Having ‘skin in the game’ is prized in fund management, as wins and losses are mutually shared between managers and their investors.

Gabrielle Boyle has taken that to heart, revealing that all her wealth and that of her family is invested in the £545m Trojan Global Equity fund she manages.

Below, she reveals why the concentrated 28-stock portfolio meets all her needs and those of her family, who are also fully committed to the strategy.

This has served them well so far, with the fund generating an average return of about 12% annually since inception in March 2006 and ranking in the first quartile of its peers over the past one, three and 10 years (and second quartile over five).

Performance of fund against index and sector over 1yr

Source: FE Analytics

Please describe your philosophy

Troy’s ethos is to protect and grow our investors’ capital. While this principle still holds, the Trojan Global Equity fund differs in that it is fully invested in global equities.

The portfolio is built on the premise that equity markets tend to underestimate the longevity and the compounding power of really rare and special businesses that can grow at high rates of return overtime. What we try to do is find those companies, not pay too much for them and then let them do the work for us, benefitting from the compounding of their earnings and cashflows over time.

What does that mean in practice?

We actively avoid fragile businesses, companies that are very capital intensive or have low margins. Instead, we prefer resilient companies that have high barriers to entry, clearly demonstrated competitive advantages and are highly financially productive, with high operating margins and very high pre-cashflow rates.

Throughout my career, the defining feature has been technological change, so we want companies that embrace change by reinvesting consistently in innovation.

How has the strategy evolved over time?

Historically, we owned companies that were slower-growing and more capital intensive. In the early days of the strategy, for example, we would have had significant exposure to consumer staples companies and we would have said that some of these companies, for example Colgate, were a poster child of what we aim to do.

Over time, the bar for what good looks like has risen and we have found better opportunities in companies such as Visa, Alphabet and Microsoft, which are unbelievably profitable, have been growing at very high rates and have got very high free cashflow margins. That's been a key part of the evolution of the of the fund.

Are these companies more expensive to buy?

We place a lot of importance on not paying too much for these companies – it goes back to our heritage at Troy, where we don't want to expose our investors to huge amounts of valuation risk.

We are not paying a significant premium for high financial productivity and high growth rate. The free cashflow yield of our companies, which is what we tend to focus on as a valuation metric, is higher than the average company in the index.

What were your best and worst calls of the past year?

It’s been a ‘last will be first’ situation – some of our stocks, which were disappointing last year, have been fantastic this year.

As a case in point, Heineken was disappointing last year but it's been one of our best performing shares this year, with a base contribution of 0.8 percentage points (pp) over the year-to-date and 0.3pp over 12 months.

Healthcare companies have been a driver of returns over the past couple of years and in a relative sense, they've been really very resilient this year.

In terms of what has hurt, it’s no surprise that some of our technology names, including Alphabet, Adobe and Microsoft, have sold off along with the broader sell-off in technology, with Alphabet losing the most year to date (-1.4pp). Diageo has also been a drag (-0.4pp).

Why should investors pick this fund?

The reason why my family and I have all our money in this fund is because it generates consistent capital growth over the long term without taking undue risk.

It's a buy-and-hold fund and you will go through periods of volatility, but if you're prepared to take a long-term investment horizon, you should expect to get a very good return without having to stress too much.

Is all your money truly only invested in the 28 stocks you own in this fund?

We obviously have a house and all of that and we have some money invested in Troy, and but by far and away, the majority of our financial assets are invested in this fund; 28 stocks is all you need.

What do you do outside of work?

I have four children, so that keeps me busy. But my favourite hobby is riding horses – I particularly like cross-country jumping. I'm a trustee of a charity called South-East Rural Charitable Trust, where we raise money for local charitable causes by going out on a Saturday and jumping hedges and other natural obstacles across the beautiful Sussex countryside.

This week, the UK signed two major trade agreements: one with India, the other with the United States. Both were marketed as diplomatic wins. But only one shows what serious trade strategy looks like.

The India deal reflects long-term planning, grounded in mutual interest and economic alignment. The US agreement, by contrast, is a tactical fix to avoid further damage from tariffs that Washington imposed in the first place. It grabs headlines but offers little of lasting value.

The India agreement, signed on 6 May, is the most comprehensive trade pact the UK has negotiated since leaving the European Union. It is broad, detailed and economically significant.

India will scrap tariffs on 99% of UK exports, while the UK will remove duties on 90% of Indian goods. For British whisky producers, that means a halving of India’s 150% tariff, with further cuts to follow. UK carmakers – until now locked out by 100% import taxes – will see those duties fall to 10%.

But the value of this deal goes beyond tariffs. It opens access to India’s vast procurement market, worth £38bn annually. It includes provisions for professional services, visa access for Indian workers and removes double national insurance payments for temporary staff on both sides.

