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Whose Portfolio is it, Anyway? Tailoring Your Fund Distribution Approach to Fund Selector Demands

The UK’s financial adviser channel has undergone significant changes in the past decade, with one of the most significant changes being the face of a client’s portfolio manager. Whereas portfolio construction and design historically resided with advisers in this channel, increasingly, this is no longer the case.

ISS Market Intelligence’s latest UK financial adviser research highlighted the fact that 60% of portfolio decisions—as measured by investment gross sales—are now beyond the remit of the client-facing financial adviser. Decision making is not evenly divided: 40% of decisions are made by portfolio managers (PMs) running model portfolios (MPS), 14% are made by PMs running unitised funds-of-funds (FoFs), while 6% are made by PMs of unitised asset allocation solutions that invest in direct securities. Financial advisers building client portfolios, or acting as de facto PMs, using a mix of single strategy funds meanwhile, still accounted for 40% investment fund gross sales in the channel.

This dramatic change in the face of the portfolio constructor has sent ripples across the UK’s fund management universe, offering new opportunities and challenges for fund managers in terms of the distribution of model portfolios and FoF products. One thing is clear, however: the preferences—whether due to investment philosophy or practicality of implementation of advisers, MPS PMs, and FoF PMs—are anything but similar.

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Notes

A version of this post appeared in Portfolio Adviser on 19th December, 2024.

Authored By

Benjamin Reed-Hurwitz, EMEA Research Lead, ISS Market Intelligence

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