By Daniel Lanyon on Tuesday 15 November 2016
The loss-making online wealth manager has received a significant injection of fresh capital to fund its next wave of expansion, which is also the biggest UK fintech investment in the six months since the Brexit vote.
Online wealth manager Nutmeg has raised £30m to fuel its growth and expansion plans from the Hong Kong based independent financial advisory firm Convoy.
With its mission to ‘democratise’ wealth management, Nutmeg managed to double assets under management in 2015 following a substantial marketing campaign as well as several new product launches. This growth in scale came at a cost, however.
Its most recent company accounts for 2015 show its losses have risen to £8.9m, a ramp up from £5.3m in 2014. Nonetheless, it is widely seen as the market leader in the burgeoning ‘robo-advice’ industry which many predict will substantially disrupt as well reinvent the advice and portfolio management industry.
Robo-advice is the name given to the fast-growing process of disruption to the asset management industry, particularly in terms of wealth management. Robo-advice firms are online-only and algorithm driven based on risk-targeted models that build portfolios for investors and conduct asset allocation.
Unlike market leaders in online portfolio management and brokering such as Hargreaves Lansdown these firms invest your money for you according to their own risk metrics and asset allocation models. They also tend to be advocates of passive fund vehicles – mostly through exchange traded funds - rather than active mutual funds which have traditionally been the mainstay of wealth managers.
Nutmeg’s new war chest, mostly courtesy of Convoy, cements Nutmeg’s position as the leading digital wealth manager in the UK and reasserts company’s democratic mission, according to a spokesman for the firm.
The £30m of new cash is the largest fintech investment in a firm since Brexit and the largest fintech raise in Europe from Asia in 2016. It means Nutmeg has now attracted a total of £59.4m investment over the last five years. Convoy’s investment in the latest round was £24m with existing backers including Schroders, Balderton Capital, Pentech, Armada Investment Group and Nigel Wray contributing to the rest of the funding round.
Investors can put as little as £500 into Nutmeg’s portfolios. The company has grown significantly since its launch in 2012 and currently manages more than half a billion pounds for a growing base of over 20,000 customers. It is now more than four times the size it was in 2014, the time of its last fundraise, and the growth rate is accelerating with Nutmeg winning more than 10,000 new customers in 2016 year-to-date, the firm say.
The new capital is to be used to expand the product offering as well as targeting a rapid expansion of the UK business, with the partnership with Nutmeg also saying the strategic partnership with Convoy will help in “opening the door to expansion” into the booming Asian market.
Martin Stead, CEO of Nutmeg, commented: “This investment cements our position as Europe’s leading digital wealth manager. We are delighted to welcome our friends at Convoy to our board. Convoy shares our huge ambition for the Nutmeg business and, with these new funds, we will be able to further scale and expand our business, bringing smart online investing and advice to more people.
“Disrupting an exclusive industry was always going to be a tough challenge, but it is one that we relish. Nutmeg is successfully enabling people from all walks of life to get their money working harder. Our ten risk-based portfolios have delivered returns of 6.5 per cent to 47 per cent in the past four years."
“We look forward to supporting Nutmeg’s continual product innovation and are confident Martin and his team are poised to deliver the Nutmeg experience to an even greater number of customers in the near future,” he said.
Johnny Chen, Senior Advisor to Convoy and former Greater China CEO of Zurich Insurance Group, will take a seat on Nutmeg’s board.