There has been a steep decline in the number of UK managed portfolios that are labelled as active, according to Morningstar research.
The research shows the number has fallen from 61% in 2022 to 48% in 2024.
Morningstar found that less than 15% of managed portfolios in its database completely abstain from index funds.
Morningstar launched its UK Managed Portfolio Database in 2022 with around 900 managed portfolios.
As of July 2024, this has risen to 1,200 portfolios.
This steady use of passives is also contributing to a downward trend for costs.
The median management fee of a blended or active portfolio is 24 basis points, while a passive portfolio has a median management fee of 12 basis points.
Passive portfolios have managed to decrease this by two basis points since 2022.
Over half (55%) of managed portfolios listed were incepted between 2018 and 2022, which Morningstar deemed a “period of fast expansion”.
However, new launches have now slowed, as Morningstar feels that the sector may now be “maturing”.
Morningstar senior manager research analyst Tom Mills said: “Nowadays, managed portfolio clients have a wide choice of offerings. Typical provider lineups include active, passive, blended and sustainable investment styles, catering to a range of client-risk levels.
“Such breadth and replication make the UK managed portfolio space a crowded landscape, creating difficulty for providers to stand out from competitors. The growing proportion of passive and blended managed portfolios, and the increased use of passive holdings in portfolios, also reflects commercial pressure on costs.”
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