Multi-asset investors still paying the price of fees as cheaper funds pull ahead, finds Morningstar

February 25, 2026

Morningstar today published its report on Multi-Asset Trends in the UK and Europe, finding that the lowest-cost multi‑asset funds continue to outperform costlier peers and attract the bulk of investor flows.

“Investors are voting with their feet: low‑cost multi‑asset funds are dominating flows while expensive products fall further out of favour. Our research shows that fees are a crucial factor for investor flows and long‑term success, with the cheapest products consistently winning market share and outperforming costlier peers. We’re also seeing managers steadily increase US equity exposure, and in the UK a continued fall in home bias in the average portfolio,” commented Tom Mills, Principal, Multi-Asset Strategies at Morningstar

Key takeaways include:  

· Lower fees remain the clearest path to success: The cheapest quintile of multi‑asset funds continues to outperform peers and dominate investor flows in both the UK and Europe.

· UK investors are far more cost‑sensitive than European peers: Nearly 40% of UK multi‑asset assets sit in funds in the cheapest quintile, with Europe gradually catching up.

· Multi‑asset funds still struggle to beat Morningstar benchmarks after fees: Performance challenges persist, particularly for higher‑risk strategies.

· Cautious strategies lack investor appeal: More defensive portfolios have found it easier to top their Morningstar benchmarks, but remain out of favour as investors rotate back towards risk or prefer pure bond exposure since interest rates normalised from 2022.

· US equity exposure continues to rise: Managers have been increasing allocations to US equities, and taking on greater currency risk in the process. Home bias in UK allocation funds continues to wane.

· Gold shines, but few benefit: Despite a strong year for gold, it remains a tactical allocation for most multi‑asset funds rather than a core holding.

· Funds of funds embraced in the UK, not Europe: Passive‑heavy fund‑of‑fund structures have gained traction in the UK, while Europe remains more reliant on active underlying holdings.

The full report can be found here.