Model portfolios combine professional asset allocation, diversification and ongoing management inside a defined risk framework. This guide covers how they work, the types available, their benefits and limits, and how they compare with direct stock picking.
A model portfolio is a professionally designed collection of investments built around a stated investment strategy, risk profile, or financial objective. It sets out how money is allocated across investments and removes the need for the investor to select individual securities.
This guide covers how model portfolios work, the types available, their benefits and limits, and what to consider before choosing one.
Model Portfolio Explained: The Core Concept
A model portfolio is a standardised investment blueprint. It defines what assets are held, in what proportions, and against what objective: capital growth, income, capital preservation, or a blend. Investors who use one plug into a ready-made strategy, and the manager handles asset allocation, rebalancing, and risk as conditions change.
Australian investors typically access model portfolios through managed accounts. In that structure, the underlying securities are attributed directly to the individual investor rather than held in a pooled vehicle, which affects both transparency and tax treatment.
Managed account funds under management in Australia reached $292.9 billion at 31 December 2025, up 25.8% over twelve months, with $21.7 billion of net inflows in the second half of 2025, according to the IMAP and Milliman Managed Account FUM Census. In the United States, model portfolio assets reached US$9.3 trillion at the end of 2025, and Broadridge projects US$18.6 trillion by 2030.
How Does a Model Portfolio Work?
A model portfolio moves through three stages: construction, implementation, and ongoing management.
1. Construction
An investment team selects asset classes, sectors and individual securities or funds against the portfolio’s stated objective, then sets target weightings and a strategic asset allocation. A balanced profile might target 60% growth assets and 40% defensive assets.
2. Implementation
The portfolio is implemented for each investor. In a managed account, the investor’s own account holds the model’s underlying securities. In a traditional managed fund, investors buy units in a pooled vehicle. The managed account approach preserves individual ownership of the assets, which affects tax treatment and flexibility.
3. Ongoing Management
Managers review the portfolio on a defined cycle, rebalance when market movements push actual allocations away from target, and adjust the strategy when the outlook changes. The same decisions apply across every investor following the model, which is what allows the approach to scale.
Types of Model Portfolios
Names and exact allocations vary by provider. The common categories are set out below.
| Portfolio Type | Minimum Timeframe | Growth Assets | Defensive Assets | Investor Profile |
| Conservative | 3 years | 15% | 85% (cash and fixed interest) | Seeking stable returns with lower capital loss risk; accepts that negative returns remain possible |
| Moderate | 3 years | 30% | 70% (cash and fixed interest) | Seeking more stable returns with a modest amount of growth; accepts some risk of capital loss |
| Balanced | 5 years | 50% (shares, listed property and infrastructure) | 50% (cash and fixed interest) | Targeting balanced returns for medium to long-term goals; prepared for periods of capital loss |
| Growth | 7 years | 70% (shares, listed property and infrastructure) | 30% | Emphasising growth to meet long-term goals; accepts return fluctuations and periods of capital loss |
| Aggressive | 9 years | 90% (shares, listed property and infrastructure) | 10% | Targeting predominantly growth assets; capital stability is not a consideration; accepts high volatility |
Income-focused models prioritise cash flow from dividends, interest and distributions. Retirees and income investors use them to fund spending without selling capital.
The Benefits of Using Model Portfolios
Professional Asset Allocation
Asset allocation covers what to buy, how much of each asset class to hold, and when to rebalance. A model portfolio applies those decisions systematically rather than case by case, which takes the timing of each decision out of the investor’s hands.
Diversification
Models spread exposure across asset classes, sectors, geographies and individual securities, which limits the effect any single holding has on the total.
Tax Efficiency
Delivered through a managed account, model portfolios allow advisers to manage tax at the individual client level: timing capital gains, harvesting losses, and handling franking credits. In a pooled fund those decisions apply to all investors simultaneously.
Transparency
Investors in a managed account can see every underlying security they own, at cost, at any time. Traditional managed funds report their holdings periodically.
