Taiwan and Korea have been the big emerging-market stories in recent years, but the biggest shock for Leon Eidelman, co-manager of JPM Emerging Markets fund, has been the fall of the region's once dominant market: China.

“If you went back 10 years and said ‘What is the world going to be?’ you wouldn’t think that the world’s second-largest economy would be of equal size to [Taiwan]. Basically, it doesn’t make any sense,” he said.

Taiwan now represents some 28.9% of the MSCI Emerging Markets index, while Korea is worth 21.4%. China has slipped to third place (19.8%) while India – the other formerly dominant country before the AI boom – stands at 10.7%.

“The valuations that currently apply to the Chinese equity market are incredibly low, and I think that investors apply a very high cost of risk to China. That’s as a result of some of the political interference in markets and equities that have obviously scarred foreign investors,” he said.

“Domestically, they’re going through some financial pain as they reconfigure the economy from fixed asset investment and real-estate-driven growth to other things.”

The Chinese economy is “very bifurcated”, Eidelman noted, with the only area of the market “ticking along” being the semiconductor stocks, which are receiving a significant amount of government investment. Consumer stocks have “suffered quite a lot”, as exporters experienced a significant amount of pressure due to changes in the tax regime, tariffs from the US and an appreciating renminbi.

With China faltering, Taiwan and Korea have overtaken it in the index thanks to their best-in-class tech giants: TSMC in Taiwan and Samsung Electronics and SK Hynix in Korea. To get there, it has taken them years and decades of spending on research and development, dedication to supply chain resilience and building partnerships with the developed world, said Eidelman.

TSMC, the largest stock in the index, is his £2.8bn JPM Emerging Markets fund’s biggest holding at just shy of 10%, with Korean juggernauts Samsung Electronics and SK Hynix in second and third place respectively.

Eidelman runs the fund alongside John Citron and veteran stock picker Austin Forey. Over the past 10 years, it has been a top-quartile performer in the IA Global Emerging Markets sector, up 119%.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics

Below, Eidelman explains why emerging markets lend themselves to growth companies, why India has struggled and which of the ‘big three’ has been the fund’s best performer.

What is your process?

We believe that the single most important attribute an equity can have is growth. In emerging markets, a lot of stocks should have that attribute because of the emergence of two strengths.

The first one is [the consumer]. If you look at the countries in the benchmark today versus 25 years ago, it’s the same. But per capita incomes have grown significantly, and spending patterns have changed alongside them. The opportunity in the asset class is to identify businesses that can grow alongside the consumer.

The second is that the asset class has gone from being a labour-cost arbitrage outsource winner to a dominant manufacturing hub for the world.

The margins that some of these export champions are delivering today reflect the fact that they carry significant amounts of intellectual property and value add.

What has been your best performer this year?

The single best contributor to portfolio performance over the course of the last year has definitely been SK Hynix.

We took a very large position in Hynix about two years ago with the view that (a) the memory cycle was really starting, and (b) it was incredibly well positioned for it. It was the first to really drive high-bandwidth memory, which is obviously what’s going into GPUs today.

Year to date, the stock is up about 140% and has contributed about 130 basis points of return.

And your worst?

The stocks that have been hit by fears around AI have been among the worst contributors, for example travel-related names Trip.com and MakeMyTrip.

There is quite significant fear that those stocks are going to be disintermediated by AI, and that you will be able to book your travel just using [LLMs].

And so, there’s been a pretty significant derating there for those stocks over the course of the year. MakeMyTrip is down 46% and has been a significant detractor to total returns.

India has been choppy recently. What’s your view on the country?

India doesn’t have [tech] hardware or AI, so today it is a much smaller percentage of most emerging market equity portfolios. Not because it’s dramatically underperformed, and not because equities have fallen a lot, it just hasn’t kept up with the earnings growth that you’ve seen in places like Korea and Taiwan.

That will change. Over time, the Indian consumer will continue improving. That should drive returns. India got very expensive, and then it underperformed right as Taiwan and Korea did very well. But it’s now not as expensive as it was.

So now you’re back to [a situation where] India’s performance should be closer to its underlying equity growth, which is pretty good. And so India should start perking up.

Are Korea and Taiwan all about just three stocks?

The Taiwanese domestic market isn’t super relevant. The Korean domestic market has historically had a lot of chaebols [large, family-owned industrial conglomerates] and a lot of issues there. Credit where credit is due, even before the tech stuff started happening, it had been pushing this ‘Value Up’ framework copied from what Japan had been doing, and that has been having some effect.

I went and saw a few financial companies just last week, where historically they would have been nowhere [near good enough quality] on capital allocation and dividends et cetera. They are actually making progress.

So it is improving as a market, and I think it would be a mistake to underestimate how important that has been.

What do you do outside of fund management?

Family obviously is important. I’ve got two small kids, so I spend a lot of time with them. Despite the travel at work, which is a lot, I enjoy travel and seeing the world.

On the more fun side of things, I scuba dive a lot. I’ve done over 2,500 dives globally. It’s my happy place.

Usually issues come from out of the blue. No one could see them coming. But when it comes to AI, the problems are staring investors in the face. The problem is, no one seems to want to acknowledge they are there.

Instead they are looking at one thing: markets going up and up.

Just look at the circular financing problem in the US. This isn’t new. In fact, it’s been a known issue for over a year. Nvidia invested $30bn in OpenAI, essentially giving it the money to build datacentres. In return, OpenAI will stuff them full of equipment from Nvidia. Essentially, Nvidia is making chips and financing its own buyers, creating its own demand.

When one ultimately fails, the whole ecosystem could collapse as all are closely intertwined. And it is not just these two. It is hard to find an AI stock that isn’t financially linked to another.

Nvidia has also committed up to $10bn to Anthropic, the company behind Claude. Microsoft is offering up to $5bn. In return, Anthropic has agreed to buy $30bn of computing capacity from Microsoft’s Azure cloud and has agreed to use Nvidia’s latest chips.

But it is not even just an equity story, the problems have bled into the world of bonds too, as these companies have had to take out debt to finance their extreme capital spending.

Companies that once had huge cash piles are now coming to the market asking for loans. In fact, Marcus Weyerer of Franklin Templeton told Trustnet this week that, of the hyperscalers, it is only Microsoft that is still making positive free cashflow.

In any other industry this would be viewed as a disaster: turning a profitable, cash generating, debt free business into a leveraged one in the hope of one day being able to justify spending. So why not when it comes to AI? Possibly because people have one eye (if not both) on the future potential returns.

Investors already have a blueprint for a collapse. In Korea, Samsung and SK Hynix make up around 48% of the KOSPI index, which is down 30% from its June high despite both companies announcing record profits over the summer.

Performance of index YTD

Source: FE Analytics. Returns in sterling.

Yet why would investors look over there when other parts of the AI chain are performing so well? Surely this is just an isolated incident? Maybe. But is it worth the gamble if you’re wrong?

Surely one can hope that with all of this going on investors are displaying some level of caution. Nope. Just look at the IPO market. SpaceX became the world’s largest ever stock market launch despite making huge losses when it raised $75bn earlier this year, giving it a $2trn valuation.

Yet much of its market capitalisation is predicated on the firm making money from building datacentres in space. No one, not even chief executive Elon Musk, truly knows how far away we really are from this being credible.

Even if it can, there is already a race to build datacentres right here on the earth and humans have a tendency to get overexcited about these things and build too many in the first place. Will space data stations even be required? Or does it just sound cool?

Anthropic is the next big test. It told investors this month it has been profitable for a whole six months, which apparently is good enough nowadays. If it gets its asking price it would leapfrog the Musk-led stock to become the most valuable company at IPO in history.

Potentially two record IPOs in one year, both from the same sector and at a time when nothing else outside of AI matters. If that’s not a sign we’re at the peak then I don’t know what is.

Look, I am not stating that this is the end of the AI ride. There are so many reasons to believe that the nascent technology will be the gamechanger everyone expects it to be and the naysayers will be laughed at.

But if things go wrong, this time around investors won’t be able to say they couldn’t see it coming. The signs are there. Issues exist. We just need to stop looking the other way for fear that doing so will make us look stupid.

Jonathan Jones is editor of Trustnet. The views expressed above should not be taken as investment advice.

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A global pandemic, rampant inflation, an aggressive rate-hiking cycle, geopolitical upheaval and the recent AI revolution show the past six years have been extraordinary for investors.

Despite all the ups and downs, overall investors have done well so far this decade. But while the average has been good, there have been some truly standout performances.

To highlight this, Trustnet looked at the best-performing funds and investment trusts across the entire Investment Association (IA) and AIC universes from 1 January 2020 to 21 October 2026.

Looking at funds first, technology dominated the list of the best performers of the 2020s so far, with more than half sitting in the IA Technology & Technology Innovation sector or focused on technology-related themes, such as AI.

Many of these technology-focused funds are exchange-traded funds (ETFs), including iShares S&P 500 Information Technology Sector UCITS ETF, Xtrackers MSCI USA Information Technology UCITS ETF and Xtrackers Artificial Intelligence and Big Data UCITS ETF.

Source: FE Analytics

The £2.3bn Amundi MSCI Semiconductors topped all Investment Association (IA) sectors with a 557.2% return since the beginning of 2020, putting it almost 190 percentage points ahead of second place in the table.

The fund tracks the MSCI ACWI IMI Semiconductors & Semiconductor Equipment Filtered index and logged first quartile returns in 2023, 2024 and 2025. However, in 2022 – when equity markets globally struggled – the fund fell to the third quartile, losing almost 30%.

Performance of the fund vs sector in the 2020s

Source: FE Analytics

Among active tech funds, the £16.7bn Polar Capital Global Technology was the best performer, gaining 370.2% – the second-best return overall.

It is run by co-managers Ben Rogoff, Nick Evans, Fatima Iu and Xuesong Zhao, who blend top-down thematic views with bottom-up stock selection to formulate its 60-85 holdings with no benchmark constraints.

Polar Capital Global Technology was also recently highlighted for its strong returns during the Iran ceasefire. The fund has also logged a strong longer-term performance, returning 938.9% over 10 years to the end of September 2026.

Performance of the fund vs sector in the 2020s

Source: FE Analytics

Gold is another big theme among the funds with the strongest returns of the 2020s. The metal first rallied as a safe-haven asset in the Covid pandemic. Inflation, wars and trade tensions then kept demand high, with a dramatic surge in late 2025 sending the yellow metal above $4,000 per ounce.

Baker Steel Gold & Precious Metals, UBS Solactive Global Pure Gold Miners UCITS ETF and Ninety One Global Gold returned 280.2%, 263.4% and 235% respectively, while WS Ruffer Gold logged the strongest return among commodity specialists, ranking third across all IA sectors with a 351.9% gain.

WS Ruffer Gold has been managed by Paul Kennedy since 2015 and has an FE fundinfo Crown rating of five.

Performance of the fund vs sector in the 2020s

Source: FE Analytics

Turning to investment trusts, natural resources led the way, with five trusts in the IT Commodities & Natural Resources sector making the list.

Source: FE Analytics

Commodity prices first took off as economies reopened after the first swell of the Covid pandemic, while Russia’s invasion of Ukraine in 2022 pushed energy and metal prices higher still.

Miners and oil firms used the windfall to pay out big dividends, which helped the likes of BlackRock World Mining Trust and BlackRock Energy & Resources Income. The two BlackRock trusts returned 228.9% and 218.1% respectively.

City National Resources Growth and Income topped the trust table, logging a 508.8% gain since 1 January 2020, more than 130 percentage points clear of second place.

The £156.1m trust, co-managed by Ian Francis, Keith Watson and Rob Crayfourd, predominantly invests in resource and mining equities.

In more recent months, the managers have benefited from holdings in refinery companies, such as Valero and Par Pacific, as the Middle East conflict continues to impact the global oil supply chain.

In contrast, the trust is more cautious on more economically sensitive base metals like copper, in part due to elevated valuations on copper miners but also concerns that higher oil prices and increasing interest rates could hurt emerging market economies the most – and these regions are key drivers of base metal demand.

It is currently trading at a 2.8% premium to the net asset value (NAV).

Performance of the trust vs sector in the 2020s

Source: FE Analytics

Meanwhile, gold’s record run lifted Golden Prospect Precious Metals, which gained 193.6%. Elsewhere, uranium specialist Geiger Counter gained 193.6%, benefiting as governments turned back to nuclear power to shore up domestic energy security and, more recently, as AI data centres have driven up demand for electricity.