It’s a step toward something deeper: an institutional framework that can evolve. For a UK increasingly focused on the Indo-Pacific, this agreement aligns trade with foreign policy.

Still, the deal isn’t without friction. Key areas – such as investment protections – remain unresolved. Services liberalisation is patchy and many tariff reductions will be phased in over a decade. Implementation won’t be simple, especially given India’s complex regulatory environment and history of slow follow-through on trade reforms.

But this is what strategic trade policy looks like. It identifies a partner with long-term growth potential and crafts terms that build mutual benefit over time.

Now consider the US deal, announced two days later. On paper, it’s a “very large” agreement, as US president Donald Trump declared. In practice, it’s little more than a climb-down from a trade conflict that Trump himself provoked.

Earlier this year, the Trump administration imposed a sweeping 10% baseline tariff on most imports. That move hit the UK hard – particularly in autos and steel. The new deal offers partial relief.

The US will lower car tariffs from 27.5% to 10% – but only for up to 100,000 UK-made vehicles annually. It will also lift duties on British steel and aluminium. In exchange, the UK will import large volumes of US ethanol and allow 13,000 metric tons of American beef.

British officials stress that food safety standards remain intact – there will be no chlorinated chicken or hormone-fed beef. That these reassurances are needed speaks to the deal’s political awkwardness.

There’s no movement on digital trade, financial services or regulatory cooperation. For all the fanfare, there’s no deeper architecture behind this agreement.

Even so, the deal has practical value. For UK manufacturers facing sudden tariff hikes, it’s a lifeline. In an era of rising protectionism, even partial exemptions can be commercially significant.

Still, this is not trade strategy. It might be best to see it as trade triage. The deal doesn’t open new doors, just props open ones that Washington had slammed shut.

The imbalance in leverage is obvious. Trump gets to prove his tariff-first doctrine works. UK prime minister Kier Starmer avoids economic fallout at home. But there’s no pretending this is a structural win for the UK.

That’s the real contrast. The India deal looks forward toward market diversification, economic growth and shared opportunity. The US deal looks inward toward political optics, defensive positioning and short-term damage control.

This distinction matters, because it speaks to a deeper question: what kind of trade power does the UK want to be?

Since Brexit, the UK has struggled to define a coherent trade identity. It talks about ‘Global Britain’, but the substance has been uneven. Some agreements, like the India deal, show what smart, persistent diplomacy can achieve. Others, like this US pact, reveal how sharply UK ambitions have collided with the realities of negotiating alone in an increasingly protectionist world.

That’s not entirely the UK’s fault. Under the current US administration, protectionism has returned as official policy. And in that context, salvaging partial exemptions may be the best outcome available. But let’s not confuse that for progress.

If the UK wants to be a relevant force in global trade, it needs to act with strategic clarity. That means building deep partnerships in growth regions, not just scrambling to contain fallout with legacy allies.

It also means understanding that not all trade deals are created equal. Some shift the trajectory of trade flows and institutional alignment. Others simply plug holes in the hull.

In this tale of two deals, one points toward the future. The other tries not to lose more ground in the present.

Knowing the difference is what separates trade policy from trade politics. And today, the UK can no longer afford to confuse the two.

Knowing when to cut your losses and when to hold out for a recovery is a question investors frequently grapple with – especially during last month’s market turmoil, when many portfolio holdings were deep in the red.

The temptation to sell grows stronger when an investment has been underperforming for what feels like too long. But exiting too early can lock in losses, and investors often end up chasing strategies that are simply in vogue at the time.

David Lewis, co-manager of the Jupiter Merlin fund-of-funds range, continues to hold at least three long-underperforming positions in the Jupiter Merlin Balanced fund, choosing patience over reaction as he allows them time to play out.

One holding that has truly tested investors’ patience is Fundsmith Equity. It last ranked in the top performance quartile within the IA Global sector in 2019, slipped to the second quartile in 2020 and fell further to the third quartile in 2022, where it remained. Over the past 12 months, it has declined by 3.5%, placing it in the bottom quartile compared to its peers.

Money has flowed out of the fund of late, suggesting investors have started to lose faith in the portfolio, but experts are sticking with it – including Lewis, who argued that underperformance is sometimes just a relative concept.

Performance of fund against index and sector over 5yrs

Source: FE Analytics

“It all depends on what a fund is underperforming against, and whether that is a relevant comparison to how you think a fund should or shouldn't have done,” he said. “Particularly for something like Fundsmith, how relevant is the comparison with the IA Global sector?”

Any market is a blend of growth and value, and each fund should be judged against its own kind, as returns are often polarised in one of the two styles.

