JP Morgan Chase has struck a deal worth almost £700m with British digital wealth manager Nutmeg as part of the US bank’s expansion into the UK retail banking and investment market.
The takeover will generate a windfall for the more than 2,100 private investors who backed Nutmeg in a crowdfunding round only two years ago through the Crowdcube platform and is subject to regulatory approval.
They bought into the business at £12.82 a share and the New York-based JP Morgan has agreed to buy it for between £30 and £32. The acquisition is also expected to generate handsome returns for employees. Most of Nutmeg’s 156 staff are thought to have share options in the business.
JP Morgan said that no decision had yet been taken on whether the Nutmeg brand would eventually disappear, promising “a considered decision on brand choice over time”, adding that Nutmeg was “a great brand and enjoys strong consumer awareness”.
Launched in 2012, Nutmeg offers ready-made risk-targeted investment portfolios that can be accessed via ISA, Junior ISAs, Lifetime ISAs, pensions and general investment accounts. It has £3.5bn in assets but has yet to make a profit since its inception. Its most recent accounts showed the firm made a loss of £21.2m — an increase on the £18.4m loss reported for 2018.
In April the firm said it had seen revenue growth of 66% as it ‘moves closer to profitability’, but did not provide updated bottom-line figures.
The firm added that it saw a 53% increase in clients to more than 130,000 in the first quarter of this year, compared with the same period in 2020. Net inflows for the first quarter of 2021 increased by 230%.
In November last year, Nutmeg partnered with JPMorgan Asset Management to launch a range of exchange-traded funds for the robo-adviser’s customers. The offering, called ‘Smart Alpha’, will include both active and passive ETFs and each portfolio will hold between 10 and 14 ETFs.
Commenting on the takeover, JP Morgan Chase CEO of international consumer Sanoke Viswanathan said: “We are building Chase in the UK from scratch using the very latest technology and putting the customer’s experience at the heart of our offering, principles that Nutmeg shares with us.”
Sharing the same sentiment, Nutmeg CEO Neil Alexander added, “Nutmeg’s customers can expect the same level of transparency, convenience and service that helped make us a leading digital wealth manager in the UK. I am truly impressed with the digital experience that Chase is building for the UK, and this new chapter in our story will see Nutmeg’s customers benefit from a wider range of products and services in the future, and allow us to expand into new markets.”
The move comes ahead of the expected UK launch of JP Morgan’s new digital bank, Chase, later this year. It also follows the launch in Britain by Goldman Sachs, three years ago, of its digital savings bank Marcus.