There has been an increase in the number of active DFM portfolios with significant weightings in passive funds this year, according to a new report from Defaqto.
There has also been a ‘noticeable rise’ in the number of passive portfolio launches, according to the research from the data and fintech provider.
Lower cost is the primary driver, according to the report, with 64% of advisers saying keeping costs low is their main reason for using passive portfolios.
There were also changes in the balance between MPS and multi-asset funds.
Defaqto found that in 2025 and into 2026, new multi-asset fund launches outnumbered new MPS portfolio launches for the first time since 2019. On adviser platforms, multi-asset funds still hold around 60% of the total combined assets of both multi-asset and MPS.
Andy Parsons, head of insight at Defaqto, said: “Cost is clearly important, but it's not just about finding the cheapest portfolio. With some active portfolios holding substantial investments in passive funds, advisers need to look carefully at what they're paying for and whether they're getting value for their clients.
“The FCA's review brings this into sharper focus. Comparing portfolios on a like-for-like basis and demonstrating robust due diligence is becoming increasingly important.”
However, separate research from wealth manager Rathbones found that active management has been gaining ground with advisers during the current market turbulence.
It found that 95% of IFAs, DFMs and private bank fund allocators said market turbulence makes active management easier to explain to clients.
Active managers’ commentary and market insight were also seen as a useful tool for supporting client conversations. The majority (97%) of respondents said these contributions can support constructive investor behaviour during volatile markets.
Advisers told Rathbones that this support can help clients remain focused on long-term objectives and avoid reactive decisions. Almost a third (29%) described the value of this contribution as high, while 68% rate it as moderate.
• PureProfile surveyed 100 UK IFAs during July on behalf of Rathbones.