“If your manager is very specifically looking at only one cohort of companies and the markets have been driven by the other, should you be penalising them?” he asked.

 “Would you hold it against your manager if they hadn’t invested in oil and gas and mining companies or any outperforming asset class that you knew from the start they would never hold?”

Many funds similar to Fundsmith have delivered comparable performance in recent times. For example, Lewis pointed to the Evenlode Global Equity fund, which he holds in other Merlin strategies, as taking a similar quality-growth and free cashflow yield approach to Fundsmith. Looking at that peer group, Smith’s performance looks “much more reasonable”.

“All managers who haven’t been focusing on stocks such as the Magnificent Seven have had far less strong performances than the sector average, but this comparison would be unfair to them,” he said.

Another key question investors should ask themselves is whether the manager can turn that underperformance around.

For Fundsmith, Lewis has a clear answer: “Smith himself is as sharp as he ever has been and he has got a really good portfolio of companies which, for the moment, have been out of favour, but as winds change, things could come back his way,” he said.

“We still believe that investing in quality compound-type companies is an efficacious way to do things.”

The growth-versus-value debate has been a key factor in the UK as well, where Lewis has three holdings – Man Income, Jupiter UK Income and Evenlode Income.

The first two have been among his best calls of the past year, as he recently told Trustnet, while the Evenlode fund was among the worst, with below-average performance over one, three and five years, as well as shorter timeframes.

Performance of fund against sector over 5yrs

Source: FE Analytics

In this case, the manager is holding on to all three for the added benefit of diversification.

“I suppose we've got something of a barbell in the UK, with Man Income and Jupiter Income on one side and Evenlode Income on the other, which is very much on more quality-growth end of the spectrum,” he said.

“The more growth-orientated managers within the UK have certainly done less well lately, but there's nothing wrong with having a blend of different managers, you don't want all your eggs in one basket.”

As for the Jupiter Strategic Bond fund, the past couple of years have been very challenging for flexible bond managers to navigate, with few historical precedents.

Performance of fund against sector over 5yrs

Source: FE Analytics

Lewis remains comfortable holding managers who “retain an eye on the risks and the downside”. He has “certainly been encouraged” that underperforming strategies like Jupiter Strategic Bond have fared better in 2025 to date, as volatility has risen in this environment of heightened economic and geopolitical risk.

Mid-cap stocks could be an attractive destination for investors hoping to avoid the worst of the market’s volatility despite underperforming their larger peers for several years, research by Aberdeen suggests.

Analysis by the fund management house suggests a combination of historically low valuations, diversification benefits, an attractive risk/return balance and strong long-term performance has put mid-caps in a “sweet spot” during uncertain markets.

Recent years have seen investors flock to large-caps, as lacklustre economic growth dampened sentiment towards companies further down the market capitalisation spectrum. In addition, some of the strongest stocks in recent years have been larger companies, such as the Magnificent Seven tech mega-caps.

Valuations of mid-caps vs large-caps

Source: Aberdeen, Bloomberg, to 31 Mar 2025

FE Analytics shows the MSCI World Mid Cap index has made a total return of 61.8% versus a gain of 84.4% from the MSCI World Large Cap over five years to 7 May in sterling terms.

But analysts at Aberdeen used data going back to 2009 and found medium-sized companies are currently trading at their lowest valuations on record compared with large firms, as the chart above shows.

This is despite the fact that they have generated higher returns than large-caps over the past 25 years and offer diversification benefits for investors cautious about the outlook for US stocks. While 73% of the MSCI World Large Cap index is in US stocks, just 60% of the mid-cap index is allocated there.

What’s more, the average volatility of the MSCI World Mid-Cap index was lower than for global small-caps, adding support to Aberdeen’s view that global mid-caps sit in a “sweet spot” in the current market uncertainty.

Risk vs return of global indices over 25yrs

Source: Aberdeen, Morningstar, 27 Apr 2025. Average over 25 years, in US dollars

Anjli Shah, manager of the abrdn SICAV I Global Mid Cap Equity fund, said: “Globally mid-caps have long been overlooked and under-loved by investors. Still today there are only a handful of global funds that focus exclusively on this part of the market. But, considering the diversification benefits they offer, now may be the time for investors to consider introducing a specific allocation to mid-caps into their portfolios.

“For companies to have made it from small to mid-cap, they tend to have established and resilient business models while remaining nimble. Thus, mid-caps can potentially offer lower levels of risk than small-caps.

“Despite these attractive characteristics, market inefficiencies still exist. Mid-caps are often under-researched and under-covered versus large-caps. These market inefficiencies present an opportunity for us to find hidden gems. Investors buying in currently would be investing at a time of record low valuations relative to large-caps – which could be an attractive entry point.”

