Investengine annual results to March '23 are out - should we be worried?

General
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  • AUM increased from £28M to £149M.
  • Revenues of only £192K, of which £74K came from managed portfolios (0.25% AUM), and £118K appears to be from interest earned on uninvested cash balances.
  • Losses of £4.9M after tax
  • Shareholders funds of only £2.3M at end March 2023 (though £1.9M was raised in April 2024).
  • Only 23 employees at 31 March 2023
  • Results delayed due to addressing issues raised by auditors

First of all, I’d say Investengine’s achievements are incredible for a team with only 23 people.

But I’m personally a bit worried about Investengine getting profitable without yanking up fees. Assuming no increase in cost base, it would need to increase the managed portfolios undermanagement from around £29M to £2B. Can it continue to raise money while making losses in the interim period?

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My bet is that SIPP transfers get them a big whack of fee-paying AUM. I wouldn’t be too worried about the initial audit issues - very common for early stage companies going through one of their first audits as they build out controls etc.

I expect that in the next year’s results they’ll start showing some advertising revenue from their partnerships with some of the fund providers (WisdomTree etc.) too

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I started using the InvestEngine platform last quarter, and having used about 9 brokerage, investment and robo-advisor platforms to date, I can honestly say it’s by far my favourite. Simple, clear, with low fees, and no-nonsense. To me it feels like it has found great product market fit. The financial figures seem to back that up. Client numbers and AUM grew by 3.8x and 5.3x for the year, which feels decent.

I can’t see fees going up on their existing products, as their business strategy is “simple, low-cost”. They will have worked out at what scale they can become profitable with the existing fee structure, and this will be a conservative estimate of where they think they can get.

Absolutely! And I’m sure there are further premium services in the pipeline. New features will also improve the platform and therefore help growth.

If I were a shareholder I’d be cautiously optimistic. As long as the growth continues, with stable customer acquisition costs, I would expect IE to get several further rounds of funding relatively easily before hitting profitability. And if not, it would be more likely to be sold than fold. They would likely get bought up by a retail bank, as there is a lot of synergy, or by a competitor, for economies of scale.

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Today I got an email, to say they have extended ISA Transfer bonus. For me that would mean they would pay be the full £2500 for my ISA transfer and charge no fees for DIY Funds

That is not going do much for there profits.

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True, the ISA bonus was extremely attractive this year, especially for large ISA transfers. It’s why I transferred my ISA to IE. Though the bonuses are less than 1% of the investments, and if a lot of those ISA transfers are cash, they’ll make a fair bit back on the interest from the deposits. I’d be surprised if we see such a generous offer next year, but if we do, it’ll be because they’ve shown it’s a cost effective way to onboard new clients and increase AUM (including cash, which is lucrative at present).

Perhaps of some concern is their reliance on cash interest to fund the platform. They’ve launched at a time that that has provided a decent return, but if we expect inflation to decrease, followed by interest rates in the coming years, revenue will become more expensive to acquire, and they may well need to monetize in other ways. As I said before, I don’t expect that to be via increasing existing fees, but they might encourage more of their clients onto the managed service. Their target clients are unsophisticated investors after all, so it makes sense that their managed service would be more popular than on more advanced platforms.

One premium feature I’d like to see, which no platform offers at present, is a managed drawdown service, whereby you say how much you want to withdraw each month, and they’ll derisk the assets in line with that need and taking into account relative asset values. This would be great for SIPPs, but also anyone drawing down from ISAs or GIAs. This feature would be a reason for me to switch to the managed service. IE, are you listening?

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Hi! Our SIPPs are designed for accumulation only at this time, meaning drawdowns cannot be actioned from investors’ dashboards. I will still pass your suggestion to our Development team who will consider adding managed drawdowns to our Roadmap. Thank you for your feedback

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Thanks, @Paul_M . Please note that a drawdown feature would benefit all account types, since there’s no point in saving if you’re not going to spend it, and sophisticated pensioners will draw down from all wrappers to minimize their tax burden. And it’s more complex than just selling a fixed amount of a pot each month. It should be part of your managed service, that moves funds from more volatile assets to less volatile assets as and when appropriate (i.e. not during a stock market crash, if that can be avoided!), to meet the drawdown schedule.

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I don’t wish to derail the thread, but managed drawdowns would be a very useful feature.
Perhaps a new thread on the subject?

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Done.