Chief investment officer Shaun Port said they were also mindful of risk in the fund, with conservative exposure to bond markets and having avoided the large sell-off in government paper of the past year.
He said the online DFM business held very little in developed market government bonds in Q4 2012 and none at all from January 2013 – at odds with a typical ‘lower risk’ portfolio.
Rather, the group positioned its portfolios towards corporate bonds across investment grade and high yield. More recently, from October Nutmeg reduced duration, bringing in bonds with an average date to maturity of less than three years to mitigate interest rate risk.
Supporting its views around market cap weightings, Nutmeg said the FTSE 250 price index rose 27% while the FTSE 100 index was up 12.5%. In addition, the portfolios had barely any emerging market exposure due to their less compelling outlook.
Port said the team had gained confidence in Japan, calling its growth prospects “robust and sustainable”.
Nutmeg sold out of its gold position in March in time as the gold price hit $1,582 with a further decline – to $1,200 – following the divestment.
In commercial property, Port said the outlook was improving and non-prime London valuations looked reasonable but he was still disappointed with the returns from his real estate holdings.
Nutmeg launched a year ago to challenge industry status quo around issues like transparency and value.
Nick Hungerford, CEO of Nutmeg, said these first results are evidence that low-cost does not mean sacrificing performance and laid a gauntlet to the industry over opacity.
He said: “We have worked hard to produce an analysis of our performance because we believe customers should have complete visibility across their portfolios. Not only are our fees low, but we are able to prove to customers that, when it comes to returns, we are highly competitive. The wealth management industry needs to stand up and take responsibility to deliver the same level of clarity as Nutmeg, to all investors.”
It published its ‘medium risk’ portfolio performance over one year to 30 September as being 12.3% compared with 9.5% for market returns and 8.6% for the average competitor return.
For ‘cautious’ investors, Nutmeg portfolio’s 8.7% beat the market by 3.5% and the average competitor by 3.7%.
Those with a higher risk appetite would not have done quite so well, relatively speaking. High-risk investors in the Nutmeg portfolio enjoyed a gain of 15% over the 12 months, marginally beating the average competitor’s 14.1% but undershooting the market by 2.9%.
Nutmeg cited its average discretionary competitive returns as those most closely matching its portfolio risk categories, as calculated by Asset Risk Consultants based on risk profile, after fees.
Market return was based on composite indices based on a risk-based asset mix of UK equities – FTSE All-Share, international equities including emerging markets – MSCI All Country World ex UK, and UK government bonds – BofA Merrill Lynch UK Gilts Total Return Index.