Trustnet looked at 26 dedicated mid-cap funds in the Investment Association universe with at least five years of track record and found that none have achieved top-quartile returns over the past half-decade.

Only one is in the second quartile (Schroder UK Mid 250, which is in the IA UK All Companies sector). There are 17 in their sector’s third quartile and eight in the bottom quartile.

However, there has been an uptick in relative performance over the past month, after investors sold out of expensive US mega-caps in the wake of president Donald Trump’s Liberation Day trade tariffs.

In April, 19 of the 29 mid-cap funds with a long enough track record were in the top quartile of their respective sector, with three in the second quartile and one in the third quartile. Just six made bottom quartile returns.

Among the first-quartile funds over one month are abrdn UK Mid Cap Equity, Jupiter UK Mid Cap, Schroder UK Mid 250, iShares EURO STOXX Mid UCITS ETF and abrdn SICAV I Global Mid Cap Equity. It should be kept in mind that a month is a very short period to examine performance.

The IA UK All Companies sector is the peer group with the most dedicated mid-cap funds – 14 of the 29 we looked at reside in this sector. What’s more 13 of them are in the top quartile over the past month, while the remaining fund (Royal London UK Mid-Cap Growth) is in the second quartile.

Rebecca Maclean, co-manager of the Dunedin Income Growth Investment Trust, is among the managers who think the UK is a particularly attractive destination for mid-cap investors.

“We see numerous compelling opportunities among UK mid-caps for long-term investors. Recent market turmoil and slowing global growth have renewed investor attention on the UK mid-cap sector, which offers superior earnings growth, a stronger domestic focus and a persistent valuation gap relative to large caps,” she argued.

She added that UK mid-caps have distinct advantages over the FTSE 100. Some 50% of FTSE 250 revenues come from the UK, whereas around four-fifths of large-caps’ revenues are international, making mid-caps more closely aligned with domestic economic trends.

Meanwhile, the UK mid-cap index has historically delivered stronger long-term earnings growth than the FTSE 100, with projections suggesting this trend will continue going forward.

“Crucially for long-term investors, UK equities remain undervalued and this is particularly evident in the mid-cap segment,” Maclean finished.

“The UK market is currently trading 20% below its long-term average price-to-earnings (P/E) ratio while the FTSE 250 is at a 20-year low in P/E discount relative to the FTSE 100.”

Amid the general sense of doom pervading at the moment, could we be seeing a chink of light for UK markets? An interview given by BlackRock’s chief executive, Larry Fink in The Times perhaps suggests so.

Fink said that BlackRock had been busy snapping up billions of pounds worth of UK assets that it sees as undervalued. Peek through the gloom and you can certainly see why.

We’ll leave politics to one side as much as we can, but note that much of Fink’s positivity stems from BlackRock having more confidence in the outlook for the UK economy today than he did this time last year. The new government is, he said, “trying to tackle some of the hard issues”. As one can see from elsewhere in the world, stable politics is worth a lot these days.

The risks are that higher taxes on business weigh on confidence and potentially lead to job losses as UK plc tries to cut costs and maintain profit margins. Still, wage growth is chugging along, consumers have excess disposable income built up through the pandemic, corporate balance sheets are strong and interest rates are falling.

On a valuation point, too, Fink’s optimism seems on solid ground. He talked about discounts being too deep in many areas of the UK market. One can certainly see his point.

UK markets all round look cheap, whether compared to peers but also to their recent history. Indeed, on a trailing price-to-earnings (P/E) ratio of 12.5x, the UK’s blue-chip FTSE 100 index is at a c. 10% discount to its five-year average P/E of 14.1x.

Look further down the market cap spectrum and things appear even better value. The mid-cap FTSE 250 index, on a trailing P/E of 15.1x, is at a 37% discount to its five-year average. The FTSE AIM 100 Index is essentially on a half-price sale.

Of course, things might take a while to get better, but that’s okay because you’re also being paid to wait: the FTSE 250 has a dividend yield that’s broadly similar to the FTSE 100, at 3.5% and 3.8% respectively – a rare occurrence. Even the AIM 100 index yields 2.4%.

Investment companies provide the perfect way to benefit from what could be a potentially powerful recovery in UK assets for a few reasons. First, they’re mostly trading on discounts to net asset value themselves, providing a double discount. Second, as well as having plenty of equity options, you can also access the UK infrastructure, renewables and property space. Fink in particular highlighted infrastructure as a key area of focus for BlackRock.

The first point of call is the stock market, where Fink said that “so many of the UK stocks’ discounts were too deep”. He singled out the banking sector, which has bounced significantly.

