Model portfolios maintained their dominance in the UK financial adviser channel during the second half of 2024, according to a new report from ISS Market Intelligence (ISS MI).
The report revealed that total multi-asset net sales remained strong in an otherwise subdued retail investment environment, rising from £6.9bn in the first half of the year to £7.1bn in the second half.
Nearly all of this growth was attributed to model portfolios, while multi-asset funds sold outside of model portfolio sales (MPS) programs saw little to no net inflows.
Adviser managed solutions remained a weak spot, reflecting a continued shift by IFAs toward formalised multi-asset programs. Fund outflows through adviser managed solutions amounted to £4.3bn in the first half of 2024, decreasing slightly to £3.3bn in the second half.
ISS MI said the findings suggested the growing preference for structured model portfolios among advisers, as they seek to streamline investment management and provide consistent client outcomes.
ISS MI EMEA research leader Benjamin Reed-Hurwitz said: "MPS remains at the fore of a broader shift to centralised investment propositions. What's striking about the growth of MPS is how much it's been driven by power users, with only about a quarter of today's IFAs accounting for the majority of today's MPS sales. With many MPS users yet to incorporate the solution across their broader practice, the question of whether we have hit peak MPS remains very much open."
"Within MPS, the third-party MPS managers won the lion's share of the net flows. Even though there is a consistent in-sourcing movement, the outsourcers are still winning the majority of the business and continue to be the driver of MPS in asset accumulation terms."
Reed-Hurwitz added: "In today's cost-conscious environment, IFAs are opting to take a balanced approach to investing. Interestingly, this is occurring through both the selection of balanced solutions and through the blending of actively and passively oriented solutions. Asset managers are increasingly evolving their distribution conversations away from active versus passive and more to active and passive. There remains plenty of opportunity for all strategy types to succeed."
As part of the report, ISS MI analysed the best-selling third party fund managers through MPS and multi-asset by six-month model gross sales in the UK. The five best-selling third-party managers within MPS providers for the six months ending 31 December 2024 were found to be:
1. BlackRock Investment Management
2. Vanguard Asset Management
3. Legal & General Investment Management
4. Fidelity International
5. Quilter Investors
The best-selling third-party fund managers within platform sold multi-asset funds-of-funds programs, by assets under management at December 2024, were:
1. BlackRock
2. Vanguard
3. HSBC
4. Invesco
5. Amundi
The best-selling third-party fund managers within the adviser managed space were:
1. Fidelity International
2. Vanguard Asset Management
3. BlackRock Investment Management
4. Dimensional Fund Advisors
5. Legal & General Investment Management
Reed-Hurwitz said: "Multi-asset solution providers have become the dominant fund selectors in the channel. The question is how much further their presence will grow. Even though the net sales picture is very positive, particularly for MPS, eventually that will taper if a greater share of new sales is not captured."