Scalability for Advisers
61% of Australian financial advisers used managed accounts in the 2026 Investment Trends and State Street Managed Accounts Report, which surveyed 1,086 advisers between November 2025 and January 2026. Those advisers allocated an average of 66% of core portfolio holdings through managed accounts. The stated driver is time: model portfolios move stock selection off the adviser’s desk.
Consistency
Every investor in a model receives the same decisions and the same rebalancing at the same time, so implementation does not vary between clients.
Rivkin Private Wealth constructs and manages model portfolios for wholesale investors. Contact us to discuss how we approach portfolio construction.
Model Portfolios vs Direct Stock Picking: What is the Difference?
Two investors can hold the same underlying stocks and end up with different outcomes, depending on how those stocks are packaged, managed, and taxed.
Model Portfolios
Pre-constructed strategies built around a stated objective and managed by an adviser or firm. The firm sets the strategy, selects the holdings, and rebalances when allocations drift from target.
Direct Indexing
The investor buys the individual securities that make up an index rather than a fund or ETF. That allows customisation and tax-loss harvesting at the stock level. The monitoring metric is tracking error, which measures how far the portfolio diverges from its benchmark.
| Feature | Model Portfolios | Direct Indexing |
| Structure | Pre-built, professionally managed strategy | Custom portfolio of individual index securities |
| Customisation | Limited to chosen profile | High; stocks can be excluded or overweighted |
| Tax efficiency | Portfolio-level rebalancing | Individual security tax-loss harvesting |
| Rebalancing metric | Drift from target allocation | Tracking error vs benchmark |
| Complexity | Low, hands-off | Higher, needs active involvement |
| Best suited to | Investors valuing simplicity and professional oversight | Investors prioritising customisation and tax control |
The investor buys the individual securities that make up an index rather than a fund or ETF. That allows customisation and tax-loss harvesting at the stock level. The monitoring metric is tracking error, which measures how far the portfolio diverges from its benchmark.
Who Are Model Portfolios Suited To?
Model portfolios serve a range of investor types and are most often used by:
- Working professionals who want portfolio management without the time commitment of running their own investments.
- Investors who want diversification and professional asset allocation with more transparency than a traditional managed fund provides.
- Retirees and income investors who need a managed strategy aligned to income generation.
- SMSF trustees who want a documented investment framework that satisfies trustee obligations and applies investment discipline.
- Investors moving from direct stock holdings who want to formalise their approach without starting again.
Frequently Asked Questions
What is the difference between a model portfolio and a managed fund?
In a managed fund, you own units in a pooled trust and the fund owns the underlying assets. In a model portfolio delivered through a managed account, you own the underlying assets directly. That difference affects tax management, transparency and flexibility.
How often are model portfolios rebalanced?
Rebalancing frequency varies by provider and market conditions. Most model portfolios are reviewed quarterly, or when individual holdings drift materially from their target weighting. Some providers use a threshold approach and rebalance when any component moves beyond a defined percentage from target.
Are model portfolios appropriate for SMSFs?
Yes. Many SMSF trustees use model portfolios as the investment framework within their fund. Doing so produces a documented investment strategy, which satisfies the trustee obligation under the Superannuation Industry (Supervision) Act, and applies consistent asset allocation.
Can model portfolios be customised?
Model portfolios can incorporate exclusions and tilts to reflect ethical preferences, sector overweights or income requirements. The degree of customisation depends on the provider and the platform delivering the portfolio.
What returns can investors expect?
Returns depend on the asset allocation of the chosen model, market conditions, and the manager’s decisions. A growth model will generally deliver higher long-run returns with more volatility than a conservative or balanced model. Providers publish historical performance data, though past returns are not a reliable guide to future outcomes.
Conclusion
Model portfolios give investors access to professional investment management without the capital base institutional mandates require. They combine asset allocation, diversification, tax management and transparency in a structure that can be matched to an investor’s goals and risk tolerance.
The structure applies equally to long-term wealth accumulation, retirement portfolios and SMSF assets. What it provides in each case is a documented allocation and a defined process for maintaining it.
Rivkin Private Wealth manages model portfolios for wholesale investors, including a dividend-focused option for income investors. Contact our team for details.