Exposure to areas like this could be gained through best-of-breed trusts in the UK equity income space, such as City of London and Edinburgh Investment Trust. Both benefit from low ongoing charges, growing dividends and cheap valuations with plenty of scope for discounts to narrow.

While both are predominantly large-cap funds, Edinburgh’s manager Imran Sattar has been seeing opportunities within the mid-cap space recently, with the private rental homes provider Grainger a notable recent addition.

Moving into the small-cap space, Rockwood Strategic provides a differentiated, high-conviction approach to investing in the UK, with manager Richard Staveley hunting for overlooked companies trading at significant valuation discounts to their intrinsic value and long-term potential.

Rookwood Strategic has proven one of the best-performing trusts in the smaller companies sector and seems, in our view, one of the purest ways of attaining the valuation discount that remains within the UK market.

Another valuation-conscious strategy here is Aberforth Smaller Companies, whose six-strong management team look to identify solid firms trading at temporarily depressed valuations and hold them through their share price recovery. In particular, they have benefited from the ongoing M&A boom, which has helped realise value in several portfolio holdings.

There are plenty of opportunities outside of equities, too, with Fink suggesting that the plethora of “frightened” money sitting in bank accounts could be used to fund projects such as power grids, railways or data centres.

HICL Infrastructure and The Renewables Infrastructure Group (TRIG) each have two-thirds of their portfolios invested in the UK, with overseas diversification to boot. Both own offshore wind farms, with HICL also investing in rail operators and railways, hospitals and roads, and TRIG invests in solar parks and battery storage assets. TRIG faced operational challenges recently, but both trusts have been reducing their debt levels and committing to share buybacks to try to tackle their wide discounts.

A purer play on UK infrastructure could come from Greencoat UK Wind, the fifth-largest owner of wind farms in the UK and the largest and most liquid trust in the renewable energy infrastructure.

The dividend yields on this trio of infrastructure trusts are in the region of between 7% and 9%, providing a meaningful yield pick-up over the 10-year gilt yield, which is currently 4.4%. Indeed, Greencoat’s management team suspects that falling long-term bond yields will be one of the two main catalysts for narrowing discounts, alongside a thinning out of the wider alternative income sector.

A third and final potential play within the UK is property. We’ve already seen private equity houses taking interest in the sector, with Balanced Commercial Property and abrdn Property Income agreeing to portfolio sales last year and Assura and Warehouse REIT being targeted this year.

Picton Property Income and Schroder Real Estate have both responded to difficulties within certain property sectors, such as offices and high-street retail, in innovative ways. Picton has successfully repurposed buildings for alternative use, such as residential and student accommodation, while Schroders is attempting to harness the green premium by making its buildings more energy efficient in the hope of attracting higher rents.

Despite today’s geopolitical turmoil, opportunities abound – and heavily discounted UK assets may be ripe for a powerful bounce although, as ever, patience is warranted.

David Brenchley is an investment specialist at Kepler Trust Intelligence. The views expressed above should not be taken as investment advice.

The stock markets are full of expressions of all kinds: don't catch a falling knife; the trend is your friend; buy the rumour, sell the news … But there is one that truly endures: sell in May and go away. Not a year goes by without analysts and the media trotting it back out. So, how true is it?

The question is particularly pertinent this year, given the dramatic movements in stock markets following Donald Trump's announcements on tariffs, disappointing US economic figures and mixed corporate results.

While gold and the Swiss franc benefited from the uncertainty, equities, particularly cyclical and technology stocks, experienced erratic movements. Against this backdrop, doubts about global growth are weighing on risk appetite.

It is in this ambivalent context that the ‘selling in May’ debate is resurfacing.

What history tells us

Historical data going back to 1928 shows that the best performing six-month rolling period, on average, runs from November to April. Hence the saying that investors should ‘sell in May and go away’ – and come back in November.

In an ‘average’ year, the S&P 500 index experiences its first significant correction in mid-May, with the index not exceeding these levels again until early July. An upward trajectory then resumes until a second major correction takes place in September. This ‘pause' tends to last longer, with the market not breaking through these levels until mid-December. The ‘Santa rally’ then takes hold.

In terms of volatility, there is no doubt that the average year sees volatility increase the most between mid-September and mid-November, with October being historically quite extreme.

There is therefore some truth in the saying that May sees the first correction of the year on average, but July is historically one of the best months of the year.

Since 1990, the S&P 500 has gained an average of around 3% from May to October. By comparison, the average gain was around 6.3% from November to April. This outperformance is observed not only for US large-caps, but also for small-caps and global equities – as measured by the respective S&P indices.

In addition, strategies that rotate between different market capitalisations have historically performed even better on average.

What’s behind this ‘theory’?

