Robo-performance comparison

artyboy

I've got a fair chunk of pension tied up with Nutmeg, with a high (8/10) risk profile. So I was less than chuffed to see this:

https://www.boringmoney.co.uk/learn/articles/robo-performance-january-2020-june-2022/

So if I'm reading this right. Nutmeg 8/10 is lagging AJ Bell's equivalent by almost 10 percentage points. And is definitely towards the bottom of the pile for higher risk portfolios.

What I find particularly concerning is that this performance period included the Covid dip, and that is exactly the sort of Black Swan event (if I'm not overstating?) where I'd have hoped that a degree of active management would have outperformed a passive fund. But it even underperformed something as basic as VLS80 by over 3 percent...?

I'm due a call from my relationship manager at nutmeg. But would appreciate anyone's thoughts here, specifically:

1) Is this a fair comparison in terms of apples and apples with investments from different providers?
2) Am I being unfair basing my opinion on performance from 'just' a 2.5 year period?
3) Is there anything obvious as to why Nutmeg seems to have underperformed its peers so significantly?

I do get that the ~20% held in bonds continues to be a drag, hence why I'd see VLS80 and not 100 as the equivalent to Nutmeg 8/10.

I don't want to make any hasty decisions here but it looks like I should have just stuck it all in VLS100 and forgotten about it! 

ewaste

I'll have a look at the link as I've seen it advertised on Facebook 🙃 Initial thought is '2' it's a very short timeframe regardless of apples to apples etc. 

Since DC pensions have become the norm and they are easy to access online. I've previously had colleagues essentially chasing the previous years 'winner'. Therefore it's good you're thinking about it and asking questions first.

Albermarle

To analyse all the reasons would take some time but it looks like Nutmegs 'expert active management 'has not done a great job.
To be fair they are not the only one lagging behind . Santander, True Potential and Wealthify also have poor results .
VLS 80 has a middling result, some way behind the HSBC global strategy funds that it competes with. HSBC global strategy adventurous and dynamic have gone up 17% and 15% respectively over the same period.

[Deleted User]

Interesting.  Yes, 2.5 years is too short of a period in the context of pension investment but Robos don’t have a long track record.  

VLS funds do provide a good benchmark. Probably too early to judge individual providers, but overall it looks like Robos don’t have a magic bullet to add value over and above passive.  

barnstar2077

I looked at nutmeg too, but then I thought if I know my risk level then why not just open a vanguard ISA/SIPP and pick one of their global funds with the same risk level, so that is what I did (FTSE Global All Cap in my case.)  I know it isn't the absolute cheapest option, but it is really simple to do and the fees are a third of Nutmeg.

dunstonh

Generally speaking, robo-providers are not aimed at people who are that interested in performance.   They are basically aimed at people who like the app or looking for a simple option.

I don't want to make any hasty decisions here but it looks like I should have just stuck it all in VLS100 and forgotten about it! 

VLS100 is the odd one out in the VLS range and you are likely to find a global tracker is a better option.

artyboy

dunstonh said:

Generally speaking, robo-providers are not aimed at people who are that interested in performance.   They are basically aimed at people who like the app or looking for a simple option.

I don't want to make any hasty decisions here but it looks like I should have just stuck it all in VLS100 and forgotten about it! 

VLS100 is the odd one out in the VLS range and you are likely to find a global tracker is a better option.

Ouch, well that's me told then 

Apart from my works scheme, Nutmeg and Vanguard are my other 2 DCs; and Vanguard is in the FTSE all world tracker, Not VLS100 - I just used that as an example because it was in the performance league table quoted.

I'd made a conscious decision to put some with Nutmeg because I thought - possibly wrongly - that it could provide both some buffering and upside potential versus an entirely passive portfolio, whilst remaining at an overall high-ish risk level. I got a decent deal on fees but it does still come out about double the Vanguard charge. 

As to everyone else that's commented, thanks, I'd almost hoped that someone would point out a huge and fatal flaw in this comparison and that Nutmeg was actually far better than I realised. But maybe I was just suckered in by all those primary colours, cutesy graphics, and one syllable words... "nutmail" indeed... what was I thinking 

Anyway, only been with them for a couple of years, but based on this, any future consolidation is likely to be in Vanguard's favour. Or perhaps I'll take a closer look at AJ Bell.

[Deleted User]

VLS100 isn’t “odd” at all. Its overweight in home equities compared to a global tracker.  There is sound argument that this strategy improves expected return for a given level of risk.  Ultimately, its a choice one has to make and its good to have the option in a “one-fund” portfolio. 

The other difference with some of the global tracker funds on the UK market is the number of securities included in the fund.  At some point I checked HSBC’s FTSE All world.  It covers a smaller range of companies.  VLS 100 holds more US stocks alone than HSBC FTSE All World holds altogether.  Presumably small companies are excluded from HSBC.  For some investors that’s a problem as the fund will likely deviate from the index by a wider margin. The other side of the coin is that smaller companies’ stocks are less liquid and the costs of including them are higher. Indeed the HSBC fund is quite cheap. 

Bottom line: these are all good products giving people options and there is nothing odd about them. 

dunstonh

VLS100 isn’t “odd” at all. 

Perhaps you are not aware of the phrase "odd one out".  It is the odd one out in the VLS range.

Albermarle

Anyway, only been with them for a couple of years, but based on this, any future consolidation is likely to be in Vanguard's favour

As already pointed out the Vanguard Life strategy funds ( not 100, the others) did not perform as well as some others, so maybe worth widening the search generally.

[Deleted User]

dunstonh said:

VLS100 isn’t “odd” at all. 

Perhaps you are not aware of the phrase "odd one out".  It is the odd one out in the VLS range.

No it isn’t. Absolutely essential within the VLS range for younger people wanting to implement life-cycle/target retirement strategy. Perhaps you are not aware of the concept.