Goldman Sachs to back retail wealth platform Nutmeg

22 January 2019, 12:42 | Updated: 22 January 2019, 19:37

Goldman Sachs, the Wall Street banking giant, is to extend its push into Britain's retail financial services sector by taking a stake in Nutmeg, the digital wealth manager.

Sky News has learnt that Goldman's Principal Strategic Investments (PSI) arm is among the largest investors in a £45m fundraising to be announced by Nutmeg in the coming days.

Sources said on Tuesday that Convoy, Hong Kong's largest listed firm of independent financial advisers, was also investing a substantial further sum in Nutmeg as part of the funding round, following its initial backing of the tech start-up just over two years ago.

The fundraising, which is being jointly led by Goldman and Convoy, will value Nutmeg at £245m, according to a person close to the company.

It is understood to be subject to approval by the Financial Conduct Authority.

Goldman's involvement will be the most eye-catching element of Nutmeg's announcement, deepening a relationship between the world's best-known investment bank and the UK fintech sector.

Nutmeg's founder and former chief executive, Nick Hungerford, had previously said that the company wanted its customers "to feel like you're walking into Goldman Sachs with £10m, even if you're logging on to Nutmeg with £1,000 to invest".

Goldman has backed a growing number of British start-ups in the last year, including Trussle, a digital mortgage broker.

Its investment in Nutmeg, which describes itself as Europe's largest robo-adviser, comes a few months after Marcus, the investment bank's retail savings brand, launched in Britain.

Goldman said last week that UK customers had deposited more than £5bn with Marcus, lured by a guaranteed 1.5% interest rate in the first year, making it a clear leader in a market which has been offering meagre benefits to savers for the last decade.

The bank's backing of Nutmeg comes at a time of profound change in the market for investment advice and wealth management, partly driven by regulators' push for greater transparency in the market.

Shifting consumer behaviour has also played a significant role in shaking up the sector, although critics argue that too little has been done to ensure that asset managers and wealth platforms disclose their fees in a clear way.

Figures cited by the Financial Times last year said that fewer than one in 10 people in the UK used a financial adviser, which drops to 6% of 35-44 year olds.

Nutmeg has more than £1bn of funds under its stewardship, and last autumn launched a telephone-based financial advice service to customers.

Launched in 2011, it remains loss-making despite having built a 50,000-strong customer base.

Its other investors include Schroders, the fund management giant, Nigel Wray, the owner of Saracens rugby club, Sir Charles Dunstone, the TalkTalk fouder, and Klaus Hommels, a prominent venture capital investor who was an early backer of Facebook and Skype.

Nutmeg boasted in November 2016 when it raised £30m from investors led by Convoy that it was "the largest ever raise for a digital wealth manager in Europe, and this is also the largest fintech fundraise since the UK voted to leave the European Union".

That deal secured the endorsement of Philip Hammond, the chancellor, who claimed it was evidence that Britain was leading the world in fintech investment.

Nevertheless, some investors have expressed frustration at the pace of Nutmeg's growth since its launch, with revenues in 2017 reaching just £4.5m.

Its executive team has been overhauled, with Martin Stead, a former EDF Energy executive, taking over as chief executive in 2015.

Neil Alexander was subsequently brought in as chief finance officer in May 2017 from Secretsales.com.

Nutmeg and Goldman Sachs declined to comment.