UK Multi-Asset Funds: Trends in Fees, Flows, Performance

Multi-asset investing is at a crossroads, and the road ahead looks nothing like the one behind it. Investors in the United Kingdom and Europe are changing how they allocate capital, select strategies, and evaluate value. Fees are falling, though the pace of these changes isn’t uniform across the region.

UK investors are leading the charge toward lower-cost solutions, while their European counterparts face higher fees and less competitive fund distribution models. Many multi-asset funds are failing to keep pace with their benchmarks, and cautious strategies are losing their appeal.

The full Multi-Asset Trends in UK and Europe report details fund performance, cost compression, and fund flow shifts. Download the report for insights on index strategies, managed portfolio pressure, and regulatory influences.

Multi-asset strategies are designed to diversify risk across asset classes and deliver smoother, risk-adjusted returns. Has this helped them to beat their Morningstar benchmarks?

The short answer: not often, especially after fees. UK‑domiciled allocation funds have struggled to beat frictionless category indexes over long periods; it’s a similar story in Europe. The study attributes the gap primarily to fees, with the remainder due to allocation differences, market‑timing attempts, and security selection.

This underperformance stems from a combination of fee drag, asset allocation missteps, and market-timing errors. A decade of US equity market dominance only amplified the difficulty for globally allocated portfolios to keep up.

If performance is measured through a cost lens, a clear pattern emerges: the cheapest quintile of allocation funds maintains a performance edge against costlier peers.

Cautious categories have fared better versus their benchmarks.

Source: Morningstar Direct. Data as of Dec. 31, 2025.

Fund fees are declining across the board, but UK fund managers are moving faster than their European counterparts. In the United Kingdom, regulatory reforms like the ban on commission payments and new requirements under the Financial Conduct Authority’s Assessment of Value have accelerated cost compression.

In the UK, the equal-weighted median cost of newly launched allocation funds fell from 97 basis points in 2016 to 59 basis points in 2025. Each year, the median cost of closing funds was significantly costlier than newly launched funds.

In Europe, the decline has been less steep; from a higher starting point, median costs have also headed downward on the continent but not as far or as fast as in the UK. The median new fund launched in 2025 carried a representative cost, excluding transaction fees, of 128 basis points compared with 146 basis points in 2016.

Managed portfolio services have also emerged as a cost-effective alternative, eating into the market share of traditional multi-asset funds.

Median fund fees by fee quintiles. 

Source: Morningstar. Data as of Dec. 31, 2025.

Breakdown of net assets by fee bracket.

Source: Morningstar. Data as of Dec. 31, 2025.

Investor preferences are shifting toward higher-risk allocations. In the United Kingdom, balanced and adventurous categories have drawn steadier interest as yields normalized and some investors moved up the risk spectrum.

Flexible-allocation strategies—portfolios with largely unconstrained mandates to invest globally across asset types—saw outflows easing in 2025 compared with the heavy redemptions of 2022–24. More conservative categories have been out of favor.

Across the Channel, Europe presents a similar but more nuanced story. Cautious strategies have experienced significant redemptions, driven partly by rising bond yields and increased competition from money-market and fixed-income funds.

Meanwhile, income‑oriented USD moderate allocation funds continue to attract assets (often trading some capital‑growth potential for steady distributions).

EUR global allocation funds, excluding the most conservative strategies, regained investor interest in 2025 as demand for both balanced and more aggressive allocation portfolios increased. Net calendar-year flows, however, remain lumpy.

Looking at flows from a fund cost angle, it becomes clear that UK investors and advisors have funneled assets toward lower‑cost options. The cheapest quintile of funds has completely dominated net flows to the asset class.

The UK has embraced allocation fund-of-funds index-based allocation portfolios, especially those built on passive components. The UK is distinctive in its heavy use of multi‑asset FoFs, which now make up around 63% of total allocation fund assets—up from 44% a decade ago.

Vanguard paved the way, but competing low-cost ranges from providers like Aberdeen, BlackRock, HSBC, and L&G have also scaled rapidly.

This isn’t matched on the continent, where FoFs are less popular, and remain dominated by active holdings. Although multi-asset ETFs offer low-cost access, structural hurdles have limited uptake, including the lack of tax advantages for ETFs and bank-driven distribution networks.

Advisors in Europe are still incentivized to sell higher-fee products, further slowing the shift toward lower-cost options.

Among GBP allocation funds, the home bias toward UK stocks has fallen sharply in just a decade, replaced by significantly higher US exposure.

This is not surprising. Over the past decade, the US, especially its large‑cap technology names, has dominated global returns. But higher US allocations come with a side effect—greater exposure to the US dollar.

While funds routinely hedge foreign currency risk on bond holdings, they often leave equity currency exposure unhedged. This means the overall currency profile of a portfolio is increasingly driven by US stock weightings.

Traditionally the dollar has functioned as a safe‑haven, softening losses during equity selloffs, but that relationship, and therefore the diversification benefit, has become less reliable in recent years. That has prompted some managers to become more deliberate when it comes to currency, for example by partially hedging some of their dollars.

UK reforms have compressed fees and reshaped advisor incentives and investor expectations. Managed portfolio services have surged in popularity, offering transparent pricing and streamlined access to model portfolios.

In Europe, however, legacy distribution models, dominated by banks and commission-based sales still present friction. Until structural changes reduce embedded costs and improve transparency, the continent may continue to lag behind the UK in delivering value-driven, multi-asset solutions.

• Scrutinize fees. Lower fees have a strong track record of supporting better outcomes, but should be judged as part of the overall evaluation of a fund, not in isolation. The Morningstar Medalist Rating, our forward-looking assessment of a fund’s merits can help. Advisors should benchmark fund fees rigorously to assess fund value propositions.
• Understand the design of your multi-asset fund. Two funds in the same category can have very different objectives, investment styles, or reliance on passive and active management. Consider how the fund allocates—such as the level of domestic bias and overseas exposure.
• Explore managed portfolio services. These can provide tailored solutions at competitive costs, though advisors must weigh their own fiduciary responsibilities and due diligence requirements.

The multi-asset category is evolving. For fund providers, staying competitive will require sharper pricing, more flexible product design, and competitive performance net of fees. For advisors, the challenge lies in navigating a more diverse market where traditional approaches no longer guarantee results.

Understanding the nuances of regional trends, cost dynamics, and investor behavior is now essential to delivering value. Whether through lower-cost funds, actively managed strategies with demonstrable alpha, or managed portfolios tailored to client objectives, the future of multi-asset investing will reward those who adapt.