Emerging market income stocks are becoming some of the best-positioned stocks to handle trade volatility this year, according to JP Morgan and other asset managers.

In a year where global stock markets have been whipsawed, some investors have turned to income strategies, favouring dividends for a consistent yield in a period of uncertainty.

While global equity income and UK equity income strategies have both performed well year-to-date (up 7.2% and 10.8% respectively), emerging markets have also rallied.

The average fund in the IA Global Emerging Markets sector is up 9%, while the MSCI Emerging Markets is up 11.2%, more than double the return of MSCI World, as demonstrated by the chart below.

Performance of sector and indices YTD

Source: FE Analytics.

However, investors may be concerned about allocating towards the region given worries over tariffs from US president Donald Trump ahead of the 1 August deadline.

Omar Negyal, manager of the JPM Global Emerging Markets Income trust, noted that investors need to be “realistic” about their emerging market allocations.

Company revenues and exports are closely linked in emerging markets, meaning that “if we are entering into a world where trade is harder, that will have consequences”. Yet he argued that many emerging market companies are in much better positions than they may initially appear.

Firstly, unclear economic policy from the White House has shaken investors' confidence in the dollar. This allows central banks in emerging markets to take a “looser approach to monetary policy”, which can provide a stimulus for their domestic economies.

This should encourage investors to diversify and turn to quality stocks in emerging markets and the surest way to determine what these quality stocks are, he continued, is to follow the dividends.

In a market where corporate governance is a “real issue”, a company that proves it can pay out a dividend to its shareholders “year in and year out” is a signal of a business quality and resilience.

These companies generally have solid long-term fundamentals and great capacity for growth that can continue even if tariff volatility remains, he explained.

For example, Negyal pointed to TSMC as “the best example of a progressive dividend stock in emerging markets”.

Despite being one of the primary manufacturers of semiconductor chips, tied to the development of megatrends, such as artificial intelligence (AI) and tech, it pays a dividend.

“That’s pretty different from a developed market investor, who usually cannot buy high-growth tech as an income investor,” Negyal added.

For more than 20 years, TSMC has grown its dividend culminating in a 5% yield. While this has now fallen to around 2% as the share price has risen, it remains a highly attractive income stock, with “long-term fundamentals we still really like”, he said.

Matthew Williams, manager of the Abrdn Emerging Markets Income Equity fund, added that despite emerging market income stocks disappointing investors over the past few years, they have entered 2025 in a “position of strength”.

He agreed that tech stocks such as TSMC are great examples of this, paying a solid yield while providing the “basic building block for digitising the economy” that other countries will need.

In Mexico, industrial and manufacturing stocks such as mining company Grupo Mexico, one of their top holdings, also look well-positioned. It’s one of the lowest-cost and largest copper producers in the world, responsible for products such as copper wiring, which will remain important for things such as modernising electrical grids worldwide, he said

“I think these will continue to go upwards, regardless of what the health of the overall global economy looks like,” Williams added.

Robert Holmes, manager of the Pacific North of South EM Equity Income Opportunities fund, noted that this is a major change for emerging markets.

“Traditional preconceptions about the emerging market asset class have started to change. Companies have matured to the extent that global investors can now make an attractive return and an attractive yield in their local currency from emerging markets,” Holmes said.

In a period where global trade is uncertain and with questions over US exceptionalism, it investors may wish to look further afield for their returns. For investors hoping to play on the recent emerging market rally, “income has become an obvious trade.”

In today’s increasingly volatile market environment, investors are seeking more than just returns; they’re looking for clarity, resilience, and long-term relevance. That search is leading many to a part of the market that’s often underappreciated during economic upswings – listed infrastructure.

Listed Infrastructure assets typically include companies that own and operate essential infrastructure, such as power grids, transport systems, and data networks, which generate steady income and are critical to major global trends such as urbanisation, digitalisation, and the shift to renewable energy.

As the global economy navigates interest rate uncertainty, geopolitical risk and signs of a cyclical slowdown, listed infrastructure has steadily emerged as a potentially compelling alternative in our view.

It includes companies that provide the services that underpin our daily lives, such as energy, transport, and digital connectivity, making them structurally important and economically fundamental. That inherent resilience is drawing fresh attention from investors who want to position defensively without sacrificing growth potential.

At a time when investors are balancing caution with the search for growth, listed infrastructure can potentially meet these objectives as one of the few places offering both.

Core sectors like telecom infrastructure, for example, tend to deliver steady cashflows and benefit from relatively low sensitivity to economic swings.

Meanwhile, areas such as energy and transport, though more cyclical in nature, can benefit from targeted investment and policy support tied to the energy transition and infrastructure renewal, in our view.

The digital infrastructure story is also evolving fast. Artificial intelligence (AI), cloud computing, and increasing data use are fuelling demand not just for connectivity but also for the energy and physical infrastructure that powers digital systems.

What began as a narrow telecom focus now spans power grids, data centres, and utilities. This shift has reinforced the relevance of infrastructure in a tech-driven world and deepened the investment case across an even wider set of sectors.

Valuation is another piece of the puzzle. Listed infrastructure companies are currently trading at meaningful discounts (around 25% on average) relative to comparable deals transacted in the private market last year.

That gap is drawing attention from private equity and infrastructure funds, particularly in regions like Australia, where takeover interest has been rising. While private capital often moves quickly on these opportunities, the public markets offer investors similar access, with greater liquidity and price transparency.

At a time when policy frameworks are playing a growing role in investment decisions, infrastructure also benefits from strong public support.

Major economies, from Germany’s energy transformation agenda to the US’ infrastructure incentives, are backing the sector in concrete ways.

But, unlike greenfield infrastructure projects, which can carry considerable construction and execution risk, most listed infrastructure companies are already operating assets with potential for predictable income streams. Where there is construction exposure, it tends to be secondary, not central to their business model.

While performance isn't the sole driver of investor interest, it's clear that listed infrastructure has demonstrated resilience during recent periods of market stress. Its inflation-linked cash flows have helped cushion volatility in a high-rate, high-inflation environment.

Additionally, engagement with the infrastructure sector has grown significantly. We are seeing appetite for listed infrastructure equity expand to being integrated into institutional portfolios as strategic allocations rather than the tactical plays they once were.

We believe the case for listed infrastructure in 2025 is robust. In a market where volatility is impacting many traditional sectors, infrastructure can stand out as a potentially compelling alternative.

With public markets offering attractive valuations, and the sector benefiting from secular growth themes and policy support, the moment for listed infrastructure appears not only timely, but long overdue.

For investors seeking resilience without stepping back from opportunity, it’s a part of the market well worth revisiting.

Giuseppe Corona is head of listed real assets at HSBC Asset Management. The views expressed above should not be taken as investment advice.

Funds run by GQG Partners, Artemis Fund Managers, St James’s Place (SJP) and Barings have all suffered a severe ratings decrease in the bi-annual FE fundinfo Crown Ratings rebalance.

The top 10% of funds based on three factors (alpha, relative volatility and consistent performance over the past three years) are awarded five FE fundinfo crowns. The next 15% receive four crowns and each of the remaining three quartiles are given three, two and one crowns respectively.

Having previously looked at the funds that have shot up the table in the past six months, here Trustnet focuses on those that have plummeted from the top of the heap to the bottom ranking.

Past performance is no guide for future returns, however, and investors should remember that all funds go through difficult patches. Whether these funds can retain their former glory will be a key consideration for those who own them.

Source: FE fundinfo

GQG Partners had two entrants on the table above: GQG Partners Global Equity, home to £2.9bn of investors’ capital, and GQG Partners US Equity, which has £1.4bn in assets under management (AUM).

The Global fund is recommended by analysts at interactive investor, having only been added to the platform's Super 60 recommendations list at the end of 2024

The portfolio is managed by FE fundinfo Alpha Manager Rajiv Jain, Brian Kersmanc and Sudarshan Murthy.

Analysts at interactive investor said: “The managers’ flexible investment approach and quality bias have typically led to strong performance through the market cycle with good downside protection during periods of market weakness. The fund benefits from an experienced manager, with a flexible, proven and well-executed investment process”.

However, GQG Partners Global Equity has made 21.8% over the past three years, a third-quartile return during this time, but has particularly struggled over the short term. It is down 7% over one year and has suffered a 15% drop over the past six months.

Managed by the same team, GQG Partners US Equity has been a bottom-quartile performer in the IA North America sector over three years, up 18.4%.

Recommended by analysts at FE Investments, they said it “combines a strong focus on quality companies with a flexibility to adapt to macroeconomic conditions, which provides multiple avenues for generating outperformance”.

