UK model portfolios marketed as active fall to 38%

The share of UK managed portfolios marketed as active fell from 61% to 38% over five years, according to Morningstar's UK Managed Portfolio Landscape 2026, first reported by ETF Express. The study analysed 1,745 live portfolios from 79 providers.

Morningstar counts portfolios by the label they are marketed under, so the 23-point fall from active reflects ground taken by passive and blended approaches together. Active and blended portfolios now use index funds for more than half of their US equity and government bond exposure.

For a selector weighing wrappers, the holdings data is blunt: open-end funds make up 91% of the average portfolio allocation against 8.6% for ETFs. ETF use rose from 7.5% a year earlier, so a new ETF line has to displace an incumbent fund rather than fill an empty slot.

Median costs for active, blended and passive portfolios have fallen since 2022, but underlying costs stabilised across all three groups this year. Tom Mills, principal for multi-asset strategies at Morningstar, said the long-running decline in costs shows signs of easing.

“Passive funds now do much of the heavy lifting in areas such as US equities and government bonds, while active funds are used where managers believe skill can add more value,” Mills said. Providers are becoming increasingly selective about where they pay for active management, he added.

As Private Wealth Daily previously reported, Morningstar puts total third-party model assets near $1 trillion.