Asset growth in discretionary model portfolio services (MPS) slowed in 2021 compared to last year but is still in line with the FTSE All Share, a report from NextWealth found.
The report, which profiled 27 discretionary fund managers including Parmenion IM, HSBC Global Asset Management and Tatton IM, showed MPS assets increased by 5% in the first quarter of this year.
Most DFMs had relative growth of 10% or less except for Betafolio, who continued to onboard new assets nearly doubling in size.
In contrast, DFMs assets in MPS grew 11% in the fourth quarter of 2020, with several firms including Betafolio, Charles Stanley, HSBC GAM, Sarasin and 7IM reporting standout growth.
HSBC GAM had the largest growth, while smaller providers like Sarasin doubled their portfolio size in the fourth quarter.
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.”
NextWealth said costs continued to vary in the first three months of this year, with DFMs charging an MPS fee of between 6bps and 40bps, although the majority of firms ranged between 20-30bps. The ongoing charges figure was shown to be even more varied.
Hopkins commented: “There is a wide gulf between the OCF of these portfolios: HSBC is at the lower end with an average OCF of 8bps while Facet is on top at 117 bps.
“The main difference between the two is that HSBC is 100% passive while Facet is 100% active, although others with a high allocation of active are charging less than 100 bps.”
Hopkins said new entrants Vanguard and LGIM were further disrupting on price, intensifying competition.
DFMs with the fastest growth in assets were also found to be among the most keenly priced.
Meanwhile, MPS allocation shifted slightly (1.7%) towards active over the last six months, with Schroders and 7IM driving the shift with increases of over 10%. In contrast, Brooks Macdonald bucked the trend by making a significant shift towards passive.