“Jain, has a proven track record over a long career and has built GQG to focus on client outcomes and alignment," they added. “The diverse experience of the managers and the analyst bank, as well as the use of non-traditional methods of analysis to gain an insight advantage, is highly differentiated and provides a competitive edge against peers.”

Another fund on the list recommended by a best-buy list is WS Lightman European, which sat in the bottom quartile of its peer group over three years to the end of June (the period covered by the rating).

However, it is in the second quartile of the IA Europe Excluding UK sector over three years to the most recent price, with a 42.5% return. It performed strongly since the end of June, making 4.4% over the past month compared with 2.9% from its average peer. 

Run by Rob Burnett and George Boyd-Bowman, analysts at AJ Bell rate the £1.1bn fund high enough to include it in the firm’s Favourite Funds list.

“We like this boutique asset manager, focused on investing in European equities. At the helm is an experienced fund manager with a tried and tested investment approach underpinned by a clear investment philosophy,” they said.

“The fund is typically invested in lower valued stocks and the performance profile is therefore likely to be volatile and different to that of the benchmark. The fund benefits from the manager’s consistent implementation of his investment process.”

Analysts at FE Investments also rate the fund, highlighting its “flexibility to play the value factor in a light or aggressive way, depending on the macro environment”.

Pictet Quest Europe Sustainable Equities is the only other fund on the list with more than £1bn in AUM. Managed by Laurent Nguyen, it uses a quantitative approach to select securities that it believes offer superior financial and sustainable characteristics.

The fund has been a third-quartile performer in the IA Europe Including UK sector over the past three years, up 34.2%. It is joined by peer New Capital Dynamic European Equity, which also appears on the list.

A number of funds run by Aegon, Liontrust, JP Morgan Asset Management and St James’s Place have rocketed up the rankings in the latest FE fundinfo Crown Ratings review, jumping from a lowly one-crown rating in January to the top five-crown ranking in the latest rebalance.

The bi-annual rankings look at three main factors: alpha, relative volatility and consistent performance over the past three years.

The top 10% of funds are awarded five FE fundinfo crowns, the next 15% receive four crowns and each of the remaining three quartiles will be given three, two and one crowns respectively.

Charles Younes, deputy chief investment officer at FE fundinfo, said: "The first half of 2025 marked a renewed confidence in growth strategies. Large-cap tech led a significant rally, assisting growth-based funds to recover from much of the market volatility that started in 2022 and impacted previous Crown assessments. 

“Our latest rebalance reflects this renewed momentum, but also highlights how quickly market sentiment can rotate. Value funds have performed well previously due to sticky inflation and high interest rates.

“While many of these factors still persist across markets, investors' appetite has shifted towards a greater risk tolerance. Quantitative strategies and disciplined benchmarking continue to be critical for consistent performance, particularly in a volatile macroeconomic environment."

The largest of the funds to jump from one to five crowns is SJP Emerging Markets Equity. With £7.1bn in assets under management (AUM), the portfolio is managed by Aikya Investment Management, ARGA Investment Management, Lazard Asset Management and Wasatch Global Investors and sits in the IA Unclassified sector.

Aegon High Yield Global Bond, another with more than £1bn in AUM run by Thomas Hanson and Mark Benbow, is also in the IA Unclassified sector.

Two more funds run more than £1bn: Templeton Emerging Markets Bond and Heptagon Kopernik Global All Cap Equity.

Source: FE fundinfo

The former, managed by Michael Hasenstab and Calvin Ho, has been the second-best performer in the IA Global EM Bonds – Blended sector over the past three years (up 36.2%), although its long-term track record is weaker, as it is the worst performer in the peer group over 10 years.

Heptagon Kopernik Global All Cap Equity, meanwhile, is headed by David Iben and Alissa Corcoran and is one of three IA Global funds on the list alongside abrdn Global Small & Mid-Cap SDG Horizons Equity and SVS Aubrey Global Conviction.

It has had a strong past year up 29.3% over 12 months, and has surged in 2025, rising 21.6% over six months. It is heavily underweight the US, with just 8.4% to the world’s dominant market, with more than 40% in the emerging markets and some 14.7% in cash.

Liontrust UK Focus is the sole UK fund on the list, having made 42.7% over the past three years, although it is below the average peer over one, five and 10 years.

Morgan Stanley US Advantage is the only IA North America fund, while JPM Japan and GS Global Absolute Return Portfolio are sole entrants on the list from IA Japan and IA Targeted Absolute Return respectively.

There were also five funds to achieve a crown rating of five at the first time of asking, as the below table shows.

Source: FE fundinfo

BlackRock MYMap 7 Select ESG, Royal London Sustainable Growth and abrdn MyFolio Enhanced ESG Index I are sustainable funds in multi-asset ranges for behemoth fund groups, while Pacific North of South EM Equity Income Opportunities has excelled in the IA Global Emerging Markets sector – sitting in second place over three years – while IFSL Meon Adaptive Growth has performed well in the IA Global peer group.

At the fund group level, Invesco houses the most funds with a five-crown rating (14), the same number it had at the start of the year, followed by Artemis (10), which has three more than in the previous rebalance.

Of the fund groups with at least 10 portfolios in their umbrella, Artemis remains the standout, with 43.5% of its funds gaining the top rating. It was followed by Man Group, Allianz and Aegon, with around a third of their funds getting top marks.

Factoring in those with more than one fund, but fewer than 10, Orbis Investments is the clear winner, with all three of its funds getting the top five-crown rating in the half-year rebalance.

Elsewhere, JP Morgan Asset Management was the big winner from the latest data, with seven new five-crown ratings, while L&G, Janus Henderson, Allianz and Threadneedle all had four more than six months ago.

By contrast, traditionally value-focused groups struggled, with M&G and Royal London (down five) slightly ahead of Schroders (down three) among the groups that saw their five-crown numbers drop.

Private equity is no longer a niche industry, with businesses increasingly turning to private equity firms to raise capital rather than applying for a bank loan or approaching individual investors.

UK-based companies alone have attracted £1.3trn in private equity investment in the past 15 years and only 36% of the country’s 500 largest companies are currently publicly listed, according to US consultancy firm McKinsey & Company.

As such, investor interest in private equity has been steadily growing. It has been paying off, with the average trust in the IT Private Equity sector outperforming the FTSE All Share.

Total return of sector vs FTSE All Share index over 5yrs

Source: FE Analytics

Below, experts outline how investors can build a comprehensive allocation to private equity by pairing complementary funds.  

Patria Private Equity Trust and NB Private Equity Partners

Dzmitry Lipski, head of funds research at interactive investor, paired Patria Private Equity Trust with NB Private Equity Partners.

Launched in 2001, Patria Private Equity Trust’s £836m portfolio of private equity funds and co-investments has a strong emphasis on European markets and has outperformed the average returns of listed private equity peers over a decade.

Lipski’s other pick – NB Private Equity Partners – invests in companies with long-term secular growth prospects and lower expected cyclicality.

“The portfolio is well-balanced, aiming to capture future growth while maintaining vintage diversification,” Lipski said.

It has more than 70 holdings with over 70% of its exposure in the US.

“The trust has consistently outperformed both public equity markets and its private equity peers over the long term, underpinned by a strong track record and the resources of the Neuberger Berman platform,” said Lipski.

Performance of funds vs sector over 5yrs

Source: FE Analytics

NB Private Equity Partners currently yields 4.7% on a historic basis, Lipski said, noting that this makes the trust a “compelling option for income-seeking investors and a potentially strong complement to the Patria Private Equity Trust”.

Both Patria Private Equity Trust and NB Private Equity Partners are trading on double-digit discounts to their net asset values (NAVs) of 28% and 22% respectively. As such, they could be a “potential attractive entry point for long-term investors”, said Lipski.

HarbourVest Global Private Equity and Oakley Capital Investment

Markuz Jaffe, analyst at Peel Hunt, said HarbourVest Global Private Equity offers a “well diversified” £2bn global portfolio of private equity through its fund-of-funds structure.

“The portfolio is also diversified across regions, industries, vintage year and investment stage,” he said, with underlying investments spread across buyout, venture, private credit, infrastructure and real assets.

“It actively uses share buybacks to enhance liquidity and address its discount,” Jaffe added.

Earlier this year, the board increased its allocation of gross realisation proceeds (profits from sales) to the distribution pool (the capital set aside for share buybacks) from 15% to 30%, Jaffe explained – a move which supports a “healthy level of buyback activity going forward”.

In contrast, the £926m Oakley Capital Investment has a more concentrated strategy centred predominantly around pan-European tech-enabled businesses.

“These businesses often benefit from recurring revenues in the consumer, technology, education and business services sectors,” said Jaffe.

As such, Oakley Capital currently benefits from a robust balance sheet and a recently increased commitment to share buybacks, he noted.

