments over £100,000. There’s also an underlying fund cost, which Nutmeg says is on average an additional 0.19%.
In 2015 Nutmeg introduced personal pensions. You can start a personal pension from scratch with a minimum investment of £5,000, or you can transfer pensions from other providers, including SIPPs and workplace pensions (provided your employer allows). This is handy if you want to consolidate all of your pensions into one easy to manage pot. Not all robo-advisors offer personal pensions so this is a USP for Nutmeg, although there is a rival in the shape of PensionBee, which is a dedicated personal pensions platform. We’ll be taking a closer look at PensionBee later.
Nutmeg at a glance:
- What kind of investments? Stocks and shares ISA, general investment account, personal pensions.
- How many risk profiles? Fully managed portfolio: 10. Fixed allocation portfolio: 5.
- Minimum investment? £500 (£5,000 for a personal pension).
- Fees? Fully managed portfolio: 0.75% (≤£100,000), 0.35% (>£100,000). Fixed allocation portfolio: 0.45% (≤£100,000), 0.25% (>£100,000). Plus an underlying fund cost (averaging 0.19%).