Similarly to the IA universe, technology has emerged as one of the dominant sectors for growth in the investment trust universe. Allianz Technology Trust, which is managed by Michael Seidenberg, has returned 327.4% since 1 January 2020.

In the trust’s full year results, published in March, Seidenberg doubled down on AI-driven secular growth and continued post-Covid technology demand as continued sources of strong returns for the trust.

With its closed-ended structure, the trust is not subject to concentration limits for its holdings and, as such, it has been significantly weighted in the tech mega-caps. Its top holding is Nvidia (9.5%), followed by Microsoft (7.2%), Alphabet (6.9%) and TSMC (6.2%).

Performance of the trust vs sector in the 2020s

Source: FE Analytics

Unlike the IA universe, UK-focused investment trusts broke into the top 30 for returns among investment trusts, with Rockwood Strategic from the IT UK Smaller Companies sector gaining 149%, while Law Debenture Corporation sits in the IT UK Equity Income sector and gained 143.1%.

France is facing one of its deepest fiscal and political crises in decades – and the consequences are reverberating through its sovereign bond market.

Mass protests swept across the country last weekend, as public anger over the government’s austerity plans spilled onto the streets.

The unrest adds to growing pressure to bring public finances under control, as France attempts to reduce its deficit from 5.4% of GDP this year to 5% in 2027 through a €54bn fiscal adjustment package. Yet public debt is projected to breach 120% of GDP, while annual interest payments are expected to jump from €79.2bn to approximately €92.1bn.

Before the protests, bond markets were already rattled by months of fiscal and political uncertainty. France’s 10-year OAT yield rose a further eight basis points to 4.86% at the start of the week, widening the gap with German Bunds at 3.41%, while the OAT two-year yield rose to 3.64% and the 30-year climbed to 5.46%.

It is not a reassuring picture for fixed income managers, with many erring on the side of caution in recent months, even as some see pockets of value.

Patrick Barbe, European fixed income head at Neuberger, said he has been “significantly short” on French OATS over the past few months but the recent sell-off led him back to neutral.

“Considering France’s fundamentals and its rating, and its annual supply achievement (92% of the annual OAT programme is done), we believe that the magnitude and speed of the widening of the OAT spread are somewhat excessive,” he said.

Meanwhile, Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions, noted the firm is currently neutral-to-slightly-underweight French government bonds, arguing the market is pricing a level of long-term sovereign risk that appears “excessive” relative to France’s actual default risk over the medium-term.

That said, Boucher remains cautious as he expects spreads to remain elevated or widen further if political uncertainty increases, “particularly in the event of stronger momentum for more radical parties in future opinion polls”.

Dan Bright, portfolio manager at Aviva Investors, has also been cautious for much of the year, staying neutral or underweight.

“However, with the underperformance in September, we see French spreads as now offering reasonable compensation for most political outcomes and have entered a modest overweight,” Bright said.

While the issues unsettling the bond market are France-specific, Europe-focused investors are not viewing the situation in isolation, with managers citing their concern that volatility could spread into other European markets.

Al Cattermole, fixed income manager at Mirabaud Asset Management, said: “France is too large a sovereign market for prolonged stress to remain completely isolated, so we would expect bouts of volatility across European government bonds if French spreads continue to widen.”

He argued that there is already some contagion in other European sovereigns, such as Italy.

Will the ECB get involved?

The widening spread between French and German government bonds puts the European Central Bank (ECB) in an awkward position – tasked with taming inflation on one hand while facing growing pressure to prevent sovereign stress from spiralling on the other.

Katharine Neiss, chief European economist at PGIM Credit, said: “If stress were to spread to other eurozone sovereign markets, the ECB could potentially deploy its Transmission Protection Instrument for non-French euro area sovereigns to help restore market functioning.”

The emerging bond-buying tool, created in 2022, allows the central bank to buy the government bonds of a specific eurozone country to prevent its borrowing costs rising too high.

However, the ECB is unlikely to ride to France’s rescue until the government shows a willingness to address its budget deficit, according to David Roberts, head of fixed income at Nedgroup Investments.

He referred back to Italy in 2011, when Italian spreads over German Bunds hit 500 basis points before the ECB acted.

“France likely needs to get to between 225 to 275 basis points over Germany before the ECB would feel compelled to step in,” Roberts said.

Instead, managers agreed that the ECB’s primary focus will remain on bringing inflation back under control.

Maxime Darmet, senior economist for France, UK and US at Allianz Trade, said: “Concerns about rising sovereign borrowing costs, such as in France, are unlikely to prevent the ECB from delivering the rate hikes it considers necessary – indeed, easing off too early could undermine its credibility and push up longer-term bond yields through a higher inflation risk premium.”

Following its October pause, Darmet expects the ECB to deliver two further rate hikes by the first quarter of 2027.

Opportunities across the eurozone and beyond

Managers are nonetheless finding pockets of value within European fixed income. Boucher said there is value in the investment-grade bonds issued by high-quality issuers.

“This segment benefits from generally solid corporate balance sheets and lower sensitivity to political developments than sovereign debt markets,” he said.

Meanwhile, Rikkert Scholten, strategist at Robeco, noted “consistent improvements” in the fiscal outlook for countries such as Portugal and Greece, while Lisa Wang, head of EMEA investment strategy at Franklin Templeton Investment Solutions, argued German government bonds “offer the clearest combination of safe-haven demand and potential gains if fewer rate hikes are needed than feared”.

Looking at other developed markets, several managers flagged Australian sovereign bonds.

Lauren van Biljon, senior portfolio manager in the global fixed income team at Allspring Global Investments, pointed out that the Australian central bank has been a “frontrunner” when it comes to rate hikes.

“This means they are closer to the end of their hiking cycle, while fundamentals are among the more robust on the global stage and valuations are good – so it’s somewhere where the intermediate part of the yield curve looks attractive,” she said.

The appeal of Australian government bonds was separately highlighted earlier this month by Fidelity fund manager Mike Riddell, who flagged the market as his highest conviction trade on the basis that the country’s collapsing housing market will force the Reserve Bank of Australia to cut rates.

Along a similar vein, Wang said Canada is a “clear alternative”, with underlying inflation closer to the target, which gives the Bank of Canada more scope to hold rates while other central banks face pressure to tighten.

Meta grew revenue 26% in the latest quarter and has forecast faster growth for the final three months of 2026, yet its shares have been mostly flat in pre-trading, swinging between -1% and 0.5% at the time of writing.

Investors are seemingly looking past the positive revenue figures to two questions: how much the company will spend on AI next year and whether the other big technology groups reporting next week can show that spending is paying off.

Meta expects to spend heavily again in 2027 if its Muse AI app (the AI agents app that was launched in the US and Canada and grew to 2.5 million daily users within weeks) keeps gaining momentum.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Meta delivered another quarter that makes it hard to argue against the strength of the core business... [Muse] early adopters are some of Meta’s most valuable users, so keeping up the momentum is key”.

The big question remains cost. He added: “We continue to see Meta as one of the best-placed names to capitalise on consumer and enterprise AI. But with next year’s investment bill still unknown, a possible equity raise and an earnings multiple that has now re-rated, the near-term balance of risk and reward looks more even”.

Marcus Weyerer, director of ETF investment strategy at Franklin Templeton, said the quarter was a good one as revenue came in 2% above analyst estimates. Earnings per share (profit divided by the number of shares) fell short due to a one-off $10bn legal charge, which he expected the market to look through. The problem, however, is how much was already priced in.

“Normally, analyst expectations go down before the actual reporting. This time they have gone up, because we’ve seen so much good news in the meantime. Q2 was an extraordinarily strong quarter. Even Q1 was very strong. But in both cases, the analyst expectations were relatively muted. This quarter it will be more difficult to see those consistent high beats just because the expectations have caught up,” he said.

However, the market should “be in good shape” if concerns around AI spending and its monetisation can be addressed, and with these results, Meta has just done that, he said.

“Monetisation is the key,” he added, although noted that he is already starting to see progress made in this area.

Monetisation has already come through in previous results from other companies, such as Microsoft and Amazon reporting “huge cloud growth” last quarter. Today, Muse is free (with limits), but there are different monetisation models proposed for the future, including taking a cut from the purchases done by its AI agents.

“I cannot predict the future, but comments from chief executives and finance chiefs are consistent across the sector. It would be very unusual if there are negative surprises here,” Weyerer said.

The remaining hyperscalers and large tech companies, including Microsoft, Alphabet, Apple and Amazon, are reporting next week, with Microsoft the main headline grabber, according to Weyerer.

“It’s the only one of the hyperscalers that still has, despite that spending, positive free cashflow. The others have gone negative,” he said. “If Microsoft said, ‘We can’t spend enough anymore,’ then that would be a problem.”

Further out, he named Oracle as one to pay attention to as it is becoming “almost a neo cloud”. Last week CoreWeave, a company that rents out AI computing power, fell on concerns about its high leverage. Oracle has high leverage and a very negative cashflow too.

“So for them, it’s even more important to show monetisation of that cloud business,” said Weyerer. However, he noted that any issues would largely be viewed as company-specific.

Where a European bank is based decides whether it is worth owning, according to Benjamin Moore, manager of the BlackRock Greater Europe Investment trust.

“Europe is a Krispy Kreme doughnut, with all of the sugar and icing around the edge and not much going on in the middle,” he said.

In the centre is the north of Europe, France, Germany and the Scandinavian markets, where “it’s much more difficult to eke out even a double-digit return”.

On the other hand, peripheral European banks have consolidated, cleaned up their balance sheets and acquired “very sticky” deposit bases, while regulators are also “much more benign” in these parts of Europe. This means the ‘peripheral’ sector is generating returns “on tangible equity”.

“So for European banks, we’re much more selective in where we will play,” Moore said.

For the best part of 15 years after the 2008 financial crisis, European banks were considered poor investments, weighed down by restructuring, fines and tougher capital rules.

“Anyone who looked at European banks 15 years ago, there was a gag reflex if you actually mentioned the European bank because the industry was in such a terrible state of disrepair,” Moore continued. “There’s been dramatic market repairs since, and so we’ve significantly increased our exposure there to an industry where things are actually really improving.”

At the end of August, the Blackrock Greater Europe portfolio had a 23.1% exposure to financials, with the main banks being UniCredit (3.7%), Allied Irish Banks (2.9%) and Caixabank (3.2%).

Fred Sykes, equities portfolio manager at Fidelity, broadly agreed, although he has held bank shares for several years. To him, the sector’s low valuation was justified in the 15 years after the 2008 financial crisis.

In that time, banks earned a return on equity (ROE, or the profit a company makes for every dollar invested in the business) of around 5%, and investors paid much less for each unit of their profit – a gap measured by the price-to-earnings (P/E) multiple.

“The banks were worse-quality businesses than the market, trading at much lower multiples,” Sykes said, referring to the chart below. “Today, ROEs have recovered, but the valuations haven’t”.

Source: Fidelity

He continued: “We’ve owned bank shares for a number of years and we still think that closing of the quality, the fact that the banks are better quality businesses than they have been historically, is not recognised by the market.”

Niklas Kammer, senior equity analyst at Morningstar, didn’t see it that way.

In its latest European Banks Industry Pulse study, the firm found that valuations look modestly expensive, as it expects eurozone and UK mortgage demand to soften, and sees corporate loan books as more vulnerable than household lending.

“Structural hedges and wider deposit margins should continue to support earnings in the near term, yet much of that benefit now appears reflected in valuations,” said Kammer.

“Looking ahead, the balance of risks is becoming less favourable. If elevated energy prices keep inflation higher for longer, further rate increases could put additional pressure on economic growth, slowing loan demand and increasing the risk of credit losses.”

But while valuation opportunities may be limited, Morningstar pointed to NatWest and BNP Paribas as its favourite picks.

The former offers “the best risk/reward trade-off among UK banks”, with a “strengthening franchise and improving structural profitability”.

Morningstar analysts anticipate “deposit franchise wins and a greater contribution of non-interest income after the acquisition of Evelyn Partners, which should improve earnings quality”.

