There could be a move away from managed portfolio services (MPS) to multi-manager funds as changes to capital gains tax come into force, according to Columbia Threadneedle.
The CGT annual allowance will fall to £3,000 in April 2024, after it fell to £6,000 last year.
Rob Burdett, head of multi-manager solutions at Columbia Threadneedle, said in recent years there has been a boom in MPS usage, supported by the growth of platforms.
He added: “A couple of things are stalling that in our view really is the beginning of maybe a more rosy outlook towards multi-manager.
“This is due to the changes in the CGT allowances, which over two years to April this year will see the £12,300 individual’s capital gains tax free allowance cut to just £3,000.”
With a model portfolio, investments are held directly by the client, which means gains or losses will usually contribute to the client’s annual CGT exemption allowance.
Burdett said the reduction makes it more likely that investors will exceed their allowance and pay tax on investment gains in any given year.
He added: “If you hold a multi-manager fund we make all those changes for the underlying investor, we don't trigger capital gains, you're in control of when you do that.”
Burdett said the changes will present the issue of whether model portfolio services will be able to be active without triggering CGT.
tara.o'connor@ft.com
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