Vanguard has rolled out a new series of model portfolios that blend active and passive investment strategies, the latest sign of how the wealth management industry is reshaping the way financial advisors construct and deliver client portfolios at scale.
The Valley Forge, Pa.-based firm launched its Dynamic Active-Passive Model Portfolio series on May 18, 2026, expanding a model portfolio lineup that has grown steadily alongside adviser demand for outsourced portfolio management solutions. The series offers seven risk-based configurations, ranging from a fully fixed-income allocation to a 100% equity exposure.
The blistering demand for model portfolios is evident based on industry assets under advisement, which according to Morningstar's 2025 U.S. Model Portfolio Landscape report surpassed $645 billion as of March 31 last year – a 62% increase from June 2023.
The new dynamic series distinguishes itself from earlier Vanguard model offerings through its use of a systematic allocation process that adjusts portfolio positioning throughout the year based on the firm's evolving economic and market outlook. The framework draws on the Vanguard Capital Markets Model, known internally as VCMM, and the Vanguard Asset Allocation Model, or VAAM, to integrate forward-looking return distributions into portfolio construction decisions.
"The Vanguard Capital Markets Model plays a critical role in how we think about future market returns," Victor Zhu, Vanguard's global head of model portfolio solutions, said in a statement.
"By integrating forward-looking return distributions with our evolving economic and market perspectives, our Dynamic Active-Passive Model Portfolios are designed to balance risk and return through a disciplined and repeatable process, helping investors navigate changing market conditions over time."
The active strategies selected for inclusion within the models are chosen through Vanguard's internal fund evaluation process, which the firm says prioritizes experienced management teams, repeatable investment processes and competitive long-term performance outcomes.
As of May 21, the Dynamic Active-Passive Series includes a roughly 33% allocation to U.S. stocks, nearly 20% to non-U.S. equities, and just over 43% in bonds. The portfolios are underpinned by Vanguard funds, with ETFs predominating over mutual funds, a Vanguard spokesperson clarified to InvestmentNews.
The Dynamic Active-Passive series follows the firm's Strategic Active-Passive Model Portfolio series, an earlier offering that Vanguard positioned as a blended approach to portfolio construction. The new series builds on that foundation but is designed to respond more actively to shifting market conditions rather than maintaining a fixed strategic allocation.
"Our Dynamic Active-Passive Model Portfolio series builds on the success of our Strategic Active-Passive Model Portfolio series and reflects what we're hearing from advisors: they want a disciplined, scalable way to blend low-cost, transparent index building blocks with active strategies," said Eve Cout, head of advisor solutions at Vanguard's Financial Advisor Services division. "These models help advisors implement that approach without adding complexity."
The series arrives as advisor adoption of active exchange-traded funds accelerates inside model portfolios more broadly. Nearly half of all model portfolios reported to Morningstar (44%) included at least one active ETF as of March 31, 2025, with the average allocation to active ETFs among those models running at 33%.
"Our Dynamic Active-Passive Model Portfolios simplify some of the most complex parts of portfolio construction and management," said Amma Boateng, managing director of Vanguard's Financial Advisor Services division. "By leveraging model portfolios, advisors can continue delivering disciplined portfolio construction while spending more time with clients during moments that matter."
Vanguard first joined the active-passive model portfolio race in 2021, breaking what had until then been its mold of using proprietary non-active ETFs to build portfolio models.
One persistent advantage of model portfolios over mutual funds has been fees, a trend that has held across multiple years of Morningstar's tracking.
The average asset-weighted fee for a model portfolio stood at 38 basis points as of December 2024, compared with 53 basis points for the average unbundled mutual fund – a gap that has actually widened since 2020, when model portfolios averaged 47 basis points against 60 basis points for unbundled funds. Vanguard's new Dynamic Active-Passive series comes with a weighted average expense ratio of 13 basis points as of April 30, according to the firm.
Its BondBuilder suite, launched in April, underscores the same cost-efficiency principle in the fixed income space. Each ladder model is constructed using one Target Maturity Corporate Bond ETF per maturity year, equal-weighted across rungs, and is designed to maintain a perpetual structure without requiring advisors to buy or manage individual bonds.
"Financial advisors are being asked to deliver more personalized outcomes with greater efficiency," Boateng said. "Intuitive and scalable fixed income portfolio construction through target maturity ETFs allows advisors to focus more time on improving client outcomes."
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