Nutmeg.com

bigoll

I've been reading up on Nutmeg.com - a managed ETF based investment platform and it looks pretty attractive from the outside. Does anyone have any thoughts or experiences from using Nutmeg or any anecdotal information / reviews to add to the mix?

bugbyte_2

Just had a look at the 'how we compare' page - The fund fees which they quote as averaging 0.3%, which is HSBC tracker / Vanguard territory. They then add 1% management fee.
Why don't you go and have a look at the Vanguard thread. I haven't got that fund personally but the Vanguard funds seem to do what this does without the extra 1%.

bigoll

Hmmm.....not sure they can be compared to be honest. Nutmeg is based on managed ETFs which are rebalanced very regularly to take account of market movements. The HSBC tracker is a tracker, not an ETF, while Vanguard appears to be a static ETF, hence no management fee. But I agree that all three have their benefits and drawbacks.

I suppose with a managed ETF the potential returns could be considerably higher than a closed ETF or a tracker, and the risks are managed better, so you pay the 1% annual fee to protect your investment and to boost it by many multiples of the fee itself.

bigoll

Also, Vanguard doesn't appear to be available as an ISA, though happy for someone to tell me otherwise. The HSBC tracker is, but I can't see how to even access it! Is it through brokers / managers or is it hidden away somewhere in the depths of the HSBC website? I think Nutmeg's accessibility and clear platform is a potential bonus.

grey_gym_sock

the vanguard lifestrategy funds include rebalancing to a retain the selected asset allocation between 3 top-level asset classes: UK equities, non-UK equities, and UK bonds. all this for a TER around 0.3%.

that is the nearest vanguard product to nutmeg. their other products are simple trackers (ETFs or funds).

i think it's fair to compare lifestrategy to nutmeg. in both cases, the building blocks are low-cost trackers for a range of asset classes. nutmeg uses a larger range of asset classes, and has a much larger element of active management - the managers have the discretion to change the proportion used of each asset class. it also costs more, which is not surprising.

let's just say that there's an on-going debate about whether it's worth paying the extra cost for active fund management.

to get vanguard in an ISA, yes, you have to go via a broker/platform, which adds costs.

if you want a single vanguard fund (e.g. 1 of the lifestrategy funds), then AFAIK the cheapest way to do that is, for up to £10k, via charles stanley, who charge 0.25% extra. or, for bigger investments, via HL, who charge £24 per year. (full disclosure: i hold shares in HL.)

bugbyte_2

grey_gym_sock wrote: »

let's just say that there's an on-going debate about whether it's worth paying the extra cost for active fund management.

Clicky here.

The netmeg site does appear to have a good front end. If you do decide to go for the vanguard, just 'phone up HL and they will talk you through setting up an account and putting it in an ISA. Similarly, if you come to the conclusion I did that trackers are a) cheaper and b) perform just as well as managed funds, go with cavendishonline as they appear to be the cheapest platform.

Link to Vanguard info

EDIT:

Forgot to add, you MUST do your own research into the funds you invest in - dont take the advice of complete strangers (like me!) on the 'net.

JohnRo

Bigoll you seem to be confusing a few terms, a tracker endeavours to mirror the market index it is tracking, an ETF is a vehicle used to sell investments, just as funds, IT's and various other vehicles do the same thing in different ways.

You're also making quite a few assumptions in these posts.

I suppose with a managed ETF the potential returns could be considerably higher than a closed ETF or a tracker, and the risks are managed better, so you pay the 1% annual fee to protect your investment and to boost it by many multiples of the fee itself.

This does not compute.

They're bottling tap water and selling it on for +1% imho. IFA's generally do the same thing, in greater detail and offer a far more interpersonal customer service for about half that amount don't they?

bigoll

I was making the distinction between the Nutmeg ETF, which isn't a tracker, and index trackers. Nutmeg doesn't offer index trackers.

With a tracker your investment is at the whim of the market performance as a whole, whereas a managed fund will flit between the best performing parts of that index or market, in theory outperforming a tracker when the market goes down. Granted it's a big if, but it is an if nevertheless.

They're putting a fund together and managing it. You could do it all yourself of course, but I suspect logging the hours and paying individual transaction fees to brokers would add up to more than 1% per year.

Not sure what sort of IFA you have, but they tend to cost a lot more overall and not be instantly accessible (booking meetings, going to their office, waiting for letters etc). Personally I'd go with instant online support from traders with their hands on the fund than an intermediary.

grey_gym_sock

well, nutmeg doesn't seem to be an ETF - it seems to be built using ETFs, and to itself be discretionary portfolio management service - or possibly a fund (they use a few terms).

but basically, it's less important what the layers are technically (ETFs, funds, discretionary management, ...). the fundamental idea is building a plausible portfolio by using 2 layers. take trackers for different assets classes (layer 1), and combine them in suitable proportions to obtain a sensible portfolio (layer 2). this is a good basic approach.

the basic approach is shared by: nutmeg, vanguard lifestrategy, some funds or funds, and so on.

if you've got a basic investment approach that makes sense, the next issue should be cost.

nutmeg doesn't do so well here: for small investments, it apparently starts at c. 0.3% (for underlying ETFs) + 1% (for nutmeg) = 1.3%

vanguard lifestrategy starts, again for small investments, at c. 0.3% (for fund) + 0.25% (for charles stanley platform) = 0.55%

that's a big difference in cost. you ought to have a powerful reason if you're going to choose nutmeg over lifestrategy.

among other ways in, funds of funds generally work out rather expensive.

DIY for the 2nd layer is another way. if you did that using ETFs as layer 1, then you're right that it would be expensive for small investments due to dealing fees. you'd be better off using funds as layer 1, and perhaps investing via cavensish online's platform (which, more accurately, means using cavendish as a broker to access the fidelity fundsnetwork platform). that would be more work, though you should be able to beat nutmeg on total cost. but it's not the obvious route.

Shaolin_Monkey

It looks like they offer a managed portfolio service investing in ETF's (i.e. trackers). They don't actually issue ETF's (there is certainly no "Nutmeg ETF" listed on the LSE). Their head of investment contributes to articles on Trustnet quite often and you can see some of the ETF's they use referred to there.

Vanguard LifeStrategy funds are passive, and probably as cheap as you can get for something approaching a balanced portfolio (TER around 0.3% + platform charges). If Nutmeg's TER is about 1.3% (and I have doubts it's as little as 1% + 0.3% as ETF's charges can go a lot higher than 0.3%, plus there's trading costs), that's much more expensive than Vanguard but still may be cheaper than a multi-manager fund like Jupiter Merlin (which can have charges of well over 2% p.a.).

I suppose the question is will you be happier with a managed portfolio than investing in a Vanguard Lifestrategy fund (or similar), or choosing a selection of funds yourself. Presumably they can provide info on their portfolio's performance so you can compare it with alternatives?

grey_gym_sock

active management costs a lot. about half the time (perhaps more than half, but let's not overstate the point), it isn't worth it: i.e. the return isn't high enough to justify using active over passive.

where are the statistics for the nutmeg team's record as active managers? picking past winners doesn't always work (to put it mildly), but it's 1 of the main things to look at.

ppl may be attracted to nutmeg because they have an snazzy website, or because they can chat to the nutmeg team. those would be really bad reasons.

discretionary investment management has indeed only been available to ppl with much larger sums to invest. it's also generally been an overpriced service, sold because it gives an appearance of personalized service. bringing that to ppl with just £1000 to invest is about as useful as bringing them worries about inheritance tax.