“NatWest has brought its capital levels in line with peers after a significant overhang following the government involvement after the global financial crisis during 2007-09. That said, improving profitability and a robust balance sheet support NatWest’s progressive dividend and share buybacks,” they said.

Conversely, BNP Paribas provides a “compelling mix of income, stability and strategic growth at a discounted valuation”, with the stock trading at a 40% discount to the European banking sector’s average price/tangible book ratio while delivering a 6% dividend yield.

Banks are not the only place where European managers are being careful. Wars in Ukraine and the Middle East, US trade policy and AI all add to the risks, with Moore saying that “the number of things you need to be prepared for and worry about in Europe is just manifold”.

“For us, the emphasis on being very focused and, frankly, very paranoid is higher than it’s been as long as I can remember,” he said.

For example, AI is lowering costs for most businesses, which leaves the question of how many pass the savings on to customers and how many keep them. On top of that, some companies gain a new source of revenue while others are left structurally challenged: the technology has upended industries once seen as defensive, such as telecoms and insurance.

His response has been to hold sectors that are completely outside that narrative, for example, jet engine makers.

The number of active emerging market funds whose three largest holdings match the MSCI Emerging Markets index’s top three has doubled in a year, Trustnet research has found, after a rally in Asian memory chip makers boosted concentration risk.

The index’s top three stocks are now Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics and SK Hynix after investors poured cash into AI ‘picks and shovels’ plays. In the IA Global Emerging Markets sector, 71 of 119 active funds – around 60% – hold some combination of these three stocks as their top three holdings.

What’s more, 59 of the 71 funds currently own the three stocks in the index’s exact order (TSMC first, Samsung second, SK Hynix third). The other 12 have the same three stocks but rank them differently: eight funds put SK Hynix ahead of Samsung and four put Samsung ahead of TSMC.

Simon Evan-Cook, multi-asset manager at MGTS Downing Fox, said: “It’s tempting to suggest that, if the index funds have been compromised by heavy AI concentration, then active funds are an antidote to that.

“But the truth is that this has become such an extreme market trend that the average active fund manager is unlikely to be much help and might even be worse. This is because of Darwinism – many fund managers that have resisted following the herd have either given up or been sacked and now, on average, they’re just positioning their funds against the benchmark.”

Source: FinXL, MSCI

The same pattern is evident in the IA Asia Pacific Excluding Japan sector, where 59% of active funds now match their index’s top three, up from 32% a year earlier.

One year earlier, just 35 of 117 global emerging market funds (or 30%) held the index’s top three stocks (TSMC, Tencent and Alibaba) as their largest holdings. The share held broadly steady the year before that, as 32% had TSMC, Tencent and Samsung as their biggest stocks in September 2024.

The shift follows a rapid rise in the index weight of Samsung and SK Hynix, both large manufacturers of memory chips used in AI hardware. Samsung’s weight in the MSCI Emerging Markets index rose from 2.9% to 8.5% over the year, including its preference shares, while SK Hynix’s rose from 1.4% to 5.9%.

Combined with TSMC’s 15.6% weighting, the three stocks now make up 30% of the index, against just 15.2% a year ago. Tencent and Alibaba, which made up two of the index’s three largest holdings in 2025, dropped to fourth and fifth places respectively.

UCITS diversification rules, applied to most funds sold to UK retail investors, limit any single holding to 10% of a portfolio, meaning funds cannot fully replicate the index’s weights for some large constituents.

Of 109 active funds holding TSMC in their top 10, 94 allocate more than 9% but none holds it at its 15.6% index weight because of this rule. Across the three stocks combined, the median active fund holds 23.6% against 30% for the index.

Leon Eidelman, manager of JPM Emerging Markets, said UCITS funds are “forced to underweight TSMC by the regulator”, even if they hold the maximum 10%. He would be “quite shocked to find funds that aren’t near that 10% limit for TSMC”, arguing that an underweight of that size was probably a bigger bet than any position most managers took on the long side.

JPM Emerging Markets holds all three stocks as its top three holdings, in the same order as the index.

A related rule caps holdings above 5% at 40% of a fund in total. The number of active funds in the sector with 35% or more in such holdings rose from one in 2025 to nine in 2026, leaving these funds little room to add further to their largest positions.

Eidelman said managers were left with “the uncomfortable reality of a much more concentrated benchmark than used to be the case for the asset class”.

“But you’re going to have to deliver more juice from the orange of stock selection, so to speak, because you’ve got more money tied up in active share, given the industry concentration,” he added.

Eidelman said JPM Emerging Markets had added value through stock selection within technology despite its TSMC underweight, by picking other Taiwanese stocks.

FE fundinfo data shows some of that shift into smaller Taiwanese and South Korean hardware makers. MediaTek appeared in the top 10 of 71 funds in September 2026, up from just 21 a year earlier, and ASE Technology went from being in five funds to 34.

SK Square, whose main asset is a stake in SK Hynix, is now held in the top 10 of 23 funds, meaning some funds’ real exposure to SK Hynix is higher than the headline holdings might suggest.

Across the IA Global Emerging Markets sector, AI and semiconductor hardware stocks now make up 70% of the typical active fund’s top 10 weight, against 41% a year ago.

The increase in Asian hardware holdings came alongside a reduction in Chinese and Indian positions. Alibaba appeared in the top 10 of 47 funds, down from 77, mostly as its share price fell relative to the rest of the index. HDFC Bank, an Indian lender, fell from the top 10 of 50 funds to 15.

As would be expected, the funds that were early to the Asian AI trade tend to have been rewarded over the two years since 30 September 2024.

The quarter of funds with the highest exposure to TSMC, Samsung Electronics and SK Hynix in September 2024 returned an average 63.9% over the following two years, against 39.4% for the quarter with the least exposure.

The average active fund in the sector returned 51.6% over the period but 89% of the highest-exposure quarter beat a basket of MSCI Emerging Markets tracker funds, which returned an average 53.5% over the same period. Just 26% of the lowest-exposure quarter beat the trackers.

The best performers of the high-exposure funds are Nomura Emerging Markets (up 138.6% over the two-year period), FTF Templeton Global Emerging Markets (up 78.6%) and Invesco Emerging Markets ex China (up 77.1%).

But avoiding the consensus did not guarantee underperformance: Carmignac Portfolio Asia Discovery, which also held none of the three stocks in its top 10 in September 2024, returned 81.2%. It now holds 24% in the three combined.

Evan-Cook added: “You have to work a little harder to find an active emerging markets fund that won’t get dragged down by this. We own four – Merlin, Neuberger, Skerryvore and Chikara India – and they all went up in July while the market and the average fund was getting walloped by the AI reversal.”

The analysis covers the top 10 holdings of active funds in the IA Global Emerging Markets and IA Asia Pacific Excluding Japan sectors, dated 30 September in 2024, 2025 and 2026. Index weights for 2026 are taken from MSCI factsheets; earlier weights are estimated from MSCI Emerging Markets tracker funds. Index-tracking products and funds of funds are excluded from the active fund counts.

Investors start every year with a set of assumptions about the key drivers of corporate earnings. Few years end with those assumptions intact, and 2026 has been no exception.

At the start of the year, the case for stronger earnings looked well supported. Central banks were expected to keep cutting interest rates, fiscal stimulus was due to support US demand, European governments had committed to higher defence spending and corporate investment in AI was still rising.

While forecasts pointed to accelerating earnings growth in the US, Europe and emerging markets, the risks were visible. The US jobs market was cooling with more unemployed workers than vacancies, and inflation was expected to remain above central bank targets.

What changed

The conflict in the Middle East pushed oil prices sharply higher, and although they retreated from their peak, they have stayed volatile. Economists' inflation forecasts, which had been drifting lower early in the year, were revised up.

Growth forecasts, which had been raised to optimistic levels, were trimmed. The debate over interest rates moved from how many cuts would come, to whether rates might need to rise, while long-dated government bond yields kept climbing. While this combination would normally weigh on earnings forecasts, we have instead seen them rise.

An unusual pattern

Over the past two decades, expectations for global earnings growth have on average been revised down by c.10% over the course of the year. Analysts tend to be optimistic at the start of a forecast period, which is why forecasts made in January deserve some caution.

However, this year is an exception. Expected earnings growth for global equities has roughly doubled since January, with the MSCI World’s earnings per share growth estimates growing from 16.3% at the beginning of the year to 33.5% at the end of the year. The size of the upward revisions sits at the extreme end of the historical range.

The pattern is not limited to the US: similar upgrades have appeared in Europe and emerging markets. Revisions are useful to watch because they show how expectations are changing, not just where they stand.

Where these earnings upgrades have come from

Energy and technology have been the key drivers of upward earnings revisions. Higher oil prices have lifted earnings expectations for energy companies. But technology has been the larger driver, especially in the semiconductor industry, which supplies the chips, memory and equipment used to build AI infrastructure.

Upwards earnings revisions in technology companies can be traced to capital spending. Forecasts for capital expenditure of the largest technology companies have been revised up repeatedly, and expectations for this year are now well over double what they were little more than a year ago.

The sums are large, with annual spending by the five largest companies now running into the hundreds of billions of dollars, comparable to the output of a mid-sized economy. Of course, one company’s spending is another company’s revenue, and the technology companies supporting the AI build-out are on the receiving end.

Earnings are not the same as cash

This demonstrates why earnings should be read alongside cash flow. The biggest spenders generate substantial operating cash flow, but they are reinvesting almost all of it back into the AI build-out.

On current forecasts, their free cash flow, the cash left after capital spending, will fall sharply and even turn negative for a period before recovering later in the decade. Meanwhile, the suppliers receiving that spending are seeing free cash flow rise significantly.

Both groups can report strong earnings, but the durability and character of that growth differ. Where the cash is going, and how long the spending lasts, matter as much as the headline profit figures.

The risk of a narrow set of drivers

When one theme accounts for a large share of upgrades, aggregate figures can mask how narrow the underlying drivers are. AI's influence is not confined to technology and has reached industrial companies through the demand for electrical equipment, construction and power infrastructure.

Earnings growth that leans heavily on a single theme is more exposed to changes in that theme, whether from shifts in spending plans, regulation or the pace of adoption. Diversifying across sources of earnings growth is the natural response.

Conclusion

Uncertainty is inherent to earnings forecasting. Forecasts are meant to be revised; the focus should be on the drivers of those revisions and on the conditions required for forecasts to be met. 

The extraordinary path of company earnings this year has three key lessons. First, forecasts made at the start of a year are provisional rather than authoritative, and the biggest driver of the year may not be on the original list at all.

Second, the direction and scale of changes to expectations can tell investors as much as the forecast itself. Third, with earnings growth now expected to be far stronger than in January, there is more room for disappointment, particularly if inflation and interest rates stay higher for longer.

The dominance of the AI theme over the continued upwards earnings revisions for 2026 and 2027 calls, in our view, for technology exposure selected with an awareness of where the cash is going.

Matthew Page is co-manager on the Guinness Global Equity Income and Guinness Global Innovators strategies. The views expressed above should not be taken as investment advice.

A balanced portfolio of 60% equities and 40% bonds should make investors 7% per year, according to JP Morgan Asset Management’s Long Term Capital Market Assumptions report.

The study found three main themes shaping the world today that are expected to persist into the future: economic nationalism, technology adoption and capital rewiring. Each impacts different asset classes in unique ways.

Economic nationalism is the understanding that governments need to influence economic activity in the current political climate, in which the international landscape has changed significantly.

The report noted that the “reliability of traditional allies and the prospect of supply chains being weaponised” have caused governments to re-evaluate which strategic activities need to be brought back in-house, such as defence spending and energy.

Turning to the second theme – technology adoption – the report found that the emphasis has shifted from the creation of AI to its integration into broader corporate life.

“Since 2023, we have incorporated incremental upgrades to our total factor productivity (TFP) and capital growth assumptions because of AI’s potential impacts. This year, we have rebuilt our AI methodology to reflect growing evidence of the technology’s impact and faster-than-expected adoption,” the report read.

Lastly, capital rewiring will result from both economic nationalism and technology adoption as both governments and corporates increase spending. Put simply, it means money will move around between sectors and geographies, meaning a broadening out of returns.

“Some of the rewiring will be forced or encouraged. Governments may want to play a role in redirecting capital more actively through a combination of carrots (tax incentives) and sticks (home-bias mandates). ‘Make at home’ and ‘invest at home’ government policies are proliferating,” the report said.

