Defaqto has launched MPS Comparator performance averages for passive and active portfolios.
MPS Comparator makes it easy for advisers to assess portfolio performance and for discretionary managers to differentiate their offerings, assisting both with their regulatory responsibilities.
The solution achieves this by allowing advisers to actively compare an MPS portfolio’s various metrics to the average of all those that have similar characteristics in terms of realised volatility and asset allocation.
Defaqto’s data shows that while passive portfolios are on average lower cost than active portfolios, there are exceptions.
Looking at returns, lower costs do not always translate into better performance, nor do above average costs necessarily translate into poorer performance. This means that value for money can sometimes come at a higher cost.
The launch of performance comparators for active and passive portfolios follows the July publication of the Defaqto in Focus: MPS report, examining over 2,000 platform portfolios.
This showed MPS portfolios are now likely to have overtaken multi-asset funds in new business total recommendations, yet highlighted the broad disparity in returns and cost.
The report makes all performance league tables available for the first time, showing cumulative performance over one, three and five years.
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Defaqto’s DFM coverage spans over 120 DFMs and around 3,000 portfolios, providing data such as performance, fees, key statistical ratios and asset allocation.
The new active and passive performance averages enhance Defaqto’s MPS solution, available within Defaqto Engage, where advisers can access Defaqto’s in-depth data analysis, allowing them to accurately compare like-for-like MPS propositions and make smarter recommendations.
Providers can compare a portfolio’s performance against its peer group with increased efficiency, and use data including key performance league tables, statistical ratios and supporting documents to enhance their propositions.
Andy Parsons, head of investment and protection at Defaqto, described the launch of as a “game-changer” for both advisers and discretionary managers.
“For the first time, like-for-like comparisons of MPS portfolios in similar risk peer groups can be compared against a performance average which is made up of real portfolios,” he said.
“The success of these MPS performance comparators coupled with the growth and popularity of passive portfolios made it an obvious next step to launch active-only and passive-only performance averages.
“Our internal analysis of Defaqto Engage – used by around a third of advisers in the UK – showed that the second most popular filter, after cost and crucially ahead of performance, for MPS portfolio selection was the active/passive filter, which underlined the need for these new performance averages.
“This launch demonstrates how, as a data and technology provider, we are evolving in serving the adviser market.”
