ETFs Gain Ground in UK Managed Portfolios, Morningstar Finds

ETF allocations in UK managed portfolios rose to 8.6% from 7.5% over the past year, while open-end funds continued to account for most holdings, according to Morningstar’s UK Managed Portfolio Landscape 2026.

The report analysed 1,745 live portfolios from 79 providers. Open-end funds represented 91% of average portfolio allocations, leaving ETFs as a smaller holding type despite their increased use.

Portfolios marketed as active accounted for 38% of the market, down from 61% five years ago. Passive and blended strategies gained ground during the period.

Active and blended portfolios used index funds for more than half of their exposure to US equities and government bonds. Active funds were used in other parts of portfolios where managers identified greater scope for stock selection or other forms of active management.

“The UK managed portfolio market is maturing, but that does not mean demand is slowing,” Tom Mills, principal for multi-asset strategies at Morningstar, said in the report. “We’re seeing providers become increasingly selective about where they pay for active management.”

Mills described open-end funds as the default holding type, with ETFs and alternative investments in supporting roles. Competition in the UK managed portfolio service market remained high, while the long-running decline in costs showed signs of easing.

Median costs have fallen across active, blended and passive portfolios since 2022. Underlying costs stabilised across all three groups in 2026, Morningstar found.

Higher-risk portfolios delivered stronger absolute returns over the past five years. They lagged Morningstar indexes more often, however, as a narrow group of equities drove market performance and made active stock selection more difficult.