Scalable Capital signed up BlackRock as a shareholder in its third round of fundraising recently and at least two more online investment managers are planning further cash calls later this year.
BlackRock took a minority stake in Scalable as one of a consortium of backers that pumped in an additional €30 million (£26.4 million), taking the total it has raised up to €41 million.
Wealth Manager revealed earlier this month that Netwealth, which counts Edward Bonham Carter among its investors, will look to both new and existing shareholders when it holds a second fundraising later this year. Similarly, Wealthify is to seek additional investment in the second half of 2017.
So how much have the online investment managers raised so far and who has been providing the funding?
A trawl of Companies House records provides most of the answers to this, but it also reveals just how complicated the share structures of certain businesses are. Many also sit within holding companies, which can prove another layer of complication, and others are harder to break down due to overseas ownership.
But by sifting through this, interesting details start to emerge. One clear trend is that the mainstream asset managers, such as BlackRock and Schroders, tend to bide their time before providing backing, leaving the early stage funding to specialist venture capital firms.
Another standout point is the sheer variety of the amounts raised and how big a stake the founders have been able to retain. Of course, many are at different stages in their development, but no firm in the fledgling sector seems to have yet posted a profit.
Unsurprisingly, Nutmeg, the most high profile company in the sector, has raised by far the most of its peers. Since it was launched in 2011, it has had multiple rounds of fundraising, with the most recent in December pulling in an additional £12 million, taking its total raised up to £71 million.
The sheer amount of fundraisings it has held has seen its shareholder register balloon to 12 pages in length. Its ownership is now dominated by major institutions, with Swiss entrepreneur Daniel Aegerter the largest with 13.19%, followed by venture capital vehicle Pentech Fund on 9.44%. Schroders and Balderton Capital, which bought 9.14% apiece in a £18.9 million June 2014 raising, are joint third largest shareholders.
Scalable, which launched into the UK in April 2016, has raised £35.2 million and Moneyfarm, which was set up in 2011, has raised the next most at £26.4 million. The former being German-owned and the latter originally Italian, makes working out their ownership more tricky, although they are the only other two firms with significant mainstream asset manager backing.
The size of BlackRock’s stake in Scalable has not yet been disclosed through filings at Companies House. However, it can be determined that Allianz paid £4.2 million for a 10.04% stake in Moneyfarm’s parent group, MFM Holding, in September 2016. This came on top of the £9.18 million Cabot Square paid for a 31.91% position the previous year, in a fundraising that included a further £2.2 million from existing investor United Ventures One (UVO). This made UVO the second largest shareholder with 27.56%, ahead of co-founders Paolo Galvani who has 11.94% and Giovanni Dapra with 11.76%.
Other online wealth firms’ founders have retained larger stakes, although these businesses tend to be at a much earlier stage. Netwealth, which raised £6.57 million, is 34.5% held by CEO Charlotte Ransom, while Wealthify CEO Richard Theo has a 43.9% stake in the firm.
It has raised £3 million, including £1.1 million from crowdfunding and £143,000 from the Welsh government. Moola, meanwhile, which attracted funding of £2.4 million, is 59% owned by CEO Gemma Godfrey, although it is very early days for the firm, which is still in beta testing.
Online wealth managers’ shareholder registers also throw up some high profile investors, many of whom are more associated with the world of active management.
Moneybox parent Digital Moneybox disclosed that Fidelity legend Anthony Bolton has a 3.1% stake in the firm with a paper value of £254,000. He subsequently topped this up to 3.38% in a later fundraising, but it is not yet disclosed whether he again paid £4.58 per share.
At Netwealth, Bonham Carter has a 1.3% stake, which is worth £255,000 on paper, with £6.49 paid per share.
The ownership structures of the online investment firms will continue to evolve through the further fundraisings and it will be interesting to see which other names appear on the registers.