Performance of funds vs sector over 5yrs

Source: FE Analytics

Despite the compelling long-term return profiles of both funds, HarbourVest Global Private Equity and Oakley Capital continue to trade on wide discounts of around 33% and 28% respectively.

HarbourVest Global Private Equity and Seraphim Space

Shavar Halberstadt, analyst at Winterflood, also highlighted HarbourVest Global Private Equity, but chose to pair it with Seraphim Space Investment Trust.

Performance of funds vs sectors over 3yrs

Source: FE Analytics

With HarbourVest Global Private Equity providing investors with exposure to more than 1,000 underlying funds and 14,000 portfolio companies, it can be considered a “one-stop shop for broad-based private equity exposure”, Halberstadt said.

Meanwhile, Seraphim Space offers more niche exposure SpaceTech investments and is the “clearest beneficiary” of increased global defence spending in the investment trust universe, he said.

Seraphim Space’s shares currently sit at a discount of 45% to NAV, based on the “flawed perception that the portfolio contains ‘pie in the sky’ ventures that may or may not generate returns in the medium term”, he said.

However, Seraphim Space’s portfolio companies are more established than one might expect, Halberstadt claimed, noting that holdings have secured partnerships and joint venture agreements with large defence names and contracts with NATO partner governments, “representing sticky revenue”.

HgCapital Trust and T. Rowe Price Global Technology

Tony Mee, chief investment officer of Asset Intelligence, took a different and more thematic approach, choosing to pair private equity fund HgCapital Trust* with the public markets-focused T. Rowe Price Global Technology Equity fund.

“The blend of specialised European private equity and broad global technology equities can help construct a resilient, forward-looking portfolio capable of capitalising on both rapid innovation and the steady growth of established industry leaders,” Mee said.

HgCapital Trust is a dedicated vehicle for accessing private equity investments in Europe’s software and business services sector.

It is listed in the UK and managed by a team with “significant experience in identifying and nurturing technology businesses”, Mee said.

The portfolio comprises a select group of European software firms that are typically characterised by robust growth trajectories and strong profitability that “might rank among the largest in their field” if they were publicly traded.

“The trust’s approach centres on building value over the long term through direct engagement with its holdings,” he explained.

The fund’s degree of concentration can lead to periods of notable performance – both positive and negative. As such, Mee suggested the T. Rowe Price Global Technology Equity fund can offer an effective counterbalance.

“It casts a much wider net,” he said.

The fund’s holdings reflect a diverse mix of regions and include companies involved in software, hardware and digital services.

“One of its strengths is the ability to adapt to shifting tech landscapes by focusing on firms with sustainable competitive advantages and clear growth prospects,” said Mee.

Performance of funds vs sectors over 5yrs

Source: FE Analytics

*HgCapital Trust is an investor in FE fundinfo.

Wealth manager Killik & Co is shifting its attention to emerging markets and China, where depressed prices offer an entry point even in the face of uncertainty, according to Andrius Makin, senior portfolio manager at the firm.

“The Chinese market as a whole is on such a low valuation and its companies are growing so quickly that they don’t need to execute perfectly. We don’t need perfect earnings delivery to get good returns,” he said.

“The valuations are just so compelling that it makes sense to be overweight”.

This position reflects both current opportunities in the country and broader concerns around concentration risk elsewhere, particularly the US, he explained.

Positive momentum and currency opportunities

The mood around Chinese equities tends to shift rapidly, Makin argued, with structural positives such as growing earnings and favourable demographics often overlooked during moments of political intervention or market fear.

In these cases, investors “dump the market” and valuations fall to very low levels. Then, “you just see the cycle repeating”.

For much of the first part of this decade Chinese stocks were under severe pressure, with the IA China/Greater China sector falling 70% between January 2021 and January 2024.

Over the past five years, only two funds have made investors money and some emerging market managers were keeping their distance.

But recent investor interest suggests sentiment may be shifting again and momentum could be building.

“With lots of political risk, China is very divisive but it’s one we’ve been asked about a lot recently,” the manager said. “People are starting to get interested again.”

This year the sector jumped 30%, as the chart below shows, with some managers getting back into the market. For example, the Lazard  Emerging Markets fund went overweight China for the first time in almost 30 years.

Performance of sector over 1yr

Source: FE Analytics

Killik’s interest in emerging markets is also informed by macro positioning, as a weak dollar is going to be positive for emerging markets generally. While not the sole driver of allocations, currency shifts are one of several tailwinds.

Diversification opportunities

Beyond macroeconomic factors, Makin emphasised the need for more deliberate portfolio construction in a market still dominated by US equities and where investors don’t realise how concentrated their portfolios are in stocks such as the Magnificent Seven.

While US equities have dominated returns in recent years, the manager said this isn’t necessarily going to be enough anymore.

Killik has been underweight the US for a while (for example by cutting its allocation to Fundsmith Equity, as he recently told Trustnet). It has been “a very painful decision for a long time, but one that has paid off a bit now” and has allowed Makin to build a more granular geographical approach.

“Historically, a lot of portfolios – even in the wealth space – just had a global allocation, with a bit of emerging markets and a bit of UK. What we’re doing now is being much more transparent about our geographical splits, with separate allocations to emerging markets, Asia Pacific and Japan, because valuations will move around a lot.”

Europe, Asia Pacific and emerging markets are all showing signs of relative strength in 2025. “Europe’s having a very good year to date. Asia Pacific as well. Emerging markets too – for the first time in a while, there are some really strong tailwinds.”

Portfolio construction and fund selection

The core of Killik’s portfolios remains anchored in low-cost exposure but the team will allocate to more expensive structures if the benefits are clear. That is the case with Fidelity China Special Situations.

“It’s a more expensive fund but it has unlisted exposure and gearing to justify that. Over short periods those things can lead to sell-offs or difficult markets but, over the long term, gearing and unlisted exposure will usually add value when markets go up,” he said.

The fund is held in high regard by many industry experts and has been highlighted on Trustnet before as a fund to diversify your portfolio away from mega-cap tech.

Makin stressed a fund such as this would sit next to the core part of one’s portfolio, which should be “low-cost and close to the index”.

“With a real, unique selling point that isn’t repeatable and is structurally embedded, we’re happy to allocate even if the costs are higher.”

Equity markets have enjoyed an exhilarating bull market in recent years, with the S&P 500 surging 60% from January 2023 through to June 2025.

The outperformance by equities, and notably by the US market, has generated an embarrassment of riches from a portfolio context. Equity benchmarks, driven by passive market-cap-index and ETF-flows buying, have left investors with very concentrated exposure.

Now, as investors review their options in mid-2025, what might they consider?

Keep on dancing?

Option A is to 'keep dancing while the music is playing', as Chuck Prince put it in 2007. Unfortunately, this did not end well for Citi and it did not end well for Mr. Prince. In 2008, the MSCI Europe was down 43.3%. This required equities to be up a whopping 76.3% just to recover investors’ capital.

In the past decade, however, painful selloffs have been followed by 'V-shaped' recoveries. 2022’s S&P-500 decline of 19.4%, even when compounded by a sell-off in 'safe haven' bonds as central banks hiked short-term rates, was short-lived. So was the more recent sell-off, between February 19^th and April 8^th 2025, which took the S&P 500 down 18.9%.

The bond market was again an unreliable friend, particularly the long end. However, the beta tide came quickly in, and investors’ modesty was maintained, as they raised their glasses and cheered “Always buy the dip!”

What goes up can go down (a very long way)

In the late 1980s, Japan was seen as the 'exceptional' country that the US is seen as today. The Nikkei 225, propelled by increased global market-cap-driven allocations from active balanced funds with MSCI World and EAFE [Europe, Australasia, and the Far East] mandates (not to mention FOMO buying) rose to a peak of 38,915.87 on 29 December 1989.

This level was not to be seen again for 35 years, as the Nikkei 225 spiralled down as much as 80% by March 2003.

Investors know they are very overweight equities, particularly US equities. Choosing to not do anything about this is an active decision.

It may be useful to consider what a prudent investor might contemplate now. The 'Prudent Man Rule' comes from an 1830 court case, Harvard College v Amory, which made explicit the requirement for trust fiduciaries to invest assets "as a prudent man would invest his own assets", considering the needs of the beneficiaries, the need to preserve the estate (or capital) and the need for income.

The rule was updated and codified in the Uniform Prudent Investor Act of 1992, which specifically required that trustees should “diversify the investments of the trust”. Hardly controversial, this is well explained in the old adage: “Don’t put all your eggs in one basket”.

Investors may want to consider realising a portion of their super-normal profits to somewhat rebalance their portfolios. For example, an investor could take profits on 25% of their US equities and still be left with 1.2x the exposure they would have deemed prudent back in January 2023.