There are several reasons for the ‘sell in May and go away’ theory. Investors are convinced that at the start of the summer, the absence of market participants due to the holidays can create an environment of low volume and low returns.

The seasonality of investment flows may also persist because of year-end bonuses in the financial and corporate sectors, with the mid-April deadline for filing US tax returns a possible contributing factor.

The average gain in the Dow Jones over the past 10 years for the November to April period was 27.5%, compared with an average of 2.9% for the May to October periods that followed.

The post-election context

This year began with a major political change in the US. Historically, stock markets tend to rebound after the election when a Republican president who favours tax cuts takes office. But since January, US indices have been extremely volatile on the back of promises of changes in the tax code but also uncertainties over trade policies, and this could continue between May and October. We will therefore have to keep a close eye on developments in international trade negotiations and their impact on investor confidence.

Why are there flaws in the theory?

More often than not, shares tend to make gains throughout the year, so selling in May generally doesn't make much sense. History shows that the opportunity cost of periodically exiting and re-entering the market can be significant.

What's more, the ease with which you can monitor your investments (compared with decades ago, when this theory of the calendar was first created) means that you can more easily follow the market and make changes to your investments at any time of the year.

Finally, it should also be remembered that yields have varied widely, not only between the periods of November to April and May to October, but also within these periods.

Would you rather think about rotation?

Since 1990 there has been a clear divergence in sector performance between the two periods – with cyclical sectors easily outperforming defensive sectors, on average, during the ‘best six months’ of the year. In particular, the consumer discretionary, industrials, materials and technology sectors outperformed the rest of the market from November to April. On the other hand, defensive sectors outperformed the market from May to October during this period.

Based on these observations, the investment research provider CFRA created an equal-weighted seasonal turnover index in April 2018.

It is also important to recognise that calendar-based stock market trends such as ‘sell in May’ do not take into account the uniqueness of each period: the economic environment, the business cycle and the market that differentiate the present from the past.

Ultimately, investors need to look at the market over the medium to long term, which takes away some of the stress.

John Plassard is a senior investment specialist at Mirabaud Group. The views expressed above should not be taken as investment advice.

The Bank of England’s Monetary Policy Committee (MPC) has trimmed interest rates by 25 basis points to 4.25% at today's meeting, in line with market expectations.

This decision reflected “continued progress in disinflation, though with risks to inflation remaining in both directions”, according to the monetary policy report.

Zara Nokes, global market analyst at JP Morgan Asset Management, said: “The economic engine is sputtering as the UK contends with a double whammy of domestic tax increases alongside trade headwinds emanating from Washington. Business confidence has deteriorated sharply as a result and, crucially, cracks are now showing in the labour market.”

However, this was not a unanimous vote, with a three-way split in the voting patterns. Five members of the MPC voted in favour of the 25bps cut, with two other members voting in favour of a more aggressive cut, while two others opted to hold rates.

Lindsey James, investment strategist at Quilter, said today’s move was widely anticipated by markets. “Investors are betting on three further rate cuts this year as rising risks to growth look likely to supersede inflationary threats in the coming months,” she added.

However, George Brown, senior economist at Schroders, believes the Bank of England has far less scope to cut rates than the market currently expects because the UK faces significant capacity constraints.

With inflation set to rise again later this year, due to “disappointing productivity and sticky wage growth”, the bank will likely only take interest rates “as low as around 4% this rate-cutting cycle”, he predicted.  

Indeed, the bank explained it would favour a “gradual and careful approach” to monetary policy moving forward, pointing to slowing GDP growth, the potential for rising inflation due to energy prices and volatility in global markets.

Baillie Gifford is synonymous with growth investing. When investors conjure an image of the Edinburgh-based firm they may well think of Scottish Mortgage or any of the plethora of growth funds that invest in high-risk, high-reward companies.

But one trust going against the grain is Scottish American (nicknamed SAINTS). Managed by James Dow, it focuses on a total return of both income and capital gains.

It is so differentiated from the typical portfolio at Baillie Gifford that it invests in something few would expect the asset management firm to own: property.

Some 9% of the trust (or £95m) is invested in direct property through an independent manager and its portfolio is far removed from the data centres or high-tech warehouses one might expect a cutting-edge firm like Baillie Gifford to buy.

The portfolio, which at the end of December stood at 11 holdings, includes properties rented out to two Aldi Supermarkets, two Greene King pubs, two Premier Inn hotels and a motorway service station.

It is rounded out by a Park Resorts holiday village, a Hollywood Bowl bowling alley, a Booker’s warehouse and an industrial site.

Manager James Dow said property has been part of the fund since around 1995 and is primarily paid for through the trust’s gearing, which currently stands at 4%.

