Planet MPS: Apart from the crowd

Each of these shortlisted portfolios come from a peer group of hundreds, so it is worth taking a look to see if the constituents have anything in common in approach or structure that sets them apart from the crowd.

One of those ‘small margins’ that might just make the difference is total cost so our next table compares the average total cost for each cohort against the total cost for each portfolio:

In other words, almost half of the portfolios on the shortlist have above-average total costs. Keeping it ‘cheap’ is not necessarily the answer. For those shortlisted, even if they have above-average total costs, it would still be fair to say investors have enjoyed value for money. That said, it will always be worth considering whether those with higher costs will still be able to maintain their advantage over longer periods of time.

The next factor that springs to mind is discretionary assets under management. Is there anything that points to a ‘big is beautiful’ element – more assets meaning more revenue meaning more resource which could lead to more efficient and consistent outcomes? Well, in total there are 20 DFMs behind the 60 shortlisted portfolios and their most recently advised discretionary assets under management (AUM) are as follows:

Again, there is a reasonable spread of results here, which on the face of it suggests success in a particular comparator cohort is not dictated to any great extent by assets under management. Nevertheless, it could be reasonable to deduce that one or two of the bigger DFMs in terms of AUM, based on the number of shortlisted portfolios in different categories, perhaps have wider skills and expertise across a number of different asset types.

While cost and size may have an influence, then, it is not a silver bullet in terms of due-diligence and recommendation. As the shortlists are based primarily on consistency of risk-adjusted returns, we may instead deduce the edge has probably been gained through consistently good fund selection, as a result of good asset allocation decisions.

Now, whenever we look at asset allocations, we are doing so at a fixed point in time – a week before or a week after and the picture could be completely different. That said, it would be interesting to take a look at one or two of the elements of asset allocation for the shortlisted funds.

After all, if asset allocation is the key to their success, there must be a whiff of a contrarian approach by the portfolio managers. At the very least, they appear not to be influenced by the masses.

So, purely out of interest, I have chosen each portfolio manager’s approach to cash, UK equities and US equities, and compared that to the average for each category – as at 30 December 2025 – which come out as follows:

There are a few interesting positions compared to the averages, but nothing that strikes us as radically contrarian. Most are overweight both UK and US equity compared to their peer groups. The right call? We shall see. I briefly mentioned that some DFMs may have broader skillsets resulting in a wider selection of top-performing portfolios. For the first time this year we have two new categories, ‘Best passive manager’ and ‘Best active manager’.

Overall, there are several ways of achieving success as a portfolio manager. Lowering cost will help. Having resource should help if applied well. Undoubtedly the best way, however, is consistently to make more correct investment calls than your competitors at a fair price.

These awards celebrate the excellence of a number of portfolio managers – but we should not forget those that just missed out on being shortlisted. There are many routes to the top of a mountain, as there are many methodologies of award selection. The light is shining on just a few here, but many more can still be proud of their achievements.

Just as a final thought, our awards are to celebrate outstanding investment performance – and it is quite right that we do so. We should not forget, however, that even though aiming for superior, consistent returns is undoubtedly the most important element of an investment into an MPS, it is not necessarily the only indicator of selection preference.

Part of the decision making will revolve around the suitability of the proposition – in particular, whether the terms, conditions and facilities are right for the client. Defaqto’s Star Ratings measure the quality of propositions and it is good to note that, of all the propositions that are shortlisted, all the portfolios except one, rates either four stars or, the highest possible, five stars.

And of course, there is another step to consider, which is how well the DFMs deliver that service. Defaqto’s service ratings are calculated using feedback from advisers that have used discretionary firms. Of all those firms that qualify for a service rating (with sufficient adviser responses) that also have portfolio/s on the shortlist, all receive the highest Gold rating. Look out for my feature article in May as that will showcase the winners.

Andy Parsons is head of investment & protection at Defaqto