What to diversify into?

By many metrics, equity valuations now look stretched. Goldman Sachs recently forecasted a paltry 3% annualised nominal total return for the S&P 500 over the next decade. Meanwhile, there is no law saying 2022’s negative performance, let alone 2008’s, cannot be repeated.  

In 2022 and again in March-April 2025, bonds have proven not to be the safe haven investors were looking for. Longer-dated government bonds have experienced more Liz Truss-like price movements. CTAs did not help in the recent sell-off. Credit spreads are now trading at almost the tight (expensive) levels last seen in 2007.

Meanwhile, the returns on short-dated bonds look paltry. At the time of writing, one-year US treasuries are yielding only around 4.0%, UK gilts around 3.75%, while one-year French or German bonds yield below 2.0%. Investors might rightly ask whether that is the best return they can aspire to in this part of their portfolios.

Alternatives arrive

Enter uncorrelated liquid alternatives – highly liquid, daily-dealing UCITS funds that are designed to be uncorrelated to traditional assets, thus shielding portfolios from equity or bond market turmoil, while targeting returns significantly in excess of cash, or the risk-free rate available from short-term government bonds.

A return of cash +4% (so around 8.25% in US dollars and pound sterling), if achieved, will provide more than double the return available from short-dated UK gilts or US treasury bonds. In Euro, a 5.9% return is triple the return available from short-dated French or German government bonds.

As investors think back to the depths of the 2025 sell-off before the 'TACO' recovery, Bob Dylan’s line from Like a Rolling Stone, 'how does it feel?' may come to mind. Rather than hearing that music playing, perhaps investors should consider playing their 'get out of (some of your) beta free' card instead?

Donald Pepper is co-CEO and head of multi-strategy at Trium Capital. The views expressed above should not be taken as investment advice.

Building a portfolio using relative measures is widespread practice in fixed income, whether comparing a bond’s valuation to similar securities or trying to outperform a benchmark by owning its better constituents. But to Jonathan Golan, manager of the Man Dynamic Income fund, both approaches are flawed.

“If you base your investment on an asset that is greatly overvalued, and then say another one is cheap in comparison, you're not actually ensuring any margin of safety,” he said. “Relative value is a fool’s game.”

Buying something simply because it appears cheaper than a worse alternative does not provide protection, only the illusion of it. “We never invest based on what’s cheap versus the rest of the market,” he said, but rather focus on cheapness in absolute terms.

He applied the same criticism to benchmark-relative investing, which he argued leads to arbitrary and dangerous positioning. “If you use the benchmark to allocate assets, you’re using a completely arbitrary metric to decide where you want to invest,” he said. “You’re using the size of a company’s debt as a proxy for expected return. There is no logical or mathematical reason why larger issuers should produce better risk-adjusted outcomes.”

Yet that is exactly how much of the fixed income world operates, according to Golan. Managers typically attempt to own the better parts of the benchmark while avoiding the worst – a style that is “the antithesis of margin of safety”.

“It's why many investors end up doing the opposite of what they should: taking on risk when spreads are tight and panicking out when prices are attractive,” he said.

It’s also why his own fund – launched in 2022 and already topping the IA Sterling Strategic Bond sector over three years with a return of 80.1% – is explicitly benchmark-unaware.

Rather than carve up the world based on regions or ratings, Golan breaks the market into segments clustered by rating, seniority and sector, and assesses each bond against its own historical valuation range, as he recently explained to Trustnet.

The result is a portfolio that tends to diverge heavily from peers. Man Dynamic Income has been heavily tilted toward financials and European service companies this year, two areas Golan described as offering the best margin of safety after the collapse of Credit Suisse and renewed risk appetite following Liberation Day.

But more important than the sectors themselves is the mentality behind them. “Everyone is cyclical at heart,” he said. “It’s human nature. People get aggressive when the market is expensive and defensive when the market is cheap.”

To avoid falling into that trap, Golan insists on two things: an absolute valuation anchor and a broad enough opportunity set to go where the value is. That often means lending where others won’t – not because the risk is higher, but because the perception of it is.

In 2022, when European real estate was trading at levels below the eurozone crisis and Covid, he saw a buying opportunity.

“That’s not a once-in-a-cycle event, that’s a once-in-multiple-cycle event. If the worst-case scenario is priced in seven times over, of course we’ll go in.”

It’s in these dislocations that his process – though systematic and data-driven – still relies on judgement. Every bond flagged as cheap by the firm’s quantitative screen is then subject to fundamental analysis to rule out value traps.

“Nineteen times out of 20, those names are value traps,” he said. “It’s only the 20th that gives us the return.”

And while he insists there is no “perfect” model, Golan noted that no single issuer in the fund has detracted more than 20 basis points from performance in two years.

That makes his fund a core offering in his view – albeit not one suited to benchmark-thinkers. “This is for investors who want a properly diversified portfolio with deep-value opportunities,” he said. “It’s not about chasing yield. It’s about getting risk-free return, not return-free risk.”

The numbers so far support him. Since launch, the fund has not only outperformed the sector, as illustrated below, but done so with strong downside protection and what Golan calls “mostly upside volatility”.

“Volatility only matters if it’s downside,” he added. “If it’s upside, you want as much of it as possible.”

Performance of fund against index and sector since launch

Source: FE Analytics

However he does not compare himself to his peers. “It’s hard enough to do this job well,” he said. “If I start worrying about the competition, it would be doubly hard.”

The S&P 500 may have suffered in the face of recent political upheaval and uncertainty but this means there is plenty of value to be had within the US market, according to BNY Investments' John Bailer.

Bailer, manager of the £1.1bn BNY Mellon US Equity Income fund, said “there has never been so much value in the US”, with president Donald Trump’s so-called ‘big beautiful bill’ set to unlock billions of dollars for US companies and their shareholders.

“An active manager that can focus on those companies that are trading below their intrinsic value, that are showing some signs of business momentum and that have high quality fundamentals can really diversify a portfolio and provide downside protection and income consistency,” he said.

Bailer has outlined four underappreciated US income stocks for investors interested in maximising value in the US market.

AT&T

American multinational telecommunications company AT&T is Bailer’s first selection.

Bailer pointed to its almost 4% dividend yield and “very attractive price-to-earnings (P/E) ratio” at almost 16x based on last year’s earnings.

Its share price is also up 23% year to date.

Stock price performance of AT&T YTD

Source: Google Finance

“What I really like about AT&T is that they are in a good position for convergence – they are able to sell wireless services and broadband services,” he said.

“Having the same company deliver both to customers reduces churn on the wireless side and the broadband side.”

By building out its fibre capabilities, AT&T will also be able to shut down its copper plant, which Bailer said will “save a lot of money”.

In addition, AT&T is expected to massively benefit from Trump’s ‘big beautiful bill’, which promises huge tax breaks for companies across the US.

“AT&T is very capital-intensive, which means they really benefit from the 100% depreciation that’s part of the tax bill,” Bailer explained.

“They’re expecting to save between $6.5bn and $8bn in taxes from 2025 to 2027.”

This “meaningful cashflow” will be reinvested in the business, shoring up the company’s pension plan “so unionised employees are benefiting from these tax savings” and offered back to shareholders via share buybacks and dividends, he said.

“We think it’s a win-win.”

JP Morgan

JP Morgan is “high-quality and inexpensive”, said Bailer, labelling it the “highest-quality financial in the US market”.

With a 1.9% dividend yield, JP Morgan has “been earning an over 20% return on tangible equity”, said Bailer.

The firm also has over $1trn in cash and marketable securities on its balance sheet, he said, highlighting its “incredible amount of liquidity”.

Stock price performance of JP Morgan YTD

Source: Google Finance

Bailer is also expecting JP Morgan to benefit from some relaxation in rulemaking for US financial institutions as the deregulation trend continues.

“They are going to have more cash to return to shareholders in the form of dividends and buybacks, and they are going to be able to reinvest more back into their clients,” Bailer said.

JP Morgan’s share price is up just shy of 25% over the year to date.

Cisco

Bailer’s next pick is Cisco, a technology company that specialises in manufacturing and selling networking hardware, software, telecommunications equipment and other high-tech services and products.

Cisco has a 2.4% yield and a “reasonable” 28x P/E ratio, with Bailer pointing to its ability to generate “a lot of free cash flow”. Its share price is currently up 16% this year.

Stock price performance of Cisco YTD

Source: Google Finance

Bailer said that Cisco is an “underrated” AI play. The company has forged partnerships with the likes of Nvidia and Microsoft as part of its strategy to accelerate AI infrastructure growth.