This borrowing is long-term debt due in 2048 with a fixed rate of 3%, which Dow said was a level where the trust can make “extra income by investing in non-equity asset classes”.

“The thing that is interesting about them is, unusually for properties, they have all got either inflation-linked or index-linked increases in the rental over time. That is the trick of it. We can borrow at 3%, and that never goes up, but we get inflation-linked increases on the rent from these properties,” the Scottish American manager said.

“That’s quite attractive and the capital value goes up over time as well. It’s an interesting opportunity. The manager has a terrific track record of finding esoteric opportunities. They are not terribly exciting except when you look back at the long-term record.”

While the property portfolio is designed to increase the trust’s yield, at 3% it remains low compared to the rest of its sector (it is the second lowest yield among the seven IT Global Equity Income trusts) and other income-generating assets such as government bonds or savings accounts. Dow defended the dividend yield, however.

“Some people are going to say they will take their 4.5% nominal gilt or government bond or bank account paying 3.5% but there are a lot of savers who think this is a really resilient income stream they can rely on,” the manager said.

At the other end of the spectrum, “some things offer a 7% yield and you’ll get it for the first couple of years and then you’ll be like ‘what happened?’ because there won’t be anything left. This is a resilient 3% and the key thing is it should grow ahead of inflation over time”.

He also noted that both the capital returns and dividend growth have contributed to a strong total return for investors over the years. In the past decade, for example, the trust has made a total return of 174.8%, the third-best in its sector and ahead of the FTSE All World index.

Performance of trust vs sector and benchmark over 10yrs

Source: FE Analytics

“If you stack up SAINTS’ long-term capital and income return and compare the results, you would have been a lot better off in the 3% that grows ahead of inflation than taking 4% in a bank account that is getting eaten by inflation every year,” he said.

However, there will be years when the trust underperforms. Take 2024 as an example, when the trust lost 4.8% in total return terms – the worst performance in the sector. Its net asset value (NAV) return was 3.3%, however, with much of the losses coming from the share price.

“The income grew last year and the earnings of the companies grew, but the discounts that opened up in investment trusts meant that, even though we had a positive NAV, the share price return is slightly negative” he said.

Additionally, Dow blamed the trust’s underweight to the US (currently 26.3% of assets) and to cyclical businesses such as tobacco, oil and banks for the poor relative performance versus his peers in 2024.

He said: “The US market absolutely roofed it last year and Europe and the rest of the world did not. Within that, things that went up were the likes of Tesla and Nvidia, which is not part and parcel of what we are trying to do. It would be wrong for us to have those in the portfolio.”

The SAINTS manager noted that “a couple of peers are effectively capital growth trusts”, which means they convert capital to income and can own the likes of Nvidia, contributing to their performance. “A couple of those did much better than us because we are focused on steady income growth.”

“Then you have some of the cyclicals that went up last year. There is another approach to generating income which is buy your high yield banks, oils, cigarettes, telcos et cetera. It is not a good investment approach in the long term as they don’t grow and there’s a lot of dividend risk. But there are periods of time when those will do well and last year European banks had an amazing year.

“If you are into Microsoft, Procter & Gamble and CME Group then last year you will have missed out on that massive rally,” Dow concluded.

The US Federal Reserve held interest rates steady yesterday, marking the third meeting with no interest rate cuts from the central bank.

The Federal Open Market Committee’s (FOMC) statement justified this caution, citing rising uncertainty about the economic outlook and the risks of higher unemployment and inflation.

This decision was expected by many market commentators. Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “It wasn’t a huge surprise to see US rates unchanged, but it will come as a blow to president Trump, who has been pushing hard for the Fed to abandon its independence and deliver lower rates for Americans.”

Lindsey James, investment strategist at Quilter, argued that investors should not expect rate cuts until “late July at the earliest”, following the end of the 90-day negotiating window for reciprocal tariffs.

“The conditions are ripe for markets to be buffeted for a while longer, as you have the threat of rising inflation and unemployment during weakening economic growth. The Fed is in for a tough few months to come as a result,” James explained.

Tiffany Wilding and Alison Boxer, economists at PIMCO, agreed that the Fed was in a “tricky spot”. Rate cuts going forward will depend on empirical data showing that the labour market is either expanding or contracting, they said. They expect the central bank to proceed cautiously until it receives “clear evidence that inflation expectations are well-anchored and that recession risks are rising conclusively”.

European equities have captured investors’ attention this year by storming ahead of other regions.

Not only is continental Europe the best-performing major equity market year-to-date in sterling terms, but it has achieved almost double the return of the next-best region – the UK – and has recovered all of its post-Liberation Day losses.

Europe is enjoying the fruits of lower interest rates, stable inflation, more political stability following the German election and higher defence spending commitments. Yet with the threat of tariffs looming and heightened geopolitical uncertainty globally, there is an argument for investing with experienced managers who are supported by large teams of analysts and extensive resources.