Below, Trustnet looks at how JP Morgan Asset Management experts expect these themes to impact different asset classes.

Government bonds

Economic nationalism should increase the neutral real rate as it is likely to be inflationary in the near-term, before eventually proving disinflationary later down the line.

“Investment in national imperatives – such as energy security, defence and grid and infrastructure upgrades – increases debt loads and tends to push real rates higher,” the report noted, while populist policies, from higher minimum wages to restricted immigration, constrain the labour force and raise costs.

“The result is a steeper curve, with more issuance and a higher inflation risk premium embedded at the long end,” the report said.

Capital rewiring lifts yields through competition for people’s cash. Meanwhile, the normalisation of yields outside the US, driven higher by domestic spending, should erode the real yield advantage of US treasuries versus other countries’ debt.

“We raise our forecast for long-end US yields relative to other developed markets partly because US investment is being repatriated into domestic markets and partly because of higher inflation risk premia,” the report read.

“Still, starting yields and inflation forecasts – as well as forecasts for dollar depreciation – mean a narrow spread of real returns across developed market bond markets and the potential for capital to diversify further across sovereign markets.”

Lastly, technology adoption raises potential growth and the neutral real rate, lifting cash rates as a result. Over the long term, the effects of technology adoption on inflation likely should be flat, but in the short term there are inflationary risks as capital expenditure and power demand squeeze supply chains.

“Later in our horizon, the productivity boost we expect presents a disinflationary risk,” the JPMAM analysts said.

Overall, using US treasuries as a barometer for developed market bonds, the firm expects a long-run average return of 4.6% over the next 10-15 years from government bonds.

Public market return assumption changes vs prior edition of report

Source: JP Morgan Asset Management

Credit

Staying with the US, investment grade bonds are expected to make 6.1% over 10-15 years, while high-yield debt is slightly higher at 6.7%.

“In credit, the building blocks for our forecasts are the underlying sovereign yields, credit spreads and the expected impact of defaults and recoveries,” the report read.

However, the three main themes of the next decade increase dispersion. Economic nationalism and capital rewiring, for example, should generate a structural and growing demand for yield as investors seek income in a higher rate world.

“This hits credit subsectors unevenly,” JPMAM analysts said. They raised both the default and the average spread assumptions for loans where issuance tied to software and AI has surged over the past five years.

High yield is a “more constructive story”, as index quality has improved, with less AI- and software-related issuance and persistently low defaults. In particular, the BB share of the index has risen, lowering spread assumptions and leading to the upgrade of US high yield returns.

Meanwhile, investment grade return expectations are also higher as issuance by hyperscalers should improve the quality and cash flow profile of the index, they said.

Equities

Among stocks, US large-caps are expected to make 7.5%, developed market ex US 7.6% and emerging markets 7.1%, as the chart below shows.

Equity return expectations by region

Source: JP Morgan Asset Management

Technology adoption is the main reason for optimism, with the ongoing capex surge, long-term productivity gains and better margins helping to drive a big re-rating in forecast US equity returns. The shift towards other developed markets should continue, however, as investors seek diversification.

“For US large-cap equity, we lift our long-term revenue growth assumption for the second year running to reflect growing optimism about AI’s revenue-generating potential. We also believe edge-case technologies, like quantum computing, could become feasible within our time frame due to AI advances,” the analysts said.

“We also upgrade our long-term return outlook for developed market equities ex US. The uplift to revenues and margins from tech adoption should be broader and less concentrated than in the US, but still meaningful.”

However, one area that may underwhelm is emerging markets, which represent a drag on performance to the overall equity expectations. In particular, the report highlighted Korea as a stock market that is heavily concentrated in one area within the AI economy: chipmakers.

“These firms win during the AI capex surge, but as capacity is built to meet demand, their profits fade,” the report noted, which means today’s “supernormal profits” will “likely normalise”.

Savers with £10,000 in an account paying 2% could be £315 better off over a year by moving to the top one-year fixed rate, according to Moneyfactscompare.co.uk. The best deal available pays 5.15% (gross), against UK inflation of 3.5% in September. This means anyone with money in an account paying 2% is losing money, while the top payers are offering inflation-busting returns.

It is not just the top rate that is ahead, however. Moneyfacts counted 1,683 savings accounts that beat inflation, including 872 fixed-rate accounts and 425 fixed-rate ISAs. A year ago there were 978 such deals, when September inflation was 3.8%. In October 2024 there were 1,731, when it was 1.7%.

The top five-year bond pays 5.37%, compared with 2% in October 2021. On £10,000, that is about £1,950 more interest over five years.

Caitlyn Eastell, personal finance analyst at Moneyfactscompare, said volatile swap rates "have created uncertainty for borrowers [and] helped push fixed-rate bonds to their most attractive levels in years".

"Top fixed terms of one year or more have climbed above 5% for the first time since December 2023, giving savers a timely opportunity to secure a competitive return and protect themselves against falling rates in the future," she said.

Easy-access accounts, which allow withdrawals at any time, pay up to 4.89%, up from 0.65% five years ago.

“However, improvements across the market may not translate into better rates on existing accounts,” Eastell said. “Savers should regularly review what they are earning and compare alternatives, as loyalty to a provider does not always pay.”

The Moneyfacts average new savings rate is 3.78% gross, which, based on £10,000, is £28 ahead of inflation over a year, as the chart below shows. Since December 2025, the average has beaten CPI by less than one percentage point at each quarterly reading, and it fell below inflation in June and September 2025.

Interest and real gain on £10,000 saved for one year 

Source: Moneyfactscompare

Sarah Coles, head of personal finance at AJ Bell, said: “If you leave your money languishing with a high street bank earning next to nothing, higher inflation is going to be consuming the spending power of your savings even faster.

“It can be difficult to spot when you see interest being paid and you feel better off, but over time your savings are dwindling.”

Hargreaves Lansdown has launched the HL Money Market fund in collaboration with BNY Investments, responding to a 35% year-on-year rise in the number of clients holding money market funds.

The investment platform said the fund has an expected yield of 3.95% at launch and an ongoing charge of 0.06%. It said the charge is "the lowest ongoing charge in the UK retail market".

It is available exclusively to Hargreaves Lansdown clients, with same-day reinvestment and next-day withdrawals. BNY Investments will manage the fund's portfolio of short-term debt issued by governments, banks and companies with strong credit ratings.

Retail investment in money market funds reached a record £6.9bn across the market in 2025, with a further £3.8bn in the first half of 2026, according to the Investment Association.

Hargreaves Lansdown said an estimated £600bn is held in "excess cash" in the UK, much of it earning less than 1% in high-street savings accounts. The four biggest banks pay savers an average of 0.95%, according to the platform.

Only 31% of Cash ISA holders are aware of money market funds, IA research found. But 64% of Cash ISA holders and 81% of existing investors said they would consider investing once given a clear explanation.

Doug Abbott, chief product officer at Hargreaves Lansdown, said: "More than 25 times as many HL clients invest in money market funds as they did five years ago and they're set to become even more popular once the new Cash ISA rules come into force next April.

"Money market funds have long been a core cash management tool for institutions, which have historically had cheap, easy access. Through our collaboration with BNY Investments, we’ve opened up these benefits to our clients."

From April 2027, savers who have used their full £12,000 Cash ISA allowance will be able to hold money market funds within a Stocks and Shares ISA, under the new rules.

HL data also shows that one in five clients who open a Cash ISA go on to open an investment account within six months.

Pensioners are set to receive just shy of £500 extra in their state pension next year after September’s consumer prices index (CPI) inflation print came in above expectations at 3.5%.

The state pension increases each April by the higher of 2.5%, inflation or average earnings. These figures are based on September figures to allow the government time to prepare.

Claire Trott, head of advice at St. James’s Place, said: “With today’s inflation figure coming in at 3.5%, below the 3.9% wage growth figure published in September, earnings are set to determine the triple lock as expected. This puts the full new state pension on course to rise by around £490 a year to just over £13,030 next April.”

It is the first time the state pension has overtaken the personal allowance, which currently stands at £12,570, and means retirees will get £250.70 a week.

The government has confirmed that once the state pension clears the frozen personal allowance, pensioners whose sole income is the state pension will not need to fill out a tax return, with any tax owed taken automatically.

It has gone further by suggesting that any income tax for these retirees could be waived, although this has yet to be confirmed. Regardless, pensioners who draw on other sources of income, such as workplace or private pensions, savings or earnings from work, may find themselves with a higher tax liability as a result, said Trott.

Andrew King, pensions specialist at wealth management firm Evelyn Partners, noted that more clarity is needed from the upcoming Budget.

If those who receive the state pension alone are not charged income tax, “that could be viewed as unfair by those who do have a smaller state pension but additional private income and so have to pay the tax,” he said.

What we do know for certain is that prime minister Andy Burnham and chancellor John Healey have plans to row back the triple lock on the state pension, reducing it to a double lock. This will remove the average earnings portion of the calculation.

However, this will only come into effect from 2030, meaning it is contingent on Labour winning the next general election.

Jon Greer, head of retirement policy at Quilter, said: “While that new framework is likely to be less generous than the current system, if earnings continue to outpace inflation over the next few years, pensioners could still benefit from further meaningful increases before the reforms take effect.

“In that sense, the impact of the earnings link will continue to be felt long after the current version of the triple lock has gone.”

The state pension remains a “crucial source of income”, with Quilter’s Retirement Lifestyle Report showing it accounts for almost a quarter of retirement income on average.

Rachel Vahey, head of public policy at AJ Bell, said: “This isn’t the end of tough decisions on the state pension,” with the state pension age also under consideration. The government has committed to upping the age from 67 to 68, but the timeline is undecided. Although currently scheduled for the mid-2040s, it could be brought forward.

“Deciding when to bring forward the move in the state pension age from 67 to 68 is still hanging over this government. If the government wants to bring forward this change to the late 2030s, it will need to make the call soon to give people at least 10 years’ notice in line with convention for increasing the state pension age,” she said.

UK inflation jumped higher in September to 3.5% with experts warning that the larger-than-expected increase is bad news for Britons.

The consumer prices index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% the previous month. On a monthly basis, the inflation print rose by 0.4% in September 2026.

Danni Hewson, AJ Bell head of financial analysis, said: “It’s exactly the news households and the chancellor knew was coming but rather hoped wouldn’t actually arrive.

“Just as nights get colder and pressure mounts on budgets, a larger than expected jump in the headline rate of inflation is an unwelcome guest – and one we hoped wouldn’t return.”

The main driver of price increases was a sharp increase in fuel inflation, which jumped 29.8% (having risen 23% in August). The expiry of the government’s temporary VAT cut on family event tickets also pushed cultural services’ inflation higher, while airfares were also higher last month.

David Rees, head of global economics at Schroders, said: “Britain is facing a perfect storm of imported inflation pressures.”

The reading follows Tuesday’s labour market figures, which showed the unemployment rate fell to 4.7% in the three months to August.

Neil Birrell, chief investment officer at Premier Miton, said: “After good news on employment in the UK, we’ve got strong inflation data for September, which is less good news.”

What this means for the Bank of England

Andrew Wishart, senior UK economist at Berenberg, said it “probably guarantees a 25bp interest rate hike at the Bank of England’s 5 November meeting”, an opinion that was echoed by others.

“The upside surprise to inflation paired with resilient economic activity and a stable, if subdued, labour market means that the benefits of raising interest rates outweigh the risks,” he said.

“To prevent the BoE from following up its likely 5 November move with a second rate hike at the subsequent meeting on 4 February, energy prices must fall or activity must soften.”

Jeremy Batstone-Carr, European strategist at Raymond James, added that today’s figures, combined with Tuesday’s unemployment figures, “should prove sufficient support for the first base rate hike of 2026” next month, while Rees said an interest rate hike “now looks like a done deal”.

Three members of the Monetary Policy Committee voted in favour of raising rates at the most recent meeting, with Hewson suggesting that the latest CPI print will be enough to “nudge at least a few MPC members off the fence” and towards a rate hike.

With an interest rate hike at next month’s meeting almost a certainty, Rees suggested all eyes will turn to the Budget on 28 October, as this could have big implications for inflation and the Bank of England policymakers.

“Expectations are low, but any significant fiscal boost would raise the risk that imported inflation becomes more persistent and force the BoE into a longer tightening cycle,” he said.