In its third quarter earnings report, Cisco reported that AI infrastructure orders from web-scale customers had exceeded $600m – surpassing its $1bn target one quarter early.

Bailer also complimented Cisco chief executive Chuck Robbins, who is supported by a “very high quality” management team.

Johnson & Johnson

This pharmaceutical company has previously failed to impress Bailer, due to its “disappointing drug pipeline”.

“But we are starting to see some improvement,” he said, predicting that Johnson & Johnson is “going to be selling the most cancer drugs by 2030 – they are going to surpass all other companies in the space”.

From a quality perspective, the company has maintained its ‘AAA’ credit rating.

It also has a 3.1% dividend yield and, at 18x P/E, it is cheaper than competitors such as Amgen (28x), Gilead Sciences (25x) and AbbVie (81.4x).

Stock price performance of Johnson & Johnson YTD

Source: Google Finance

“I would argue Johnson & Johnson provides a bond proxy type of exposure,” said Bailer. “It isn’t very economically sensitive, but it pays a nice dividend yield and they have a very good balance sheet.”

More than 30 funds in the IA Targeted Absolute Return sector have always made investors money over the past three years, according to research by Trustnet.

We examined absolute return funds’ 12-month rolling returns in each of the past 24 months – the same metric used by the Investment Association trade body to compare fund performance.

Of the 68 funds with a long enough track record, 31 (or 45.6% of the sector) achieved a positive gain in every rolling 12-month period, a sharp increase from the seven funds that appeared on this list a year ago.

The past three years have been headlined by volatility, with rampant inflation and high interest rates, the outbreak of war in pockets around the world and an unstable political landscape making it a difficult time to know how to invest.

Absolute return funds are designed to perform in all market conditions, aiming to make the positive gains regardless of the world around them.

The IA Targeted Absolute Return sector is home to a range of strategies, each with their own ways to achieve this. Some use long/short devices, while others use derivatives and futures. Some are market neutral, while others will take large bets.

Source: FE Analytics

The best performer among the 31 consistent performers is the £356m AQR Style Premia UCITS fund, which has made 60.6% over the past three years. Managers Antti Ilmanen, Andrea Frazzini, Jacques Friedman, Michael Katz, Ronen Israel and Tobias Moskowitz aim to build a portfolio that has “low-to-zero correlation to traditional markets” while making “high risk-adjusted returns”.

In second place is the £283m YFS Argonaut Absolute Return fund run by FE fundinfo Alpha Manager Barry Norris, up 48%, while Paul Wood and Michael Bedford’s £32.6m VT Woodhill UK Equity Strategic fund (37.6%) rounds out the top three. Only the latter of the three funds, however, was included in the study last year.

Top of the pile of this research in 2024, Jupiter Merian Global Equity Absolute Return is in fourth place, up 36.5%. Run by Alpha Manager Amadeo Alentorn, it is a market-neutral portfolio of long and short global equity positions that aims to beat the Federal Reserve’s funds target rate over rolling three-year periods.

The £3.7bn behemoth has been popular among investors, receiving £1bn worth of net inflows in the first half of 2025, half of the £2bn added to the systematic equities range.

Jupiter launched a leveraged version of the fund earlier this year, alongside the existing strategy.

Also of note is the Aviva Investors Multi Strategy Target Return fund run by Peter Fitzgerald and Ian Pizer. It was formerly managed by Euan Munro, who left the flagship Standard Life Global Absolute Return (GARS) strategy to set up this Aviva fund. The portfolio aims to beat the returns of cash (the Bank of England base rate) by 5%, over rolling three-year periods.

Analysts at Barclays Smart Investor recommend the fund, placing it on the firm’s best-buy list. They said: “The team is well-resourced compared to peers and is a flagship product for Aviva Investors, giving us comfort that Aviva will continue to invest in the resources and talent required to continuously drive performance. The fund also acts as a good diversifying investment in a traditional portfolio.”

Barclays analysts also recommend the £2.5bn Janus Henderson Absolute Return fund, which appears on our list of the most consistent absolute return strategies. Up 21.7% over three years, the portfolio is headed by Ben Wallace and Luke Newman, the former of whom was given a mandate to run a long/short strategy for US hedge fund Millenium Management worth around $1bn earlier this year, according to reports.

Wallace and Newman run two concurrent strategies alongside one another. The first is a ‘core’ portfolio, where they invest in companies they believe have good long-term growth prospects. The second is a ‘tactical’ portfolio, which aims to take advantage of short-term market anomalies.

“What we also like is that they have quite distinct styles, which complement each other very well,” Barclays analysts said. “Wallace provides a more analytical and detail-oriented approach and takes the lead on portfolio management, while Newman focuses on overseeing the team and managing client relationships.”

The Janus Henderson fund is also rated by analysts at FE Investments, who said it is a “good option for an investor who wants to diversify their portfolio made of traditional assets, without taking too much risk”.

They also gave their approval to Premier Miton Tellworth UK Select, managed by John Warren and Johnnie Smith. It has made 23.1% over the past three years and also appeared on the 2024 iteration of this study.

It is a hedge fund that aims to generate positive returns with low volatility and low correlation to UK equities by making buy and sell calls on UK stocks based on quantitative tools that use alternative data to track various macroeconomic indicators.

“The ability for the fund to benefit from falling share prices has allowed it to protect capital very well in volatile and negative markets, whilst still benefiting from some of the upside in better times,” FE Investments analysts said.

“Overall, we think the fund has an interesting and differentiated philosophy and performance profile and can provide effective diversification within a traditional equity and bond portfolio.”

European stocks gave up early gains on Monday, after the United States and European Union concluded a trade agreement that imposes a 15% tariff on most EU exports, including cars, pharmaceuticals and semiconductors. In exchange, Europe pledged hundreds of billions in purchases of American energy and military equipment.

The deal was initially welcomed by the market, as it averted the threat of 30% tariffs that were due to take effect on 1 August. The Stoxx Europe 600 rose as much as 0.9% at the open, but was flat by mid-afternoon as automakers reversed sharply, led by a 2.9% drop in Stellantis after an initial 4.6% rally, while Volkswagen, Mercedes-Benz and Porsche also erased gains.

Performance of Stellantis over 1 day

Source: FE Analytics

Luxury names such as LVMH held onto small gains, while defence stocks including Rheinmetall and Hensoldt sold off on fears of political pressure to favour US equipment purchases.

Chris Hiorns, manager of the EdenTree European Equity fund, said: “We are still in a worse position than when we started.”

He acknowledged that the 15% rate “should be liveable” but warned it leaves key industries exposed, such as pharmaceuticals, where Trump remains committed to pushing down prices for US consumers, meaning European companies could take a hit.

However, it is not all doom and gloom. The removal of uncertainty should allow businesses to deploy some previously held back investment spending, so there might be “some catch-up”, he said.

He pointed to German infrastructure spending as an example: “There’s going to be a lot of extra investment in infrastructure. One interesting area is bridges – that’s an area where they said we’ve got to renovate and upgrade a lot of the bridges in Germany related to the defence spend.”

Janet Mui, head of market analysis at RBC Brewin Dolphin, echoed Hiorns. “The deal removes a major overhang on the uncertainty that had weighed on transatlantic business confidence,” she said, adding that clarity, even if imperfect, allows businesses to “plan, adjust and adapt”.

Over the longer term, Hiorns agreed that markets could look through some of today’s risks and the deal “might turn into more of a positive towards the end of the year, once markets can focus on a broader reacceleration and fiscal stimulus rather than just the tariff noise”.

However, he cautioned that investors should not expect a linear recovery as there is usually a lag before investment turns into earnings, even if confidence improves, beforehand.

Other experts maintained a cautious tone. Russ Mould, investment director at AJ Bell, said this is far “from a done deal” as there are still “material uncertainties as to what even the new agreement could mean once it is implemented – assuming that it will be”.

Michael Browne, global investment strategist at Franklin Templeton Institute, welcomed the certainty the deal brings but warned that the tariff burden will vary across sectors.

“It is almost impossible for German autos [to absorb the cost] but plausible for luxury goods. If corporates are to raise prices by 15%, how much will the US consumer wear?” he asked.

He raised concerns about substitution risk – where US buyers switch permanently to alternative goods – especially in industries like steel. “This is potentially dangerous territory as it equates to a permanent loss of business,” he said.

Browne added that the uniform tariff rate reduces the incentive for tariff arbitrage, where companies shift production to countries with lower duties. “A 5% differential [like the one in place between Ireland and the UK] is probably not enough to warrant this, but some companies will undoubtedly shift.”

He also noted the scale of Europe’s concessions, highlighting the natural gas contract as “very important”.

