After its rapid expansion, the UK managed portfolio sector has “considerably slowed”, signalling market maturity rather than diminished adviser appetite for managed portfolio services (MPS).
Those were the findings from Morningstar’s latest study on the UK managed portfolio landscape.
The research also found that total costs have continued to trend downwards due to cost savings in underlying portfolio holdings.
The rate of this downward trend is faster compared to the similar trend witnessed in UK mutual fund costs. However this has been achieved through greater use of passive holdings.
The amount of offering with primarily active holdings is in steady decline, with the majority of recent launches using greater passive content and styling themselves as “passive” or “blended.”
In terms of platform implementation, open-end funds account for over 92% of combined average portfolio weightings, followed by exchange-traded funds at 7.5% – with use of active ETFs being rare.
The research also found managed portfolios stick mainly to equity, bond, and cash allocations.
Still, some providers are prepared to use listed, closed-end vehicles for access to direct assets, “where liquidity and premiums/discounts to NAV need to be monitored”
In 2022, bonds and equities witnessed falls but strong equity markets have driven healthier returns since, particularly for more adventurous categories, Morningstar said.
Nonetheless, equity-heavy portfolios have struggled to keep pace with category indexes.
Morningstar principal for multi-asset strategies Tom Mills said: “The UK managed portfolio landscape has reached a point of maturity, with providers focusing on refining cost efficiencies and adapting to evolving adviser preferences.
“The shift towards passive and blended strategies highlights the growing emphasis on affordability and scalability, while the steady decline in active holdings underscores the competitive pressure to deliver value in a cost-conscious market.”