Fidelity International has launched an active ETF range designed to cushion equity losses during market downturns while retaining growth potential, to help investors stay in the market throughout the cycle.

The Dynamic Buffer range launched with the new Fidelity Global Equity Dynamic Buffer UCITS ETF and the Fidelity US Equity Dynamic Buffer UCITS ETF. Both will have an ongoing charges figure of 0.5%.

Both combine Fidelity's Research Enhanced equity approach with a systematic downside buffer target. The targeted level of downside buffer adjusts gradually as markets move and is not guaranteed.

Fidelity also considers ESG factors when assessing investment risks and opportunities for the range.

Fidelity Global Equity Dynamic Buffer UCITS ETF and Fidelity US Equity Dynamic Buffer UCITS ETF listed on Borsa Italiana and Xetra today (21 October 2026). Further listings follow on the London Stock Exchange on 22 October 2026 and the SIX Swiss Exchange on 26 October 2026.

Neil Davies, head of ETFs at Fidelity International, said: "Market corrections are a recurring feature of equity investing and can occur without warning. For investors, the challenge is how to navigate these periods without losing sight of their long-term investment objectives.

"Our Dynamic Buffer range has been designed with this in mind, combining Fidelity's research-driven equity approach with a systematic downside buffer target. It brings a new type of equity solution to our active ETF range, broadening the choice available to clients as we continue to grow our offering."

The launch follows Fidelity's Equity Enhanced Yield ETF range earlier this month and takes Fidelity's active ETF offering to 30 products.

Sustainable funds – those prioritising investing in companies with strong environmental, social and governance (ESG) credentials – have fallen out of fashion in recent years as investors have shifted their focus toward more immediate concerns, such as geopolitical fragmentation, sticky inflation, rising interest rates and slowing economic growth.

Yet demand has not dried up entirely, with some investors continuing to back funds investing in companies with strong sustainable as well as financial fundamentals.

Investor appetite is, however, more selective, with the £3.7bn Royal London Sustainable World Trust fund one of the most-researched funds on Trustnet over the past 12 months.

The multi-asset vehicle is co-managed by FE fundinfo Alpha Manager Mike Fox, alongside George Crowdy, Sebastien Beguelin and Daphne Tsang, screening companies with strong ESG-related standards. Prospective holdings are expected to pass both a sustainable and financial assessment, with top holdings in the portfolio including Amazon, TSMC and Standard Chartered.

With the fund dating back to 2009, Rob Morgan, chief analyst at Charles Stanley, noted it “built a reputation long before sustainable investing became de rigueur”.

Then, when sentiment toward sustainable funds began to sour in 2022 and mass outflows kicked in, the fund managed to adapt to the new market regime while maintaining strong returns.

It has posted first quartile returns in the IA Mixed Investment 40-85% Shares sector over one, three, five and 10 years to the end of September 2026, gaining 187.5% over the decade.

Performance of the fund vs sector over 10yrs

Source: FE Analytics

Darius McDermott, managing director at FundCalibre, said: “The fund proves investors do not have to sacrifice returns for their principles – sustainable funds have had a difficult time but savers’ appetite for money that does more than grow but also does some good for the world has not gone away.”

Ben Yearsley, director at Fairview Investing, said he regularly uses this fund for non-sustainable clients as well as sustainable ones, “as it’s good enough to merit inclusion in ‘normal’ portfolios”.

However, investors should not have all their eggs in just one basket, no matter how impressive the fund’s performance has been. As a result, Trustnet asked fund selectors to suggest alternative sustainable funds for those who want to maintain a commitment to sustainability-focused objectives within their portfolios.

Staying within the IA Mixed Investment 40-85% Shares sector, McDermott first suggested the £1.7bn Liontrust Sustainable Future Managed fund.

The fund – which is co-managed by Peter Michaelis and Simon Clements – has had a rockier time of it as its quality-growth and mid-cap bias “fell out of fashion”. It sits in the fourth quartile for returns over five years but maintains a first-quartile return over 10 years, gaining 107.7% over the full decade, showing that its recent woes have been compensated for over the long term.

This volatility has made it more unpopular among investors, as it logged £321.8m in outflows in the first half of this year. McDermott confirmed this “makes it the contrarian choice”.

However, across discrete annual calendar returns, the Liontrust strategy has also logged some stronger years – for example, it limited losses to 0.5% in 2018 while Royal London Sustainable World Trust lost 3.1% and the sector average was a 6.1% loss.

“This fund takes a similar thematic approach [as the Royal London strategy], backing companies benefiting from long-term shifts such as better healthcare, cleaner energy and greater efficiency, with a meaningful bond allocation,” McDermott said.

Current themes in focus include resource efficiency – such as energy usage and water management – alongside affordable healthcare and enhanced digital security.

McDermott also suggested Rathbone Greenbank Strategic Growth, which is co-managed by David Coombs and Will McIntosh-Whyte and has almost £260m in assets.

Similar to other sustainable funds, it has a bias away from less sustainable sectors, such as oil and gas, defence and mining, while targeting technology, healthcare and industrial names across eight sustainable development categories which link to the UN Sustainable Development Goals, including energy and climate, health and wellbeing and innovation and infrastructure.

Alongside equities and bonds, the fund also holds alternatives, such as gold, which McDermott argued makes it a more diversified option for investors’ portfolios. “It should also therefore be less volatile,” he said.

Over five years, the fund has logged a volatility of 8.5% versus 12.6% for Royal London Sustainable World Trust. “The trade-off is it is unlikely to keep pace in strong equity markets,” he said.

Indeed, its roughly 60% allocation to equities is the lowest of all funds mentioned. This has weighed on performance, with Rathbone Greenbank Strategic Growth logging one of the weakest returns over five years at 8.4%.

Meanwhile, Yearsley suggested the smaller £88.5m CT Sustainable Universal MAP Growth fund as a potential lower-cost alternative, with an ongoing charges figure (OCF) of 0.39% versus 0.77% for Royal London Sustainable World Trust.

Managed by Eloise Robinson since late 2024, the fund – which sits in the CT Sustainable Universal Multi-Asset suite launched in 2019 – invests in companies providing solutions to ESG-related challenges, including energy transition, resource efficiency and sustainable infrastructure.

The suite applies a tri-pillar approach to investing: it ‘avoids’ companies that don’t align with ESG criteria, such as fossil fuels; ‘invests’ in companies deemed to be making a positive and sustainable contribution and ‘improves’ portfolio holdings by engaging with companies on best practice and management of ESG risks.

To make assessments of company eligibility and performance, the management team utilises international frameworks such as the UN Sustainable Development Goals.

Similarly to the Royal London strategy, the fund counts hyperscalers and AI-related plays among its top 10, such as Microsoft and TSMC, alongside more defensive names across healthcare (Eli Lilly) and financials (Mastercard).

Morgan looked away from mixed asset funds, suggesting Ninety One Global Sustainable Equity, which sits in the IA Global sector and is co-managed by Stephanie Niven and Miles Hamilton.

“The fund favours quality-growth businesses, has a relatively concentrated portfolio and builds positions around long-term sustainability themes,” Morgan said.

However, unlike the Royal London Sustainable World Trust, the £183.7m Ninety One strategy has struggled, sitting in the third or fourth quartile of the IA Global sector over one, three, five and 10 years, gaining 145.4% over the decade.

The performance gap is largely explained by the difference in mandate. Ninety One Global Sustainable Equity has stricter sustainability constraints, specifically investing in companies that contribute to positive environmental change through sustainable decarbonisation.

It has adopted the Sustainability Impact under the Financial Conduct Authority’s (FCA) SDR rule, which requires funds to demonstrate real-world positive sustainability outcomes from its investments.

Royal London Sustainable World Trust, by contrast, has adopted the broader Sustainability Focus label, which requires funds to invest in companies making a positive contribution to one or more sustainability themes.

“While Royal London Sustainable World Trust is perhaps a more pragmatic sustainable fund, Ninety One Global Sustainable Equity could be seen as the purer impact strategy,” Morgan said.

Alternatives could stage a comeback as experts worry about the correlation of equities and bonds. But while commodities, cash and private markets have all been in the headlines in recent years, one area that could be overlooked is activism.

In the investment trust world, there are companies that buy into other investment trusts whose shares trade below the value of their assets, pushing the boards to sell assets or hand cash back to shareholders.

These trusts can earn a place in portfolios, according to Benjamin Newton, investment manager at Credo, as a way to “harvest the discount anomaly” in the investment trust sector.

“Returns come mainly from discounts narrowing and from events such as asset sales, mergers, tender offers or wind-downs, rather than from market direction,” Newton said. “That gives them diversifying, partly idiosyncratic, return drivers”.

The case to invest is strongest when discounts are wide and boards are under pressure to act, which he described as broadly today’s environment. Alternatives – particularly property, infrastructure and renewables – “continue to trade well below the value at which their assets could be sold”, he continued.

The pool of wide discounts has shrunk, though. Across the whole Association of Investment Companies (AIC) universe, the average discount has roughly halved from almost 20% in late 2023 to around 10% at the end of August, according to analysis by Kepler, with the discount of equity-focused trusts back in single-digit territory.

Josef Licsauer, research analyst at Kepler, said boards played their part: “Boards have become far more active: buying back shares, offering tenders, merging for scale, cutting fees and rethinking dividend policies, often with no activist on the register at all.”

Some of that action, however, was prompted, at least in part, by activist pressure, Licsauer said, and much of the recent activist attention has had to move to the segments of private equity and alternatives trade where discounts are still at 20% or more.

But for Thomas McMahon, head of investment companies research at Kepler, the return of activist trusts still depends on the market more than one might think. High interest rates, for example, dampened demand across many trust sectors from 2022, particularly alternatives, and share prices were weak as a result.

So should investors bother with the asset class?

What an end investor gets from an activist approach depends on which one they pick and the method employed to extract gains. AVI, where Tom Treanor is head of research, works through private dialogue and practical proposals first and uses public pressure only where needed, Licsauer said.

Meanwhile, Saba Capital, the New York hedge fund, has a more aggressive, requisition-based approach that aims to expel old management and gain control of the assets: this year, it secured control of Edinburgh Worldwide Investment Trust and Impax Environmental Markets.

Other strategies include MIGO Opportunities (MIGO), co-managed by Treanor, and Achilles Trust, run by Robert Naylor and his team at Harwood. The former engages with boards quietly across the whole investment trust sector, while Achilles concentrates on trusts that own alternative assets and takes a harder line.

MIGO is a diversified ‘discount opportunities’ fund, Newton explained, that could sit as a core holding for an investor who does not already run this kind of strategy; Achilles is a special-situations satellite; it has a handful of positions where the outcome depends on campaigns succeeding and on a cash exit being delivered.

For investors considering how much and which to hold, Newton said Achilles “suits a small, complementary allocation alongside a broader portfolio”. Credo itself holds a small position in Achilles, preferring it over MIGO because Credo already buys trusts on discounts where it sees a catalyst, a specific event that could close the gap, so MIGO is likely to overlap with its existing portfolio.

MIGO’s record under its current approach is also short. Co-managers Charlotte Cuthbertson and Treanor began concentrating the portfolio on alternatives in June 2025. Its net asset value (NAV) rose 19.4% in the 12 months to 5 May 2026, which McMahon said reflected a buoyant equity market.

“Wide discounts mean the real benefits of the strategy have yet to be felt,” he said.

Looking at shorter time frames, MIGO’s NAV total return was 3.9% in the fourth quarter of 2025 against 3.4% for the MSCI AC World index. In the first quarter of 2026 MIGO’s NAV fell 0.2% while the MSCI AC World index lost 1.4%.

Performance of fund against index and sector over 1yr

Source: FE Analytics

McMahon added that, since 2022, although equity markets have done well, MIGO has lagged, as high interest rates dampened demand for alternatives. He also flagged concentration as the main risk, noting that “corporate activity is unpredictable and may disappoint in significant individual positions”.

Even so, he said “crunch time is rapidly approaching for the alternative assets sectors”, and that the managers’ approach can deliver good returns “even if markets are weak, as so much of the value is in the underlying discounts”.

Achilles has less history to judge. Newton described it as young, concentrated and harder to trade, and said those traits are why Credo keeps the position small. It is for experienced investors comfortable with campaigns that either succeed or fail.

