Hitting the target

Outcome based investing (OBI) is not exactly a new concept but one which we have witnessed a number of DFMs adopting.

OBI focuses on delivering a specific outcome aligned to the client’s needs and requirements - for example, a specific annualised return over a given timeframe. 

Clients may favour this approach above others as it is easier to tell if the DFM is delivering on the mandate. 

A crowded market

Defaqto continues to see a steady flow of new MPS entrants to the market and the vast majority of these new solutions have been designed with platforms in mind specifically for the adviser market, with some new entrants being the result of a collaboration between DFM and adviser firms.

To underline the direction of travel, more than 10 per cent of firms are only available on adviser platforms. 

Cost and scalability remain the focus for DFMs, and costs can really only be driven down further as further new entrants arrive, challenging established charging structures.

That being said, more than half of the firms have less than £1bn of discretionary assets under management (almost 10 per cent are less than £100m).

Whether they can all survive in this increasingly crowded market remains to be seen, but the signs are positive as assets under management are increasing across the board. 

David Boyle is a researcher for funds and DFM at Defaqto