More than half of independent financial advisors (IFAs), discretionary fund managers (DFMs) and private banker fund selectors said they are moving significantly towards active strategies while maintaining core equity exposures due to continuing global uncertainty. That outweighs the 18 per cent switching to defensive and tangible assets and the 29 per cent going into cash and short duration bonds.

Rathbones commissioned the research via PureProfile. During July, the agency interviewed 100 UK IFAs, discretionary fund managers, private bankers and investment fund selectors at large banks managing around £234 billion ($318 billion) for retail investor clients.

Managers are attracted to active strategies because they can pick sector winners such as defence and cybersecurity while avoiding companies with supply chains vulnerable to global uncertainty, according to the study.

Higher interest rates and the growing gap between successful and unsuccessful companies is adding momentum to the switch, the firm said. Fifty seven per cent of respondents said they are feeling much more favourable towards active compared with 39 per cent who said they are slightly more favourable towards passive strategies.

Momentum will build into next year. Almost all respondents (95 per cent) said they expect their allocation to active strategies to increase in 2027, including 13 per cent who expect significant increases.

“Current macroeconomic conditions, the geopolitical environment and extreme market concentration within equity indices is part of the reason for the switch to active management, but fund selectors working for retail clients also recognise the attraction of being able to pick sectors and winners within sectors,” Tom Carroll, CEO, Rathbones Asset Management, said. “That is driving growing interest in active strategies, which is likely to continue into next year no matter what happens with current global issues.”

Rathbones Asset Management research shows that fund selectors are most likely to use active-only strategies in emerging market equities and corporate bonds and high yield debts where 42 per cent questioned only use active. The same number do so in developed market large cap equities although 43 per cent said they were passive only for this asset class. They are least likely to be active-only for government bonds, gilts and treasuries and most likely to be passive-only for commodities.

Ninety nine per cent of IFAs, DFMs and fund selectors at private banks are also concerned that passive growth trackers are over-exposed to companies with stretched valuations and 91 per cent agreed that some markets, such as small caps and emerging market debt, are unsuitable for passive indexing.