Multi‑asset investing is evolving quickly, with shifting costs, portfolio positioning, and product design reshaping investor behaviour across the UK and Europe. Morningstar’s Manager Research team’s most recent report shows the latest trends across performance, performance and flow to reveal where investors are allocating and which strategies are gaining traction.
Key takeaways from the report:
- Performance Challenges and Investor Interest
- Many of the trends highlighted in our previous report extended through 2025.
- Multi-asset funds continue to struggle to outperform their category benchmarks, especially the more aggressive categories, even though selection success in 2025 was also found beyond US large-cap names.
- Cautious allocation strategies performed better as compared with the category index but remain out of favor with European investors as fixed income regains popularity.
- Investor flows in other categories have begun to recover, indicating that interest in multi-asset solutions has not disappeared.
- The cheapest quintile of funds has shown a persistent edge over competitors.
European managers embrace (US) equities
- GBP flexible allocation funds run meaningfully lower net equity exposure than their EUR and US dollar peers, but both have increased their allocations since 2023.
- More managers are reducing their home bias, as shown by rising allocations to US equities, but that also comes with added currency risk for those unhedged.
Gold shines, but not many profit
- Gold had a banner year, but it still isn’t part of most multi-asset funds’ strategic asset allocations, with a few notable exceptions.
Fees continue to trend lower
- Allocation funds tend to come with higher costs in Europe compared with the UK because of differences in market structure.
- Allocation flows are highly correlated with fees; lower-cost products are gaining market share and already dominate the UK market.
- Vanguard is winning the multi-asset exchange-traded fund race in Europe.
Funds of funds are popular in the UK
- The fund-of-fund approach to multi-asset investing has grown rapidly in the UK but not on the European continent.
- Fund of funds that primarily use passive underlying holdings have gained much traction in the UK, whereas active funds continue to dominate European fund-of-fund portfolios. It’s not all one-way in the UK, however: Fund of funds using active funds can thrive if they can keep total costs modest.
Other observations
- Target-date funds remain a small part of the overall allocation landscape.
- Multi-asset income funds remain popular in Europe.
- There were winners and losers in GBP flexible allocation in 2025, as overall outflows slowed.
To read the full report, head here: Multi-Asset Trends in the UK and Europe | Morningstar
Main image: book, report, read, jonas-jacobsson-0FRJ2SCuY4k-unsplash