“Effectively it ends the supply doubts that Europe has had since the end of Russian supplies of gas.” He added that the scale of energy and defence purchases would likely shape transatlantic economic ties for years to come,” he said.

Strategists also highlighted the deal’s interest rate implications. Browne said the agreement could “put a cap on the euro” by helping to clarify the US inflation outlook, “enabling the Federal Reserve to cut rates”.

As we mark the half-year mark, global markets remain unsettled by tariff disruptions, US growth concerns and lingering foreign policy challenges.

In this environment, with much of their revenue generated domestically or regionally, emerging market economies and companies are showing structural resilience and provide a compelling growth opportunity.

China and India stand out. Home to nearly 3 billion people, the real story lies in the transformative consumer and technological shifts underway. China is not only a massive consumer market but is a global technology leader, most notably in electric vehicles (EVs) and battery technology.

Local champions such as CATL, which dominates the global EV battery market with a 40% share, and BYD with 15%, the world’s leading EV manufacturer, highlight China’s ambition.

India, meanwhile, is emerging rapidly as a vast consumer market underpinned by sweeping reforms, infrastructure expansion and digital inclusion. Domestic consumption drives 60% of GDP.

The success of the Aadhaar identity system and the surge in affordable smartphones have propelled financial inclusion and e-commerce adoption. Companies like Indigo Airlines and Bharti Airtel are capitalising on India’s infrastructure growth and ambitious middle class.

Latin America is navigating the current landscape well also. The region is enjoying relative stability, buoyed by favourable trade dynamics, resilient currencies, and improving governance across key markets.

At the forefront is MercadoLibre, the region’s leading e-commerce platform and dominant force in digital payments – offering exposure to both consumer growth and financial inclusion.

Itaú Unibanco, Latin America’s largest bank, is another standout. With over 55 million customers and a growing digital footprint, Itaú reflects both the maturity and ongoing transformation of financial services in the region.

Meanwhile, LATAM Airlines, South America’s largest carrier, is rebounding as regional mobility and tourism accelerate.

Interestingly, Sea Limited in Southeast Asia is replicating the MercadoLibre playbook: building an integrated ecosystem across e-commerce (Shopee), digital payments (Monee), but including entertainment (Garena).

These integrated models are powerful because they generate cross-platform synergies, producing deep network effects and user retention.

This is impactful in emerging markets where traditional infrastructure is lacking, banking penetration is low, and the rise of digitisation enables rapid adoption.

For investors, the message is clear: emerging markets deserve a place in portfolios, but success requires careful stock selection. With over 2,500 investable companies, focusing on those delivering strong returns on equity, cash generation, and profit growth is key.

John Ewart is an investment manager at Aubrey Capital Management. The views expressed above should not be taken as investment advice.

Jet engine maker Rolls-Royce has been a standout performer in the UK market over recent years, as a strong corporate turnaround story, rebounding air travel, and promises of higher defence spending have boosted sentiment towards the company.

FE Analytics shows Rolls-Royce stocks have posted a 972% total return over the past three years, far outpacing the 37% rise in the FSTE All Share.

Performance of Rolls-Royce vs FTSE All Share over 3yrs

Source: FE Analytics

Over the same period, the firm has also made a higher total return than every one of the Magnificent Seven stocks (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia and Tesla), which have dominated headlines and market leadership for much of the recent past.

This rally means Rolls-Royce is now the fifth-biggest stock in UK market, accounting for 3.8% of the FTSE 100 and 3.3% of the FTSE All Share. Below, we look at the reasons behind this performance and which funds hold the biggest positions.

Why has Rolls-Royce outperformed?

Rolls-Royce’s share price has continued to rise sharply in 2025 following a strong run over the past three years, reflecting the progress in the company’s turnaround strategy under chief executive Tufan Erginbilgiç.

The group met key financial targets originally set for 2027 two years ahead of schedule, improving investor sentiment towards the stock. This included significant improvements in operating profit and free cash flow, underpinned by a sharp focus on cost discipline, simplification of the business and more rigorous capital allocation.

Performance of Rolls Royce vs FTSE All Share over 2025

Source: FE Analytics

Rolls-Royce’s civil aerospace division has been central to its earnings recovery in recent years.

A rebound in widebody air travel and higher utilisation rates pushed large engine flying hours above pre-pandemic levels. This boosted high-margin aftermarket revenue, particularly in engine maintenance and long-term service agreements.

Alongside this, Rolls-Royce’s engine order backlog has grown by over 11% year-on-year, supported by the sustained production momentum at Airbus and Boeing. The company remains a key supplier for both of these aerospace majors and its strong aftermarket performance has helped drive both margin expansion and predictable cash flow.

In recent months, Rolls-Royce’s defence business has become a more meaningful contributor to investor sentiment, as the UK and other European countries pledge to increase defence spending in light of growing geopolitical threats and pressure from the US.

The firm’s defence order intake has increased sharply, underpinned by substantial wins such as the £9bn ‘Unity’ submarine reactor contract with the UK Ministry of Defence. The group is also a core partner in the Global Combat Air Programme (GCAP), developing the propulsion system for the next-generation Tempest fighter platform.

These programmes, along with broader demand for naval and aviation propulsion systems, have lifted the defence backlog and provided greater visibility into future earnings. Rising defence budgets across Europe, Australia and other Indo-Pacific countries are creating sustained demand tailwinds, offering Rolls-Royce additional earnings resilience amid geopolitical uncertainty.

The group’s improved financial position has allowed it to resume shareholder distributions.

In early 2025, Rolls-Royce reinstated its dividend and launched a £1bn share buyback, reflecting a stronger balance sheet and renewed confidence in sustainable cash generation. Net debt has been eliminated and Fitch upgraded the company’s credit rating to investment grade.

Which funds hold Rolls-Royce?

FE Analytics shows that 84 funds in the Investment Association universe hold Rolls-Royce as one of their top 10 holdings. The 20 with the highest allocations are shown in the table below.

Source: FE Analytics, funds’ own factsheets

The funds with the two largest positions - Ninety One UK Special Situations and Ninety One Global Special Situations – are both managed by Alessandro Dicorrado, who has a value approach to investing.

Ninety One UK Special Situations, which has the biggest weighting to Rolls-Royce in the Investment Association universe, has performed strongly in recent years (although this cannot all be attributed to a single holding). It’s the third-best performing fund in the IA UK All Companies sector over one year and the best performer over three years.

In the fund’s annual report to the end of March 2025, Dicorrado noted the contribution of the stock to the fund’s total return, saying: “Jet-engine maker Rolls-Royce rose on the back of multiple hikes to guidance and future targets; the stock has now risen 10-fold in the space of less than three years.”

Other funds with Rolls-Royce as their largest holding (according to their most recent factsheets) include Ninety One Global Special Situations, Sanlam Active UK, CT Pan European Focus and JPM UK Equity Growth.

Sentiment towards the stock remains positive. JOHCM UK Dynamic managers Mark Costar, Tom Matthews and Vishal Bhatia highlighted Rolls Royce as a company that “continues to relentlessly execute”, through recent wins such as securing a landmark contract to build three small modular reactors in the UK and a cost-effective re-entry into the narrowbody engine market.

“These provide new medium-term avenues for growth, adding to the strong momentum at its power systems division and the clearly enhanced prospects for defence operations,” the managers said. “Despite stellar performance over recent years and a dizzying share price chart, remarkably, the equity is still not expensive; as a result, we retain a conviction position in this high-quality situation.”

Some managers are trimming the stock, however. In the latest update for Artemis UK Select, Ed Legget and Ambrose Faulks said they have taken profits from Rolls-Royce in recent months, even though it was one of the fund’s strongest contributors in the second quarter of 2025.

Trustnet users have increasingly been researching the funds run by Artemis Fund Managers this year, as the group jumps to the top of the performance tables in several sectors.

Over the first half of 2025, the most-viewed funds by Trustnet users were Vanguard LifeStrategy 80% Equity, Vanguard LifeStrategy 60% Equity, Fundsmith Equity, Artemis Global Income and Vanguard LifeStrategy 100% Equity.

Many of these funds are consistently popular with investors, but a closer look at Trustnet’s factsheet pageview data shows there has been some movement in the amount of overall research activity individual funds have been attracting.

Source: Trustnet, Google Analytics

The fund with the largest uptick in research by Trustnet readers is Artemis Global Income, which accounted for 0.91% of all factsheet views in the first half of the year. This is up significantly from the 0.41% it won in 2024.

This means the fund has become the fourth most-popular fund on Trustnet, rising from 20th place last year.

Artemis Global Income has been managed by Jacob de Tusch-Lec since inception 15 years ago in July 2010; he was joined by fund manager James Davidson in 2018 and analyst Yin Loke in 2023.

