A new report from Defaqto has identified a “noticeable” rise in passive investing, through both an increase in passive portfolio launches and significant weightings in passive funds within active portfolios.
The key driver behind the shift is lower cost, the firm said, with 64% of advisers stating that keeping costs low is their main reason for using passive portfolios.
The findings form part of the second edition of Defaqto In Focus: MPS, which comes as the Financial Conduct Authority reviews the MPS market, looking at how firms are applying the Consumer Duty to deliver good outcomes for clients.
With 129 discretionary fund managers and 2,246 MPS portfolios available on adviser platforms, Defaqto said the challenge for advisers is comparing like with like and evidencing their research.
The report also 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: “We’re seeing some interesting changes in the balance between MPS and multi-asset funds, alongside a continued shift towards passive investing.
“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.”
The report also highlighted a significant slowdown in responsible investing, from almost 30% of recommendations at the end of 2021 to around 10% today, with no new responsible portfolio launches since December 2025.
Defaqto said its 2025-2026 Satisfaction Study points to the same finding, with 74% of advisers saying that fewer than 20% of their clients had expressed an interest in including ESG principles in their portfolios.
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