“Investors are essentially backing the Harwood team’s record in delivering realisations, notably at Hipgnosis Songs, Round Hill Music and Urban Logistics,” he said.

He also pointed to how Achilles is paid: “Achilles charges its base fee on the lower of market value or NAV and earns a performance fee only if it returns cash to shareholders more than 10% above their entry price, so the manager is paid for delivering exits rather than for gathering assets”.

Finally, the Achilles trust trades on a wider discount than MIGO (6.5% versus 0.66%). Its board is buying back its shares and holding a continuation vote in 2027, as manager Robert Naylor said here.

The portfolio will be able to offer to return capital to investors, Newton said, once one of its main deals, Spire Healthcare, potentially closes later this year or early in 2027.

Between 1975 and 1979, inflation averaged about 16% a year in the UK and about 8% in the US. Ten-year gilts yielded 13.2% on average and US treasuries 8%. Once rising prices were taken into account, lending to the government was a lousy proposition.

Then the economic regime began to change. UK inflation peaked at 21.8% in May 1980, and US inflation at 14.8% two months earlier. Bond yields topped out about 18 months later, at 16.3% on 10-year gilts and 15.8% on treasuries. A multi-decade bull market in bonds followed.

Bull market in bonds from early 1980s to 2020 – US and UK 10-year government bond yields

Source: Schroder Diversity Real Return Team, LSEG Datastream, September 2026.

By 2020 it had run out of road. Ten-year gilts yielded just 0.1% and treasuries 0.5%. Global government bond yields reached their lowest level in more than a century of recorded history. Backward-looking returns were strong.

On a forward-looking basis, however, there was scant reward on offer for even patient investors. With yields below zero after inflation, bonds were once again certificates of confiscation and investors had a great deal to lose if growth or inflation recovered. Both did, and bond prices fell sharply.

Six years on, the market presents a different opportunity. Ten-year gilts now yield about 5.5% and treasuries about 5.3%. That provides a positive real return, with a modest cushion.

That is not to say the backdrop is benign. Inflation is uncomfortably high and likely to rise into 2027. The US fiscal picture has become a structural maths problem, with large and persistent deficits and no simple solution.

Meanwhile, protectionist policies that prioritise national interests and economic security over 'free' market economic growth are driving changes to global trade agreements, supply chain management and access to commodities. Oil prices are higher as a result.

Paradoxically, running economies 'hot' – tolerating higher inflation in pursuit of stronger growth – may prove the necessary long-term answer to these problems, even if it causes trouble along the way. Economic and market conditions are ostensibly positive but feel unstable. This is also why government bonds are out of favour.

That said, as much as fundamentals matter, so do valuations. And bond prices have adjusted materially in recent months.

One old rule of thumb we have always found instructive is, over the long term, government bond yields should sit roughly in line with the trend rate of nominal GDP growth.

When yields are above that level, bondholders are being fairly paid for the conditions they face. Yields below it are generally less constructive. In the UK, trend nominal growth is between 3.5% and 4.5%, and a little higher in the US. Against that benchmark, yields at or above 5% look adequate.

GDP is, of course, backward-looking, while markets price the road ahead. Yet when market pricing is weighed against what the future may hold, the risk-reward looks better than it has for some time.

Nominal UK GDP growth (YoY) vs 10-year UK gilt yield

Source: Schroder Diversity Real Return Team, Bloomberg, September 2026.

Start with inflation. Cyclical forces bring upside risks to inflation, but with them downside risks to real growth. This equilibrium could resolve higher, as it did between 2021 and 2023.

Missing today, however, is the cocktail that fuelled that episode: rapid money supply growth, fiscal expansion, excess household savings and pent-up demand. Artificial intelligence is a bit of a wildcard on the productivity side, but we would not form a base case around a step-up in nominal GDP growth on a multi-year basis from current levels.

Then there is monetary policy. Central banks look set to tighten, but the market is already pricing in 100 basis points of rate rises in the UK by the middle of next year and 75 basis points in the US. That raises an obvious question: if the Bank of England were to raise rates four times, could the UK economy handle it, and for how long?

Finally, consider the role bonds play. A shift from negative to positive equity-bond correlations has belatedly caused investors to question whether bonds still belong in their portfolios.

However, giving up on the asset class offering any utility under risk-off conditions is a bit like closing the barn door after the horse has bolted. Disinflationary and even deflationary outcomes remain possible over the medium term. For government bonds, the horse has returned to the stable, providing optionality under that scenario.

None of this calls for a strategically bullish view on government bonds and duration. But from a tactical perspective, the landscape is shifting.

It is worth putting some numbers on this. An investor who bought 10-year gilts in August 2020, when yields were at their all-time low, would earn a total return of 0.77% over 10 years, assuming a static reinvestment rate. At today's yield, the same assumptions would produce a total return of close to 70%. That is a sizeable difference.

Regimes change, and so do valuations. The job is to adapt.

Robin McDonald is a fund manager and head of multi-manager at Schroders. The views expressed above should not be taken as investment advice.

Investment trusts have outperformed their open-ended ‘sister’ funds in almost nine in 10 cases, according to data from the Association of Investment Companies (AIC).

In 28 out of 32 cases (88%) where an investment trust and an open-ended fund have had the same fund manager for the past 10 years, the investment trust has outperformed.

On average, investment companies with a sister fund added an extra £37 per £100 invested to the total return over a decade, or an additional 1.7 percentage points per year, based on figures to the end of September.

Over five years the figures dropped, with 29 out of 40 trusts beating their broadly identical open-ended alternative with an average gain of £8 (or 1.3 percentage points per year).

This rose over shorter timeframes, however, with 33 out of 40 winning over three years and 34 out of 41 over 12 months.

Nick Britton, research director of the AIC, said: “It’s good to see investment trusts’ natural advantages help managers to generate strong performance over the past decade.

“Being able to gear is clearly helpful, as is the flexibility to invest in less liquid assets. With investment trusts, managers can also pick their moment to buy and sell investments, which isn’t always possible with funds that have to follow investment flows.”

Trusts that beat their funds

Looking at the performance of individual fund pairings, perhaps the clearest example of this is the BlackRock World Mining fund and investment trust.

Both are managed by Evy Hambro and Olivia Markham and invest in the shares of mining stocks from around the world. They have performed phenomenally well over the past decade, both sitting in second place of their respective Investment Association (IA) and AIC sectors.

However, the trust has eclipsed its fund partner, up 381.7% versus a 252.1% gain for the open-ended option, a gap of almost 130 percentage points, as the below chart shows.

Performance of trust vs fund over 10yrs

Source: FE Analytics

Two more examples come from the Baillie Gifford suite. Roderick Snell manages both the closed-ended Pacific Horizon trust and open-ended Baillie Gifford Pacific fund. Both are the top performers in the IT Asia Pacific and IA Asia Pacific Excluding Japan sectors, with the trust up 351.5%, compared with the fund’s 258.8% rise.

Meanwhile, Edinburgh Worldwide and Baillie Gifford Global Discovery are both global small-cap portfolios run by a team including Douglas Brodie, although he is joined by different co-managers on the two. The former is up around 167%, while the latter has made just 55.9% over the past decade.

Several trusts run by FE fundinfo Alpha Managers beat their open-ended counterparts including those managed by Fidelity’s Alex Wright, Invesco’s Stephen Anness and Schroders’ Robin Parbrook.

The funds bucking the trend

While trusts were broadly better performers, there were some exceptions. The largest differential came from the tech space, where Polar Capital Technology couldn’t keep pace with the open-ended Polar Capital Global Technology.

Both are run by Ben Rogoff and his team and have been hugely successful for investors over the past decade, benefiting from a tech rise during the Covid pandemic and more recently the AI boom of the past few years.

However, while the trust has made investors some 679% over 10 years, the fund is up even more – 798.4%.

Performance of trust vs fund over 10yrs

Source: FE Analytics

There were only three other instances where the fund beat the trust. Janus Henderson Asian Dividend Income beat Henderson Far East Income by 22 percentage points over the decade, while BlackRock UK Income was 16.7 percentage points ahead of the BlackRock Income And Growth Investment Trust.

WS Lindsell Train UK Equity was also ahead of the Finsbury Growth & Income Trust, although there was less than 2 percentage points in it.

Chancellor John Healey will not hike capital gains tax (CGT) in the upcoming Budget on 28 October, according to reports.

It had previously been rumoured that he would look to increase CGT to bring the tax in line with income tax but Healey has ruled out such a policy change, Treasury sources told the FT and The Times.

The prospect of changes to CGT rules had caused some consternation, particularly among investors. Facing a fiscal black hole, rising gilt yields recently have added pressure to the Treasury, with interest payments now much larger on newly issued debt.

Labour’s manifesto promised not to raise income tax, VAT or National Insurance, so capital gains was viewed as tax that could be used to increase the country’s coffers.

Rob Morgan, chief investment analyst at Charles Stanley Direct, said ruling out a further increase to capital gains tax will provide reassurance to business owners and investors ahead of the Budget.

“The decision suggests the Treasury is increasingly focused on the risks of behavioural change rather than just the headline rate. Higher CGT rates can encourage investors to delay asset sales, potentially reducing the amount of tax ultimately collected,” he said.

“It also reflects broader concerns about economic competitiveness. At a time when the government is trying to encourage investment and growth, another rise in CGT could send the wrong message to entrepreneurs, business owners and investors.”

Michael Healy, chief executive of IG Consumer, said the decision to rule out CGT reform was “welcome” and sends a “much-needed” positive signal to investors.

Investing should be for the long term, he argued, but this requires confidence that the rules under which you are investing are not being changed all the time.

“Over the past decade, investors have faced repeated changes to investment taxes and rules,” he said, which could have put some people off investing. But it is not just changes that come into force that create uncertainty – investors also have to navigate proposals that are subsequently changed or dropped.

“The government must now build on this by committing to a stable investment tax regime that gives more people the confidence to invest for the long term. This is also one of the best ways the government can reduce reliance on the state and strengthen the UK’s fiscal position,” he said.

Other CGT options

Sarah Coles, head of personal finance at AJ Bell, said taking CGT changes off the table at the upcoming Budget will turn people’s attention to other potential policies.

While he has backed down from upping rates, Healey could cut the annual exempt amount again. Coles described this as “fraught with so many difficulties it might not be something the chancellor wants to rush into”.

In particular, she noted that it could also put people off investing outside of tax wrappers such as ISAs and SIPPs.

Another change that has been mooted before is to make CGT payable on death, a suggestion from the now-defunct Office of Tax Simplification.

“This isn’t an easy or straightforward change, so the chancellor is unlikely to be in a rush to embrace it if he has other options,” said Coles.

“It would mean that rather than gains resetting on death, estates could face a horrible tax bill. Those who hoarded assets to get around the current tax rules could face enormous bills at the worst possible time. And those who were planning to do so would need a complete rethink.”

It would also raise issues around the blurred lines between CGT and inheritance tax, with a double hit to estates likely to be politically unpopular and met with “serious opposition”.

Some 82% of financial advisers expect to increase their use of model portfolio services (MPS) over the next two to three years, according to research from Nedgroup Investments.

Of those planning to increase their use of MPS, 34% said they would do so significantly while 48% expect a smaller increase. Just 4% of advisers overall anticipate reducing their use of MPS, and 14% expect it to stay about the same over the period.

Source: Nedgroup Investments

Among independent financial advisers (IFAs) surveyed, all said they already use MPS as part of their client offering, with 64% doing so for most of their clients.

Third-party MPS accessed via platform was the most common delivery method, cited by 24% of respondents. MPS run by a discretionary fund manager (DFM) and multi-asset funds were each used by 22%, while 18% relied on in-house model portfolios and 14% used bespoke DFM portfolios.

Source: Nedgroup Investments

Apiramy Jeyarajah, chief commercial officer at Nedgroup Investments, said the findings show MPS will become “an even more integral part” of the adviser market in the coming years.

“With over 80% of advisers expecting to increase their use of MPS over the next two-to-three years, we can see growing confidence in outsourced investment solutions, as firms look to deliver consistent client outcomes, improve efficiency and enable advisers to spend more time where they add the greatest value: helping their clients achieve their financial goals,” she said.

“It’s significant that every adviser surveyed is already using an MPS in some capacity, with two-thirds using them heavily for most of their clients. The direction of travel is clear, demand for scalable, professionally managed investment solutions will continue to grow.”