The fund is run with a contrarian approach, looking beyond ‘traditional’ income stocks to less well-known holding such as Japanese and Spanish banks, defence contractors and pork suppliers in emerging markets.

This contrarian tilt, which includes an underweight to the US, is part of the reason why the fund has grabbed investors’ attention in 2025 with its strong performance. At the end of 2025’s first half, Artemis Global Income was the highest-returning fund in the IA Global Equity Income sector over one, three and five years.

De Tusch-Lec explained: “We try to skate towards where we think the puck will go and we started this year with some big themes running through the portfolio.

“We took the view that there would be increased spending on defence that was not fully reflected in prices, the global economy was not going into recession and interest rates would remain reasonably high. The world is going through a regime change towards higher inflation, geopolitical conflict and more government intervention.”

Performance of Artemis Global Income vs sector and index in H1 2025

Source: FE Analytics

However, this is not the only Artemis fund that investors have been more interested in this year as the fund house experiences a period of strong returns. FE fundinfo data shows 54% of Artemis’ funds are in their sector’s first quartile over one year, 61% over three years and 71% over five years.

Joining Artemis Global Income in the top 25 funds with a higher research share on Trustnet this year are another five funds by the group: Artemis SmartGARP European Equity, Artemis UK Select, Artemis Monthly Distribution, Artemis SmartGARP UK Equity and Artemis US Smaller Companies.

All of these funds are also in the top quartile of their respective sector over one and three years, with all but Artemis US Smaller Companies holding this rank over 2025 so far as well.

Another common theme of the funds being researched more this year is a value approach. While growth investing has tended to hold market leadership since the 2008 global financial crisis, value has outperformed at times in recent years as inflation surged and central banks increased interest rates from their historic lows.

Some of the funds in the above table that take a more value or contrarian approach to investing include many of the Artemis strategies, Orbis Global Balanced, M&G Global Dividend, Ranmore Global Equity, Schroder Income and Man Income.

Of course, not all funds can be increasing their share of research activity. Those being hit with the largest falls in interest over the past six months compared with last year include Jupiter India, Royal London Global Equity Select, Baillie Gifford Managed, CFP SDL UK Buffettology, Fidelity UK Smaller Companies, Fundsmith Equity and L&G Global Technology Index Trust.

Change in Trustnet research share by sector over H1 2025

Source: Trustnet, Google Analytics

When it comes to how investor interest has changed towards Investment Association sectors, IA Mixed Investment 40-85% Shares saw the biggest jump. In 2024, the peer group accounted for 9% of factsheet views on Trustnet but this has increased to 9.66% this year.

Orbis Global Balanced benefitted from the largest increase in factsheet views this year, to the point where it went from being the 52nd most popular fund with Trustnet users to the 11th.

This is one of the funds with a contrarian approach, seeking out undervalued companies and investing in them with high conviction. This approach has worked in the recent years, with Orbis Global Balanced the highest-returning member of the sector over one, three and five years as well as over 2025 to date.

Investors have also been researching European equity funds more, driven by the continent’s improving economy and cracks in the ‘US exceptionalism’ narrative.

Equity income is also a theme as investor continued to make their money work harder amid higher inflation, with more research going into both the IA Global Equity Income and IA UK Equity Income sectors.

The FTSE 100 has been on a strong run over the past year, with some of the UK’s largest companies, including Natwest, Lloyds and Ashtead Group, propelling the index to new heights. The same can’t be said for smaller UK businesses, however.

Funds focused on the smaller end of the market have fallen flat over the past 12 months, as the chart below shows.

Performance of index and sectors over 1yr

Source: FE Analytics

Although the average UK small-cap fund has made a loss over the past year, tough markets aren’t just about containing the downside, with some funds thriving in this environment.

Below, Trustnet highlights the IA UK Smaller Companies funds that have managed to leave their peers behind and posted good returns in the past 12 months, despite the adversities.

Only three strategies have achieved a double-digit return in the period analysed: iShares MSCI UK Small Cap UCITS ETF (12.6%), Dimensional UK Small Companies (10.7%) and JPM UK Smaller Companies (10.4%).

Source: FE Analytics

The iShares exchange-traded fund (ETF) is designed to replicate the performance of the MSCI United Kingdom Small Cap index. The benchmark is key here, however, as the top end of the portfolio is made up of larger names such as financial advice firm St James’s Place, engineering firm Weir Group and distribution firm Diploma. All three are FTSE 100 names.

Among active managers, the closest to the top were one percentage point behind this tracker. In second place was £246.6m Dimensional UK Small Companies portfolio, which is made up of small positions (the largest is 1.7% in Direct Line Insurance Group) in as many as 320 stocks.

Meanwhile, the JPM strategy is co-managed by Georgina Brittain and Katen Patel, whose bottom-up stock selection has generated a 5.1% three-year alpha for the portfolio.

Chris Metcalfe, chief investment officer at iBoss, noted this fund when it outperformed during the most difficult time for UK smaller companies funds – Liz Truss’s failed mini-Budget in 2022.

“If we were to invest in the UK smaller companies sector again, it would potentially be through a fund such as this, where the managers have been in place for several years,” he told Trustnet last February.

The fund was also highlighted as one of the most consistent regional small-cap funds of the decade at the beginning of the year.

The managers’ largest overweights to the fund’s benchmark (the Numis Smaller Companies plus AIM) are banks (4.7%), construction companies (4.4%) and financials (4.1%).

Further down the list, Schroder UK Smaller Companies and its institutional version stood out, both managed by Andrew Brough.

These strategies performed in the high single digits, all the while maintaining relatively low volatility, as previously covered on Trustnet.

However, they haven’t always been as consistent and featured in Bestinvest’s Spot the Dog report in March last year. It was one of the only two IA UK Smaller Companies funds to end up in the study, which highlights consistent underperformers based on three-year data.

WS Gresham House UK Smaller Companies, Premier Miton Tellworth UK Smaller Companies and Artemis UK Smaller Companies also stood out.

Performance of fund against index and sector over 3yrs

Source: FE Analytics

These are popular names that have been recommended by experts multiple times on Trustnet. The Gresham House (£303m of assets under management, run by Ken Wotton) and Artemis strategies (£577m, co-run by Mark Niznik and William Tamworth) both have an FE fundinfo Crown Rating of five.

RMSR analysts praised the latter for its record of “steady and significant” outperformance, “deep understanding of individual companies” and “willingness to patiently build long-term positions”.

The team follows an anti-momentum approach and is comfortable buying stocks during downturns, “especially when valuations are attractive and risks are favourably skewed”.

Finally, the Tellworth strategy, co-run by FE fundinfo Alpha Managers John Warren and Paul Marriage, has a number of elements that set it apart from its peers, according to analysts at Square Mile.

They highlighted the managers’ commitment to a style-agnostic approach that remains true to the UK smaller companies universe.

While some rivals drift up the market-cap scale, this team continues to back often-overlooked businesses “where others may fear to tread”.

Most importantly, they said, it is managed by a “pragmatic and knowledgeable” team with a proven ability to navigate different market cycles.

This article is part of an ongoing series analysing the best funds in the worst-performing sectors. Previously, we covered China and India.

Multi-asset investing can be complicated. With a plethora of asset classes to choose from and even the potential to short stocks, investors can become overwhelmed by the sheer range of options and the dichotomy in returns on offer from fund groups.

For Simon Nichols, co-manager of the £3.6bn BNY Mellon Multi-Asset Balanced fund, “simplicity is underrated”.

“We try to keep our portfolio transparent – we don’t use any derivatives or more complex instruments,” he said, instead sticking to a more traditional pairing of equities and bonds.

The fund currently invests around 73% in global equities, 18% in bonds – specifically UK gilts and US treasuries – with the remainder in cash.

He uses a bottom-up approach, making sure that each investment in the portfolio “really speaks to each other”.

“We want to make sure that each individual component plays its role within the portfolio,” said Nichols.

Simple has proven to be effective, with the fund logging a top-quartile performance against its sector over one, three, five and 10 years, managing a 112.8% total return over the decade.

Performance of BNY Mellon Multi-Asset Balanced vs the sector over 10yr

Source: FE Analytics  

Below, Nichols explains why he doesn’t trade short-term anomalies, how disruption is the most exciting and worrying thing for fund managers and why he still believes in  life sciences despite the sector failing to rebound since Covid.

What is BNY Mellon Multi-Asset Balanced fund’s process?

We take a long-term view which, for this fund, means we don’t do a lot of trading. We look to invest in companies that we think have got a future-facing business model and we try to steer away from those companies that have perhaps got a more challenged structural backdrop. We are not looking to trade any kind of short-term valuation discrepancies that may appear in markets.

