ETF use edges up in UK managed portfolios: Morningstar
Morningstar’s UK Managed Portfolio Landscape 2026, which analyses a database of 1,745 live portfolios from 79 providers, finds the proportion of portfolios marketed as active has fallen from 61 per cent to 38 per cent over five years, as passive and blended approaches gain ground.
Tom Mills, Principal for Multi-Asset Strategies at Morningstar, says: “The UK managed portfolio market is maturing, but that does not mean demand is slowing. We’re seeing providers become increasingly selective about where they pay for active management.
“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. Open-end funds remain the default holding types, with ETFs and alternatives still in supporting roles. And while competition in UK MPS remains high, the long-running decline in costs shows signs of easing.”
Key takeaways include:
Active and blended portfolios on average now use index funds for more than half of their US equity and government bond exposure, reserving active management for areas where managers see greater scope to add value.
The long-running fee race may be reaching a floor. Median costs have fallen across active, blended and passive portfolios since 2022, but underlying costs stabilised across all three groups this year.
Open-end funds still dominate holdings, representing 91 per cent of average portfolio allocations, although ETF use has edged up from 7.5 per cent to 8.6 per cent over the past year.
Higher-risk portfolios delivered stronger absolute returns over five years but struggled more against Morningstar indexes as narrow equity-market leadership made active stock selection challenging.