The survey was carried out by Censuswide among 100 finance professionals, with fieldwork conducted between 22 and 26 May 2026.

Investing in Taiwan and Korea has been a sure-fire way for emerging market and Asia funds to top their respective sectors over recent years, but some have managed to beat their peers without needing to lean too heavily into either country.

Both sectors have benefited from the AI boom, with Taiwan’s TSMC now the largest company in both the MSCI Emerging Markets and MSCI AC Asia Pacific ex Japan indices. Just behind are Korea’s big two: Samsung Electronics and SK Hynix.

The boom in these companies has led to exponential growth in the two markets, with the MSCI Taiwan and MSCI Korea indices up 217.3% and 164.4% respective over the past three years, far outpacing the more general emerging market and Asia benchmarks.

Performance of indices over 3yrs

Source: FE Analytics

The MSCI Emerging Markets index has a combined weight of 50.3% to the two countries, with Taiwan accounting for 28.9% and Korea 21.4%. This dips slightly for the MSCI AC Asia Pacific ex Japan index, with a 49.7% allocation split 28.6% and 21.1% respectively.

Yet it has not been imperative for funds to own these countries to make money, research by FE Trustnet has found. Of the 34 qualifying funds* in the top quartile of the IA Global Emerging Markets sector over the past three years, 10 are underweight both countries.

Pacific North of South EM Equity Income Opportunities had the lowest weighting to the two countries, with a combined 28.1% invested in Korean and Taiwanese stocks.

Run by Kamil Dimmich, Robert Holmes and FE fundinfo Alpha Manager Matthew Linsey, the portfolio has made 74.4% over the past three years despite its market underweights.

However, this is not to say the fund is against these markets. Korea is its largest country weighting, with Taiwan in third place. China is in the middle of the two. Samsung Electronics is its largest position at 3.2% of the fund, with SK Hynix also in the top 10, although both are much smaller than their index weightings.

It is the only income specialist on the list below. In second place, Ninety One Emerging Markets Equity has 16% in Taiwan and 18.4% in Korea, meaning its total exposure to the two stands at 34.4%. Its largest weighting is to China, where 24% of the portfolio is allocated.

The fund has been the second-best performer in the IA Global Emerging Markets sector over three years, up 100%. Managed by Archie Hart and Varun Laijawalla, it is rated by analysts at Barclays Invest who placed it on the bank’s best-buy list.

“We believe the team at Ninety One is one of a small number in the marketplace that has the breadth, depth, experience and expertise to navigate this space,” they said, noting that the long-term performance validates its process of buying high-quality companies that are attractively valued.

Source: FE Analytics

The most popular fund on the list among fund pickers, however, is Invesco Global Emerging Markets (UK), which is tipped by researchers at AJ Bell, Fund Research Centre and FundCalibre. It also appears in the Titan Square Mile Academy of Funds and the FE Investments Approved List.

It is run by a team of three including Alpha Managers William Lam and Charles Bond. Ian Hargreaves is also co-manager, although he is to retire next year, with Matthew Pigott and James Dermottroe replacing him. It has an impeccable track record, generating a top-quartile return over one, three, five and 10 years.

While Taiwan and Korea make up more than 50% of the emerging market benchmark, they are not far behind in Asia indices either.

Turning to the IA Asia Pacific Excluding Japan sector, of the 26 qualifying funds* from the peer group, just five are underweight both countries.

BNY Mellon Asian Income stood out for its willingness to be different. The fund has just 31.4% invested between the two countries, more than 9 percentage points less than any others on the below list.

Source: FE Analytics

Up 72.9% over three years, the fund is headed by Zoe Kan. It is heavily weighted to TSMC (9.4%) and Samsung Electronics (9%) but does not invest in much from Taiwan and Korea outside of these two large holdings.

Income funds dominated the list, with Schroder Asian Income and Jupiter Asian Income also underweight both countries.

The latter is up 91.7% over three years. It is run by Jason Pidcock, who used to run the BNY Mellon Asian Income fund before leaving the firm. He is joined by co-manager Sam Konrad.

It is heavily favoured by analysts, appearing on the best-buy lists of AJ Bell, Hargreaves Lansdown and FundCalibre, as well as Titan Square Mile and RSMR.

Hargreaves analysts said it is a “great way to access Asia’s exciting growth potential, along with a regular income”, noting that Pidcock has invested in Asian income for a long time – something “few other managers” have done.

One who has, however, is Richard Sennitt, who has been in charge of the Schroder Asian Income portfolio since 2001. It is backed by analysts at FE Investments, Titan Square Mile, RSMR and the Fund Research Centre, the latter of whom said Sennitt is a “highly experienced, Asian-trained fund manager” who is supported by a “very well-resourced team at Schroders”.

“As an access point for Asian yielding equities, we feel that the fund has proved its worth,” they said.

*Country weighting data is not available on FE Analytics for all funds in the top quartile of either the IA Global Emerging Markets or IA Asia Pacific Excluding Japan sectors. As such, the number of funds in this study is lower than the total number of portfolios in the top quartile of the peer group over three years.

Takeover bids have been an almost permanent talking point for UK fund managers over the past few years, as overseas buyers have put in record numbers of deals for domestic companies.

This has left some feeling “frustrated” or even “sad”, but there are also times when investors should welcome these deals, according to investment trust managers.

Since January 2023 there have been 166 bids completed on UK companies with a market capitalisation of over £100m, for a total value of £180bn, according to Peel Hunt research. In the same period, there have been just 11 initial public offerings (IPOs) for a total value of £6bn.

Number and value of bids over 3yrs

Source: Peel Hunt estimates

With UK companies cheap relative to other regions, mergers & acquisitions will only become more likely and IPOs less so, UK fund managers have warned.

Will Tamworth, manager of Artemis UK Future Leaders, revealed the fund has had 40 companies in its portfolio acquired since 2019.

He said: “This says third parties are taking a more positive view on the UK economy and the outlook for these companies than the public domestic market is. But it also reinforces the view that valuations aren’t just a little bit wrong – they are wrong by nearly 50%.”

He noted that this can be “frustrating” and is “not good for the UK economy or the UK market over the long term”.

Meanwhile, Job Curtis, lead manager of City of London Investment Trust, said five of the trust’s holdings have received takeover bids since 1 January of this year alone – all from overseas companies: Segro from Prologis, Schroders from Nuveen, Tate & Lyle from Ingredion Incorporated, Beazley from Zurich Insurance and Rotork from ABB.

The Peel Hunt research also pointed to other factors that make UK companies attractive acquisition targets for overseas bidders: the country’s openness to foreign buyers; increasingly international boards and shareholders who care less about where a company is listed; and the UK’s shrinking weight in global indices, which has fallen to 3.4% of the MSCI World from 6.5% around a decade ago.

Cashing in versus compounding

The growing number of takeovers is having an impact on trust managers’ ability to capitalise on compounding. Gareth Channon, manager of Aurora UK Alpha, said: “We don’t like [these takeovers] because we like to have investments that you can keep forever.”

He pointed to Apollo Global Management’s takeover of UK airline easyJet, which is set to complete early next year via a £7.15-per-share cash offer, equating to £5.7bn.

“It was trading on one-times enterprise value to EBITDA [earnings before interest, tax, depreciation and amortisation] – it was absurdly cheap,” Channon said.

“It has cash and it owns the planes, so it might [have gone for a huge] premium, but it still went for a cheap price, and the buyers are expected to make a lot of money – so we don’t like it, unless it’s us.”

However, Ken Wotton, manager of the Strategic Equity Capital, noted that there are times when a takeover can benefit UK managers.

“When there is a strategic exit at a multiple that we think effectively gives you tomorrow’s price today without the risk, then we are happy – it’s only frustrating when you get a company taken private at a 30% premium to a very depressed price,” he said.

Peel Hunt noted that the average bid premium has reached 45% so far in 2026.

Around a quarter of the names owned by Wotton’s Strategic Equity Capital trust have ended up being taken over since the end of 2020. He noted this is “not a surprising figure”.

“The companies we look for are ones which we think either have, or are building, strategic value. So they are attractive to other investors or private equity – and they are also trading at half price relative to companies elsewhere,” he said.

Meanwhile, Imran Sattar, lead manager of Edinburgh Investment Trust, admitted he gets “a little sad” when strong UK businesses get taken over, but took a similarly pragmatic view to Wotton, arguing it isn’t always such a bad thing as it means getting paid tomorrow’s price today.

He highlighted portfolio holding Rotork as an example, which was taken over by ABB at 506p per share – a 60% premium.

“I got three, maybe four years’ worth of compounding on day one, and that’s quite valuable for investors,” Sattar said. “So yes, you lose the power of compounding over several years, but you’re swapping it for strong returns today.”

Anyone unusually keen to feel anxious, depressed or even utterly terrified might wish to quietly leaf through the pages of the World Economic Forum’s Global Risks Report. This annual analysis of the threats facing our planet and its inhabitants invariably makes for sobering reading.

As if the sheer variety and scale of the challenges weren’t daunting enough, the WEF scans the horizon through the lens of interconnected causality. Such a framing underlines how the dangers we collectively face form a complex network of cascading and compounding interactions.

Like every edition before it, 2026’s report places great emphasis on the climate crisis. Environmental decline is directly or indirectly linked to nearly every other risk, including economic downturn, inequality and even cyber-insecurity¹.

“Climate action is caught in societal, political and economic crosswinds,” warns the report. “The growing divergence between rising demand for energy on the one hand and climate change and associated social realities on the other could come to a head in the coming years. Difficult, values-based choices will continue to emerge in the race between economic, political, climate and societal considerations.”

This sounds suspiciously like a polite way of saying we’re in an absolute mess. Both as citizens of the Earth and as investors, we might usefully ask who could be best placed to lead us out of it.

It seems futile to look to the world’s largest economy, at least under its current aegis. Re-withdrawing from the Paris Agreement, branding climate change “a scam”, espousing an ethos of “Drill, baby, drill!” – no, the US doesn’t exactly fit the bill right now.

So what about the world’s second-largest economy? Sceptics – including many investors – might scoff, but there’s good reason to believe China represents a far more convincing candidate.

Established leadership

Although the news went practically unremarked in much of the West, including the UK, China recently passed a major milestone in its retreat from fossil fuels. Solar energy accounted for 1,286 gigawatts of the country’s overall power generation at the end of July – three gigawatts ahead of coal².

While it could be viewed as a hair’s breadth in the grand scheme of things, this gap is hugely significant. China first embraced electrification more than a century ago and coal had been its principal power source ever since. Having lived in Shanghai in the mid-2010s, even I can remember when blue skies were a rarity.

With some justification, the National Energy Administration (NEA) hailed solar’s long-awaited supremacy as “a signature achievement”³. Yet this is just the latest in a series of environmental and energy-related landmarks – some widely appreciated, others less so.

Most of us are by now well aware, for instance, that China builds and sells more electric vehicles (EVs) than any other nation. BYD officially knocked Tesla off its perch earlier this year, having racked up over 4.5 million sales in 2025⁴.

It pretty much follows that China also enjoys primacy in the field of EV batteries. CATL, a company founded only 15 years ago, is at the vanguard, with an international client roster that includes BMW, Ford and Volkswagen.

Then there’s wind. Beijing claims China has ranked first globally in terms of installed wind power capacity for the past 15 years and it’s hard to imagine any other economy could seriously contest this assertion⁵.

And we mustn’t overlook the bigger picture with regard to solar, of course. In the words of the NEA, China boasts “the most complete and competitive” photovoltaic industrial supply chain in existence. Around 80% of all solar modules are now made in China.

Interconnected causality as a positive

A vital point here is that the impacts of China’s energy-transition efforts aren’t confined to China itself. Chinese EV, battery, wind and solar companies are constantly furthering their reach.

Crucially, many of the most promising businesses in this space – as in so many others – can be found beyond the obvious names. As a fund that specialises in Asian smaller companies, we particularly like brand-agnostic “enablers” that are capable of responding to or even pioneering disruption.

CATL is a classic example. Today we believe the likes of Zhejiang Shuanghuan Driveline and Precision Tsugami are among the promising, high-quality businesses that are cut from similarly green and attractive cloth.