We also try to invest with conviction. We want our investment to make a difference. We have maybe 50 to 60 individual equity positions in the portfolio at any one point in time.

We try to have a consistency of approach which investors can understand. We also have the flexibility to invest anywhere, which has helped us stand the test of time with this portfolio.

What have been some of your best calls recently?

Over the past 12 to 18 months, equity markets have performed better than bond markets. If we look at our portfolio from a sectoral point of view, we were really helped by this and we think we are overweight relative to our peers.

GE Vernova has done really well for us – it was spun out of GE last year. It manufactures gas turbines for electricity generation, among other things. This is a play on the new technology wave and artificial intelligence (AI) – AI especially needs a lot of power and gas is a good transition fuel.

I think the market had thought that perhaps this was not going to be a company that could grow a lot, but it turns out there is an awful lot of demand for power.

It has been a strong contributor to returns between June 2024 and 2025 with GE Vernova’s share price increasing by 185% in GBP terms.

At the end of 25 June, the company had a 1.9% in the fund.

And your worst?

On the negative side of things is a company called Danaher, which is a US-listed company operating in the life science space.

We have held it for maybe two or three years now and found that the life science industry has not started to recover significantly from the very strong period it had through Covid-19. The market has been a little bit disappointed with the pace of recovery within Danaher.

Over the 12-month period to 30 June of this year, Danaher’s share price declined by 27% in GBP terms.

However, we have used that weakness to increase our holding – taking the long-term view, we tend to want to use weakness, if we still believe in a company, to increase our position. At the end of 25 June, it was a 1.1% position in the fund.

What is exciting you about investing at the moment?

The thing that both excites and worries us the most is the amount of disruption we’re seeing. The potential for future disruption also seems to be at very elevated levels. Of course, there will be winners from that disruption and there will be losers.

What do you do outside of fund management?

I’m a keen runner. I do think it’s important to get away from the desk and the screens to maintain perspective.

Over the shorter term, I’m teaching my daughter to drive, which is taking up a lot of my free time at the moment and is quite the experience.

President Donald Trump has talked openly (and backtracked) about firing Federal Reserve chair Jerome Powell in recent weeks as he continues to believe the Fed is holding back America by keeping interest rates high.

His argument is that rates should be slashed to 1% to help stimulate the economy but misses out on some key problems. For starters, it will discourage investors from buying US debt, which will likely be required in the future as his Big Beautiful Bill Act, which promises tax cuts and spending, will almost certainly need to be financed from additional debt. It isn’t coming from meaningful budget cuts, that’s for sure.

This one issue is a microcosm of the Trump presidency so far. The US feels like a minefield: both politically and economically.

Strong arguments in favour of certain policies have their drawbacks that are often swept under the rug, while one set of economic data can seemingly contradict another.

I thought that the start of the year 2025 would be a period of prosperity for American companies (given how business-friendly Trump was during his first term), but this time around, there is far more chaos.

Markets typically hate chaos and uncertainty, which is why the S&P 500 has fallen behind the rest of the world this year.

Yet, while many fund managers and experts have suggested now is the time to diversify away from the US, many others continue to have high weightings to the world’s largest market.

It makes sense. America continues to be the most growth-oriented market in the world, housing some of the most innovative and disruptive companies. And these mega-cap tech stocks dominate the global investing landscape.

In a world that continues to evolve and grow, markets with older, more defensive companies (I’m looking at you, UK) risk being left behind.

Dominated by banks, miners and oil, these companies are all solid businesses, but they are not leading the next wave of innovation and are therefore unlikely to profit from things like artificial intelligence, electric vehicles and the disruptions we do not yet know about.

Businesses will adapt and use these innovations, sure, but they are not going to be the ones making the meaningful gains from producing these technologies.

So what should investors do? In the short term, the US is as risky as I can ever remember it being. Spats between the president and the Federal Reserve, a potentially inflation-turbocharging ‘Big Beautiful Bill Act’ and a fracturing of the post-World War Two global order mean there are serious risks with lumping money into American stocks.

Throw in the fact that the US dollar is weakening and, from a UK perspective, returns might fail to live up to expectations.

But over the long term, it probably remains the best bet for investors who want to capitalise on an ever-changing world full of future growth potential. Silicon Valley remains a hive of innovation.

Diversification will help, particularly in the short term, but will not insulate investors from the worst, if this chaos continues for the next three years.

Investors should absolutely prioritise broadening their portfolios, but longer term should keep a healthy chunk in the US. They may just have to get used to taking many more lumps along the way than they have in the past.

M&G considers whether European markets are on the path to renewed strength.

Invesco looks at the big headlines of Q2 and their short-term impact on the market.

Allianz dives into the evolving debate on the future of software.

PGIM presents survey insights on the issues that matter most to key decision makers in fund selection.

Investors across both the retail and institutional space are increasingly looking to private markets for investment opportunities, with private-equity assets under management projected to reach £7.4trn globally by 2029.

The trend is potentially beneficial to portfolios, according to Rob Morgan, chief investment analyst at Charles Stanley, who said that the world of private investments can be “a source of diversification and decent returns for investors”.

The £41bn 3i Group is the “behemoth” of the private-equity investment-trust world, noted Morgan, pointing to its strong growth record and FTSE 100 status.

Performance of 3i Group against the benchmark and sector over 1yr

Source: Fe Analytics

However, it isn’t your typical private equity trust, with the vast majority (around 60%) of its entire asset base tied up in European supermarket retailer Action, which has driven a large part of 3i’s strong returns, especially in the past five years.

The large exposure to one company does bring about significant specific company risk versus a typical investment trust or fund, Morgan warned.

“In some ways, this is a shame as other elements of the portfolio are somewhat crowded out,” he said.

Fortunately, the growth story of Action and its impact on 3i performance thus far holds “considerable appeal”, with the fund boasting an almost 68% premium to net asset value (NAV) – paired with a 1.3% ongoing charges figure (OCF).

Trustnet asked three experts which funds they would hold alongside 3i Group to ensure investors interested in private markets can gain a more diverse exposure to private equity.

Alliance Witan

For James Carthew, head of investment companies at QuotedData, the priority is to ensure there is maximum diversity to complement 3i’s more targeted approach.

He suggested the Alliance Witan investment trust, noting that it offers exposure to the “best ideas of some of the world’s best fund managers”, with around 20 stocks per manager, or just over 200 holdings in total.

Performance of the trust against the benchmark and sector over 1yr

Source: FE Analytics

“It comes with a more attractive dividend yield than 3i (2.2% versus 1.7%) and is also a large, liquid FTSE 100 constituent with a market cap of £4.9bn,” he said.

It’s also cheaper, trading at a 5.27% discount to NAV with a 0.56% OCF.

Top holdings are dominated by US tech, including Microsoft, Amazon and Alphabet, alongside healthcare stocks such as Novo Nordisk.

NB Private Equity Partners

But there is also the option to double down on private equity.

Ben Yearsley, investment consultant at Fairview Investing, has been a “fan of private equity for many years”, and it forms a big part of his investment portfolios.

“Over the long term, the returns are excellent from private equity, and the beauty of it is companies are unique – you don’t find them in any index; therefore, they add genuine diversification to portfolios.”

He pointed to NB Private Equity Partners as a potential option to sit alongside 3i, noting it is well-diversified and has been investing progressively more into direct companies and away from private equity funds – “closer to the action and lower fees”.

Performance of the trust against the sector over 1yr

Source: FE Analytics

NB Private Equity Partners is currently trading at a 28.8% discount to NAV. It is mostly investing in telecom, media and technology (44%), alongside industrials and financial services, at 17% and 14% respectively.

Given private markets carry a higher risk, Yearsley said he would look at an absolute maximum 10% stake in private equity overall, split between 3i Group and NB Private Equity Partners.

Pantheon International

Morgan from Charles Stanley suggested that broader private equity trusts, such as the £1.5bn Pantheon International, will provide a “varied approach to the asset class”.

The strategy combines stakes in leading third-party funds with co-investments in single assets, which Morgan said makes it an appealing “one-stop shop” for investors wanting diversified private equity exposure.

“There’s also a strong leaning towards cash-generative mature buyout and growth-capital investments rather than early-stage venture capital, so Pantheon is likely to be a less volatile option than those based towards the latter,” Morgan said.

Performance of the trust against the sector over 1yr

Source: FE Analytics

Pantheon International shares presently trade at a 34.2% discount to NAV. “That’s significantly narrower than a year ago, thanks to some concerted efforts by the board to reduce it through share buybacks,” said Morgan.

He suggested that an 80/20 split in favour of Pantheon would be appropriate to have a more diverse core holding in the asset class, alongside a “punchier satellite position that is oriented towards a single business”.