Sales of Model Portfolio Service (MPS) funds dominated the UK financial adviser channel during the second half of 2024.

According to a new report from consultants ISS Market Intelligence, total multi-asset net sales were strong an otherwise "muted" retail investment sales environment, rising from £6.9bn to £7.1bn over H2 2024.

The company says that Model Portfolios accounted for nearly all of the growth in the advised retail investment market.

The firm said the weak spot remained adviser-managed solutions and this was underlined by a continuing shift by IFAs towards multi-asset solutions.

Fund outflows through adviser-managed solutions totalled £4.3bn in the first half of the year and only £3.3bn in the second half.

The firm’s research found that another notable trend was the growing dominance of blended portfolio solutions across all multi-asset solutions sales.

Around half of IFAs use an MPS, says the report, and many focus on multi-asset funds that blend active and passive funds to a “meaningful degree”. These firms accounted for 86% and 62% of all MPS and multi- asset fund sales, respectively, said ISS MI.

The data comes from ISS MI’s latest research, “Portfolio Construction Uncovered: Insights from the frontline of UK Retail Advice.” The report draws on adviser platform and funds-of-funds investment data to explore model portfolio, multi asset market and adviser-managed structures, trends and opportunities at the solutions and portfolio level.

As part of the study, ISS MI analysed the best-selling third party fund managers through MPS and multi-asset by six-month model gross sales in the UK. The five best-selling third-party managers within MPS providers for the six months ending 31 December 2024 were found to be:

1. BlackRock Investment Management
2. Vanguard Asset Management
3. Legal & General Investment Management
4. Fidelity International
5. Quilter Investors

The best-selling third-party fund managers within platform-sold, multi-asset funds-of-funds, by AUM at December 2024, were: 

1. BlackRock
2. Vanguard
3. HSBC
4. Invesco
5. Amundi 

The best-selling third-party fund managers within the adviser-managed space were: 

1. Fidelity International
2. Vanguard Asset Management
3. BlackRock Investment Management
4. Dimensional Fund Advisors
5. Legal & General Investment Management

Benjamin Reed-Hurwitz, EMEA research leader at ISS MI and lead author of the report, said: “MPS remains at the fore of a broader shift to centralised investment propositions. What’s striking about the growth of MPS is how much it’s been driven by power users, with only about a quarter of today’s IFAs accounting for the majority of today’s MPS sales.

“With many MPS users yet to incorporate the solution across their broader practice, the question of whether we have hit peak MPS remains very much open.”

“Within MPS, the third-party MPS managers won the lion’s share of the net flows. Even though there is a consistent in-sourcing movement, the outsourcers are still winning the majority of the business and continue to be the driver of MPS in asset accumulation terms.”

ISS Market Intelligence (MI) is a provider of data, insights, and market engagement solutions to the global financial services industry including asset and wealth management firms, insurance companies, distributors, service providers and technology firms. The report is available via its website.