It’s worth noting, too, that the phenomenon of interconnected causality works both ways. Just as failures in one sphere can trigger negative ripple effects elsewhere, progress in one sphere can trigger positive ripple effects elsewhere.

By way of a quick illustration, take the aforementioned link between environmental damage and cyber-insecurity. It’s by no means as tenuous as it might initially appear.

The rise of artificial intelligence and the consequent energy-intensive demands imposed by data centres have made reliable energy systems a must. In Changshu, a city in China’s Jiangsu province, computing infrastructure now safely consumes more electricity than residential air-conditioning⁶.

In the final reckoning, investing requires optimism – which helps explain why a key trick to surviving The Global Risks Report lies in recalling that humanity has a remarkable way of innovating its way out of trouble. Both in relation to environmental issues and other challenges, investors shouldn’t underestimate China’s capabilities in this regard.

Xin-Yao Ng is co-manager of the Aberdeen Asia Focus investment trust. The views expressed above should not be taken as investment advice.

Semiconductor stocks – one of 2026’s market darlings – crashed last week after inflation data, interest rate expectations and doubts over artificial intelligence spending weighed on sentiment.

The Philadelphia Semiconductor index fell 11.4% in US dollar terms in the week ending Friday 16 October, FE fundinfo data shows, compared with a 1.6% fall in the broader MSCI AC World.

The semiconductor index has had a strong run in 2026 and remains up 57.2% for 2026 despite last week’s fall, against a gain of 12.5% for the MSCI AC World.

Performance of Philadelphia Semiconductor index vs ACWI over 2026 to date

Source: FE Analytics. Total return in US dollars between 1 Jan and 16 Oct 2026

US consumer prices rose 3.7% year-on-year in September, up from 3.4% in August, the latest data from the Bureau of Labor Statistics shows. Producer prices rose 6.3%, up from 5.4%, the fastest increase in more than four years, raising expectations of a further Federal Reserve interest rate rise.

Higher interest rates tend to be bad for growth stocks because they lower the present value of profits due in the distant future and growth companies get most of their value from those profits.

Chip stocks SK Hynix, Samsung and Micron also fell during the week, with Micron down 4.3%. Western Digital, SanDisk and Seagate Technology also fell more than 5% in a single session, according to global advisory firm Norman K.

Dell dropped 19.2% after Barclays downgraded the stock, citing concerns over slowing growth in AI infrastructure spending, Edmond de Rothschild Asset Management noted. TSMC fell 1.8%, despite reporting record quarterly results of NT$763bn, 2% ahead of consensus estimates.

The falls followed an announcement from Chinese manufacturer CXMT of a memory chip positioned to compete with SK Hynix, Samsung and Micron. Grégoire Kounowski, head of advisory at Norman K, said: “Behind the scenes, speculation is rife regarding the date by which this AI sub-segment might reach saturation.

“Major manufacturers have invested heavily to build new factories within the next three to five years. Industry insiders therefore anticipate an overproduction crisis by 2029, coupled with the rise of Chinese players like CXMT.”

Doubts over the profitability of AI companies have added to the pressure. Anthropic's third-quarter revenue grew by close to 50% to $17bn, but at a slower rate than expected, and it now looks likely to miss its $110bn annualised revenue target for 2026.

OpenAI's annualised revenue estimate has been cut from $70bn to $50bn, according to Norman K.

Kounowski added: “After having long been driven by growth prospects, the AI market is now entering a new phase: that of demonstrating its profitability.

“The real challenge, therefore, is no longer whether AI will transform the economy, but determining to what extent the markets can value this transformation before financing and profitability constraints become a hindrance.”

Nina Stanojevic, senior investment specialist at St James's Place, agreed that the sell-off reflects a combination of macroeconomic pressure and growing scrutiny of valuations and earnings growth.

She added: “While AI remains a potentially transformative technology, the optimism surrounding the sector has left parts of the market vulnerable to even relatively modest disappointments.

“A compelling long-term growth story does not necessarily translate into an attractive investment at any price. The key question for investors is whether future earnings can justify current valuations, rather than simply whether the recent sell-off represents a short-term correction.”

South Korean chipmakers SK Hynix and Samsung are central to the global AI memory chip supply chain. Stanojevic said this creates a concentration risk, as investors trying to diversify away from US technology stocks through buying emerging markets could still end up exposed to many of the same underlying drivers.

Some investors saw opportunity in the sell-off, however. Edmond de Rothschild Asset Management has “reinforced” equity exposure following the market declines, as it expects the upcoming earnings season to show how well companies are performing.

Despite the declines, tech funds took in $10.7bn over the week, with 2026 global inflows annualising to a record $196bn, according to Bank of America. BofA's Bull & Bear Indicator dropped from 8.1 to 7.4, ending a “sell signal” for risk assets that had been in place since 26 May, driven by the bank’s indicators suggesting a net 52% of global equity market indices are oversold.

However, BofA said investors are most overweight tech since August 2020 and that an AI bubble forming in 2027 is “now consensus” among the investors it surveys. The firm said it is not adding to its own tech exposure as a result.

US semiconductors producer price index

Source: Bank of America, Silicon Data, Bloomberg

BofA pointed to US semiconductor producer prices as a signal to watch going forward. Rising prices would support a positive outlook for the sector, while a reversal would point to tighter AI financing conditions and weaker economic growth in 2027.

Quilter Cheviot has launched a Liquidity managed portfolio service (MPS), giving advisers a dedicated option for short-term cash needs or planned withdrawals.

The portfolio, which invests predominantly in a range of high-quality money market funds, will have an ongoing charges figure (OCF) of 0.1% and can be used as a standalone strategy or alongside the firm’s other MPS offerings.

It is part of a number of changes to its MPS range, which mark 25 years since the product suite was launched.

The IDX range has been rebranded as Index+, with three new funds added. This brings it in line with the firm’s Building Blocks MPS range, which is an actively managed solution investing in a combination of direct equities, bonds and external fund holdings. Both now span the same seven risk levels.

The Index+ range combines predominantly index-tracking funds with active alternatives, which the firm said strengthens diversification benefits. The total cost of the on-platform Index+ managed portfolios ranges from 0.28% to 0.37%.

Michelle Andrews, managing director, distribution at Quilter Cheviot, said: “Over the past 25 years, advisers have navigated changing tax rules, new regulations, evolving technologies, shifting client needs and geopolitical turmoil.

“Throughout it all, experienced investment management and diversified portfolios have remained essential. The continued growth of managed portfolio services reflects that enduring need.”

She added that choice matters and said the new Liquidity MPS and an enhanced index range are designed to help advisers support a broader range of clients without compromising asset allocation discipline or cost efficiency.

More than a quarter of UK adults (26%) would invest up to £50,000 without professional financial advice, according to research by Mattioli Woods, despite 44% saying they do not feel prepared for major financial decisions ahead.

The gap is wider among men, with 34% saying they would be comfortable investing between £10,000 and £50,000 without advice, compared with 19% of women.

Some 30% of respondents said they would seek professional advice for all financial decisions while 21% would be comfortable making pension and retirement decisions without any professional input.

When facing an important financial decision, 41% said they would turn first to family or relatives, ahead of the 31% who would approach a professional financial adviser.

Those aged 55 and over were more likely to seek an adviser, while younger respondents favoured family support.

After family and advisers, respondents said they would most likely turn to a bank or building society, then to friends or colleagues.

One in 10 said they would make the decision alone.

Rising living and housing costs were the most commonly cited concern, at 40%, followed by unexpected health or long-term care costs at 39% and loss of income at 33%.

Respondents said long-term financial planning should begin at an average age of 28.5, rising to 30 among those in London and Wales.

Amit Joshi, managing director of wealth at Mattioli Woods, said the findings show that people recognise the need to plan for their financial future but do not always act on it.

"The concern, however, at seeking advice later on in life is the limited time to develop financial security, so we encourage individuals to start planning earlier with an adviser," he said.

He added that evolving tax, pension and inheritance rules make professional advice valuable when people are making long-term financial decisions with lasting consequences.

"It is understandable that people turn to family and friends when faced with an important financial decision," he said.

"However, decisions around investments, pensions and long-term financial planning can have unanticipated and significant consequences that last decades."

The findings are based on research carried out by YouGov among 2,078 UK adults, surveyed between 2 and 3 September 2026, on behalf of Mattioli Woods.

Price comparison site Moneysupermarket, wealth manager Brooks Macdonald and retailer Frasers are three companies that the market has wrongfully marked down, according to three UK fund managers.

All come with concerns including how AI will impact business models, stalling growth and even questions surrounding the reputation of its founder. Yet the pricing of these stocks might have been judged too harshly, according to some.

The phenomenon isn’t limited to these names either. According to Will Tamworth, manager of Artemis UK Smaller Companies and Artemis UK Future Leaders, the median company across his fund trades on a price-to-earnings (P/E) ratio of 10x, has a free cash flow yield of nearly 9%, is producing double-digit earnings growth and has no net debt.

“If we found that median company, we would be arguing it was about 50% mispriced,” he said. “That’s the scale of the mispricing we see in the UK market.”

Moneysupermarket

Tamworth’s main example was Moneysupermarket, which owns the MoneySavingExpert website. It is the market leader in price comparison, has no net debt and a free cash flow yield close to 10%. Its Savings Club has 2.5 million members, which the manager said turns a one-off search each year into repeat business.

While investors fear that AI assistants such as ChatGPT will take over the job of comparison sites, Tamworth disagreed.

“The reason we don’t think it does get disrupted is that it’s a regulated business,” he said. “It has links into all the insurance companies. Amazon tried to come into this market three or four years ago but exited a year later, having never built up that panel of insurers.”

It might also be that AI chatbots are a solution to a problem that doesn’t exist.

“You can already go to Moneysupermarket and get 300 quotes in 30 seconds. What’s the advantage of using a bot or an agent to do that for you?”, he asked.

“And why would the insurers give links to the agents when they know that the person is going to switch the second a cheaper insurance product becomes available, when most of them make money out of that unwillingness to switch at the first possible moment?”

Performance of stock over 1yr

Source: FE Analytics

Brooks Macdonald

Ken Wotton, manager of the Strategic Equity Capital trust, chose Brooks Macdonald, a UK wealth manager and financial adviser. The market rates it as a business with no growth, at about 7x operating earnings (profit from running the business before interest and tax). Wotton said deals for UK wealth managers in recent years have mostly priced them at 12x to 18x.

Chief executive Andrea Montague joined as finance director and has run the company for two years. Wotton said she has spent that time fixing the business.

“She’s done a lot of heavy lifting to try and improve and transform the business to put it into a position where it can resume growth, which has stalled,” he said. “The market is not yet believing that.”

Brooks Macdonald has now reported three consecutive quarters of growth, Wotton noted, predicting a re-rating if that continues, followed by upgrades to profit forecasts.

But if that doesn’t happen, he said a takeover is a likely outcome, with private equity already active in the sector.

Wotton holds about 25% of the company across the funds he manages (he is lead manager of WS Gresham House UK Microcap, WS Gresham House UK Smaller Companies and Strategic Equity Capital, and co-manager of the Baronsmead Venture and Second Venture trusts, as well as WS Gresham House UK Multicap Income).

This, he said, would be enough to block a special resolution, the type of vote that needs a supermajority.

“It’s highly unlikely that, whether it’s private equity or corporate, anyone will try to buy that company without us agreeing to it,” he said. “So we can effectively stop a takeover at a premium to a depressed price, or we can enable one at the right price.”

Performance of stock over 1yr

Source: FE Analytics

Frasers

Finally, Gareth Channon, manager of Aurora UK Alpha, picked Frasers, the retail group run by Mike Ashley. He said investors have struggled to look past Ashley’s public image and miss the financial record underneath.

“It’s a discount retailer, which is a terrible business to be in,” Channon said. “But just stand back and look at the record, look at the machine underneath, and he earns over 15% return on his capital. And he’s not good at articulating what he’s done, so you have to trust him on his record.”

Channon said the shares trade at less than half what the business is worth, and Frasers also owns 11 million square feet of property, which Channon said protects the downside. On top of that, Frasers is almost the only group buying UK retail property and recently took control of the luxury brand Boss.

“When you own the whole shopping centre, not only do you decide where your shops go, but you also have all your competitors trading,” the manager said. “So it’s a very advantageous position for these groups.”

Performance of stock over 1yr

Source: FE Analytics