Dan Caps, Lead Portfolio Manager of UK firm Evelyn Partners’ Index MPS range, outlines how a new approach can help to achieve greater diversification, protection and stronger return potential.
Passive investing has evolved rapidly over the past two decades as investors increasingly gravitate towards low-cost solutions that track the performance of indices, across equities, bonds and other assets. But what was once a relatively narrow proposition has since expanded dramatically, with a far broader range of index-tracking and factor funds now available to support more sophisticated portfolio design and the ability to express more precise investment views. Central to this evolution is the emergence of ‘active passive’ investing – an approach that combines the low cost and transparency of deploying through index tracking funds with an active approach to tactical asset allocation and style tilts.
Caps explains that managers of multi-asset portfolios are no longer confined to a limited set of market-cap weighted equity exposures and broad bond benchmarks, which historically offered little flexibility for expressing more nuanced portfolio views. Instead, today’s expanded toolkit allows index-tracking and factor funds to be used to achieve a more balanced exposure across regions, sectors and investment styles.
“We can now do far more with passive strategies in portfolio construction than was possible 20 years ago largely thanks to the huge amount of product innovation in index-tracking strategies. While keeping costs low remains a key attraction, and transparency and simplicity are equally important, ultimately, asset allocation is the main determinant of long-term returns.
“At Evelyn Partners, our Index MPS portfolios are built around central asset allocation guidance, with differentiation coming through how these views are implemented. Market‑cap‑weighted indices often provide the foundation but are then complemented by techniques such as equal weighting, value tilts, duration control and diversification beyond traditional equities and bonds. The result is a more modern, evolved approach to constructing an index‑tracking portfolio.”
The firm writes that this has underpinned the success of Evelyn Partners’ five Index MPS portfolios, each suited to different risk profiles, which were first launched to direct clients of Evelyn Partners in August 2022. The range was extended to the firm’s intermediaries business a year ago, providing financial advisers with a low-cost, strong performing and differentiated range of solutions for their clients amid growing demand for index investing.
Having marked its three-year anniversary last summer with a robust and highly competitive performance over that period, Evelyn Partners’ Index MPS has continued to build on that momentum into the first quarter of 2026 which was a choppy period for markets as war broke out in the Middle East. Each risk profile has significantly outperformed its Asset Risk Consultants (ARC) comparators since launch, over the past 12 months and in the first quarter of 2026, the firm says.
Cost efficiency has also played a meaningful role in supporting performance. The Index MPS range has an average ongoing charges figure (OCF) of 0.10 per cent , and a competitively priced annual management fee of 0.15 per cent. This places it among the cheapest 10 per cent of all MPS offerings on the market, according to research from market intelligence firm Defaqto.
However, the firm writes that it is Caps’ active approach to implementing index-tracking strategies that has ultimately driven strong return outcomes.
“This is not something we could have done five or 10 years ago when some of today’s biggest passive multi-asset funds were first launched,” Caps says. “What is becoming increasingly evident is that not all of those funds have evolved their implementation, and as a result have not kept pace with the innovation we’ve seen in the index-tracking investment space.”
Caps highlights the risks of complacency that can arise from long-running success of market‑cap‑weighted indices, warning of ‘a false sense of security’ as markets have become increasingly concentrated, particularly in respect of US mega‑cap technology stocks. The growing popularity of index trackers has coincided with a rare period of exceptional performance for market-cap weighted global exposures, masking underlying risks.
“If investors believe there is no need to actively consider asset allocation and instead focus on buying market-cap, then they are in danger of underestimating market risks, especially given the absence of a prolonged downturn since 2007-09,” Caps adds.
“The broader range of index-tracking options now available reflects the rise in popularity of index investing in general, as greater interest in this style of investing, and more assets being invested, encourage fund providers to offer a wider range of funds in this space. However, market-cap weighted indices have become more concentrated and, in many cases, more expensive, in terms of valuations, and the momentum has started to turn against US-focused market-cap exposure, with the US underperforming other equity regions by the greatest margin in 32 years in 2025.
“The idea that your portfolio changes that significantly and you do nothing about it doesn’t sit comfortably with us. As concentration increases, our response at Evelyn Partners is to seek diversification, using some exposure to equal‑weight or fundamentally weighted strategies to offset unintended biases. The same applies in fixed income, where duration and credit risk must be actively considered rather than simply accepting benchmark exposure.”
Caps says the valuation and concentration risk could lead to a prolonged downturn for the most heavily weighted market-cap exposures. He points to 2022 as an example of this, when broad benchmark exposure proved challenging for many investors, particularly within fixed interest, with some cautious portfolios only now beginning to recover from the sell-off.
“With our asset allocation framework, we were able to protect our Index MPS portfolios from much of the 2022 downturn. That included keeping duration short in fixed interest and having much greater diversification in our equity portfolios than standard market-cap weighted allocations. This puts our range in a stronger position to weather volatility,” he explains.
While Caps is proud of the performance achieved to date, he emphasises that his “passion for passives” is ultimately driven by a broader ambition: encouraging more people to invest.
“The rise of passive investing has been positive for all investors in helping to drive down costs. But if we can move beyond the active versus passive debate and focus instead on getting more people comfortable with investing in the first place, that’s where the real long-term benefit lies,” he says.
“The UK has an investment problem. Excessive focus on what is ‘right’ or ‘wrong’ can create barriers, so let’s get people comfortable with investing. Passive strategies have earned their place in portfolios through their low cost, transparency and simplicity – and that makes them an excellent starting point for many investors.”
Dan Caps is joining a panel chaired by ETF Express Managing Editor, Beverly Chandler, at Fund Forum this year. The agenda is here and we can offer you a discount for tickets, using this link.
