Asset Allocation Research for UK Advisers

A multi asset fund is a single fund which includes within it a ready-made portfolio of funds from two or more of the 4 key asset classes: Equities, Bonds, Alternatives and Cash.
One way to imagine them is a Burrito with a little bit of everything: meat, veg and sauce (a diversified meal), wrapped up in a tortilla (a single fund wrapper) for convenience and ease of transportation!

Equities have recovered strongly from the tariff shock earlier in the year. Dollar weakness vs Sterling has weighed on the relative performance of US equities; however, this was a step-change and there are concerns for Sterling too.  Gold has continued to perform very strongly on the “debasement trade” and Central Bank buying.  Within Bonds, Emerging Markets are in better shape than Developed Markets, in our view.

On 4th December 2025, the Trump administration published its 2025 National Security Strategy (NSS).
The strategy envisages, accepts and even promotes return to great power diplomacy, realpolitik and spheres of influence. The NSS was controversial primarly for its criticism of European allies that made Vance’s 2025 Munich Security speech seem less like of an aberration and more of stated policy.  The NSS is the stated intention of the Trump administration and actions will continue to follow policy. 

Elston has launched the UK’s first smoothed MPS, available on Aberdeen, Hubwise, Nucleus and Wealthtime.

Read More: https://www.professionaladviser.com/news/4523751/elston-unveils-uk-multi-platform-smoothed-mps

Elston Consulting has launched the Elston World Equity Factor Equal Weight Index (ticker ELSFEW).
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The index represents an equal weight allocation to six London-listed world equity factor-enhanced ETFs from BlackRock’s iShares:including world equity exposures for six different factors: Value, Quality, Size, Momentum, Minimum Volatility and Yield.
The index is available for research purposes and also for potential fund manufacturing by asset managers looking to enter the systematic investing space as a half-way house between traditional active and traditional (market-cap) passive.
An active factor allocation strategy is one of the fund innovations featured on Elston’s Research & Development Wish List, the firm writes.
The fund format is more readily accessible than ETFs to the approximately GBP900 billion AUM platform-based UK IFA market – a fact lost on many US-based ETF issuers who have been waiting over a decade for ETF connectivity on UK platforms to be resolved to unlock that market.  Elston was an early pioneer of “fund of ETFs” to resolve this, with its first fund-of-ETFs launched in 2020.
The new factor index is a sibling index to the Elston World Equity Sector Equal Weight Index launched in 2022 (ticker ELSWES) which was built with London-listed sector ETFs from SPDR.  This sector equal weight index is used as a benchmark for an active sector allocation fund launched by Foster Denovo in 2023 and managed by State Street Global Advisers.
Henry Cobbe, Founder & Head of Research at Elston Consulting, says: “Many UK advisers are aware of the Fama-French three factor model, and see that as a so-called “evidence-based approach”.  The reality is that there are more discernible factors beyond the Fama-French model alone.  So, if advisers are looking at the evidence, they need to consider all the evidence.  Whilst some factors like Value may show strong performance over the very long run, the performance gap between best (Momentum) and worst (Value) factors over the last five and 10 year performance has been huge.  Active factor selection, and “tilting” to prevailing market regimes is key.  A buy and hold approach is really unhelpful if you’ve “set and forget” the wrong factor for a decade or so.”
Hoshang Daroga, Investment Director at Elston Consulting, says: “The concentration issues for traditional world equity indices are well documented.  We see active factor and sector selection as having a key role to play in tilting portfolios to different styles and exposures in different market regimes, and for style diversification purposes.
The challenge is how to evaluate those factor and sector selections given market-cap weighted indices have high concentrations and a resulting inherent bias.  We built the World Equity Factor and Sector Equal Weight indices to help asset allocators evaluate to what extent their active factor or sector selections have added value against a simple equal weight approach.”
Scott Adams, Head of Adviser Relations at Elston Consulting, says: “Elston was one of the early pioneers of index-of-ETFs in 2014 and fund-of-ETFs in 2020.  A rules-based systematic index-of-ETFs helps asset allocators readily evaluate strategies in real time via their preferred data vendor or analytics provider.”

Read the article in ETF Stream

The US equity market has pushed on higher this year fuelled by the AI boom, and investors are beginning to question whether the environment resembles the latter half of the 1990s with its dotcom boom (and subsequent April 2000 bust). While valuations in certain areas look stretched, the broader market picture is more mixed.

As asset allocators we are aware of the surplus of funds in some areas, and glaring gaps in others.  That’s why we maintain a wishlist which we share in our catch ups with fund houses.  We are now making this public to drive industry engagement.

With the dollar down 20% since 2022, hedging looks tempting. But UK debt, housing risks, and BOE policy suggest sterling could be even more vulnerable.

Read Henry Cobbe’s latest interview with Professional Adviser about why adviser-built model portfolios could be the real winners in the MPS market.

​https://www.professionaladviser.com/interview/4519429/adviser-built-portfolios-win-mps-race

For UK financial advisers only

A lot has changed since Henry Cobbe called for greater Customisation of Model Portfolios by financial advisers back in 2018.  Industry has heeded the call with Custom MPS being the fastest growing sub-set within the rapidly growing MPS market.
Henry also outlined why he thinks Advisers, not DFMs, will win the race in Managed Portfolio Services (MPS) in this podcast with FT Adviser in July 2022.

Over 90% of the approx £2bn in AUM managed by Elston Portfolio Management is in adviser-defined Custom mandates designed by Elston Consulting, who are leaders in this field.  This excludes the approx £4bn in AUM of Elston Consulting's other DFM clients including a national advice firm.

Co-manufacturing is soaring in popularity: in this workshop, Henry Cobbe explores what is it, and what are the risks in this article.

Although the Bank of England cut rates, long-dated Gilts yields are rising (so their values are falling).

The US Genius Act is creating an opportunity for private sector stable coins.

Whilst there have been structural and trading shifts driving Dollar weakness, there is downside risk to Sterling too.

UK Gilts yields are rising and risk becoming unanchored.

​Elston Consulting, an investment solutions provider supporting UK financial advisers has designed a range of Sustainable model portfolios built with 100% SDR compliant funds. The portfolios have been launched by Elston Portfolio Management, a platform-based MPS provider.

We discuss the rationale for being overweight US Equities given the resilient economy and strong earnings growth outlook.  But one manager's overweight can be another manager's underweight: it depends on your benchmark and how you define "Neutral."

​While the theoretical case for private markets can look compelling, the practical realities are more complex and not without pitfalls.

There are some key issues investors need to consider, in our view, are: 1) illiquidity, 2) opacity and 3) fees and misaligned incentives.
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We explore each of these in turn.

Andrea Acimovic explores the UK FCA SDR rules for funds and how they could be applied to Managed Portfolio Services offered by investment managers.

Andrea Acimovic (Elston) explores the evolving SDR rules and impact on MPS providers in our Elston Investment Forum 2025.

​Read on for more details.

Where next for the UK economy? Hermione Taylor outlines the challenges at our Elston Investment Forum 2025.

​Read on for more details.