Model PortfoliosJun 18 2021

Model portfolio growth slows in 2021

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Model portfolio growth slows in 2021

Growth rates in discretionary model portfolio services slowed in the first quarter of 2021 after a bumper Q4, according to research.

Overall DFM assets in MPS grew 11 per cent in the last quarter of 2020 but the growth rate slowed to 5 per cent in the first quarter this year, according to NextWealth’s latest MPS proposition comparison report.

Heather Hopkins, managing director at NextWealth, said: "Some DFMs have seen considerable growth driven in part by steady and continued shift of assets toward discretionary MPS, continued price pressure and the launch of successful ‘responsible' portfolios. 

“Looking forward we expect continued fee compression and new ESG compliant solutions to continue to drive growth in MPS assets."

The report profiled 27 DFMs including HSBC Global Asset Management, Tatton IM and FE Investments. 

Betafolio, Charles Stanley, HSBC GAM, Sarasin and 7IM were highlighted as seeing the largest growth in 2020, with Sarasin doubling its portfolio size in Q4.

The report also outlined how fees continue to vary widely, suggesting better priced providers were seeing bigger growth.

The DFMs surveyed charged between 6 and 40 bps, withe the majority of firms charging between 20 and 30 bps.

Hopkins said HSBC had one of the cheapest offerings with an average ongoing charges figure of 8bps, while Facet was at the other end of the scale charging 117 bps.

She added: “The main difference between the two is that HSBC is 100 per cent passive while Facet is 100 per cent active, although others with a high allocation of active are charging less than 100 bps.

“New entrants Vanguard and LGIM are further disrupting on price, intensifying competition. DFMs with the fastest growth in assets are also among the most keenly priced, suggesting one impacts the other."

Finally, MPS allocation shifted by 1.7 per cent towards active management over the past six months.

Hopkins said Schroders and 7IM were driving the shift with increases of more 10 per cent.

She added: “Brooks Macdonald bucked the trend by making a significant shift towards passive."