Performance of European equities vs other regions YTD

Source: FE Analytics

Two popular strategies fitting that bill are BlackRock European Dynamic and Fidelity European, the largest actively managed funds in the IA Europe Excluding UK sector with £4.5bn and £4.2bn respectively.

They are both led by FE fundinfo Alpha Managers (BlackRock's Giles Rothbarth and Fidelity's Sam Morse) and feature on several platforms’ buy lists. They each achieved top-quartile returns over 10 years to 6 May 2025, although they have struggled more recently.

Performance of funds vs benchmarks & sector over 10yrs

Source: FE Analytics

The funds’ investment styles are complementary so they could work well as a pairing, said Richard Philbin, chief investment officer (investment solutions) at Hawksmoor Investment Management. “They tend to trade off each other quite well,” he noted.

BlackRock European Dynamic is growth-oriented and has a beta of about 1.1, whereas Fidelity European focuses more on valuations and has a beta of approximately 0.8, Philbin said. Both portfolios are fairly concentrated, with BlackRock holding about 50 stocks while Fidelity has 45.

Rothbarth takes large bets away from his benchmark, whereas Morse is more benchmark-aware. Nonetheless, both funds have a sizeable off-benchmark position in the UK, worth 5.4% for BlackRock and 4.4% for Fidelity.

Those in favour of Fidelity European

FE Investments uses Fidelity European as a core holding, said fund analyst James Piper.

Morse and co-manager Marcel Stotzel believe dividend growth drives returns so they look for high-quality companies with low debt, strong balance sheets and earnings growth that can keep raising their dividends. These factors have given the fund a defensive tilt and a growth bias, Piper explained. The portfolio’s average price-to-earnings (P/E) ratio, return on invested capital and earnings growth usually exceed its benchmark.

The fund doesn’t take big sector or country bets which, combined with its defensiveness, is why it works well as a core holding, he said. This also means alpha is driven by stock selection.

Piper praised Morse’s consistent investment process and his “diligent, unemotional way of approaching investment – really thinking about the bottom up and ignoring the noise”.

The fund has underperformed over the past year due to its considerable exposure to large international companies, especially those in the consumer discretionary sector such as L’Oreal and LVMH, which have been vulnerable to weaker Chinese demand and tariff concerns, he acknowledged.

Tom Bigley, fund analyst at interactive investor, is also a fan of Fidelity European, describing it as “a strong option for investors seeking quality-growth exposure to European markets”.

“Given the proximity with which the fund is managed to its benchmark, returns are unlikely to differ enormously from the market over the short term and therefore are unlikely to astound in a rising market. However, the strategy has shown great resilience on the downside, aided by the emphasis on looking for quality attributes on companies' balance sheets,” he said.

Square Mile has awarded an AA rating to Fidelity European because of its high conviction in Morse and Stotzel, said Martin Ward, senior investment research analyst. “Morse has a history of acting as a safe pair of hands,” he explained.

Ward also emphasised the strategy’s defensive credentials and said it may underperform during bull markets. “However, we feel the strategy should typically provide a more robust performance profile in weaker, more volatile market environments, which should improve its risk-reward characteristics over time,” he said.

“Since January 2010, the strategy has outperformed in 70% of down months and the portfolio tends to operate with a beta of less than one to the market, with a relatively low tracking error.”

Backers of BlackRock European Dynamic

BlackRock European Dynamic features on AJ Bell’s favourite funds list as its growth pick within Europe. Head of investment research Paul Angell described it as a “highly credible fund, managed out of BlackRock's enviably large team of European portfolio managers and analysts”.

Rothbarth has spent his whole career in this team, working closely with the fund’s previous manager, Alister Hibbert. He started out as a financials analyst before becoming a named manager on the fund in 2021.

The investment strategy focuses on “businesses with the best cashflow and earnings stories, typically giving the portfolio a growth bias”, Angell continued. “The fund can be dynamic with regards to this style exposure however, for example rotating into more cyclical names in the second half of 2020.”

For Ward, the unconstrained nature of the strategy is one of its key attractions. “It is one of the most flexible funds in the team’s product range. The portfolio manager can alter the fund’s stylistic, investment sector and market capitalisation positioning to take advantage of any opportunities that may arise,” he said.

However, this also means that performance can deviate materially from the benchmark. The fund outperformed significantly in 2020 but underperformed materially in 2022, he said. It is fourth quartile within its sector over the past 12 months.

“The strategy may suit investors that are willing to accept a little more volatility from their exposure and this fund should be seen as a long-term holding,” he noted.

Ward also praised the team, describing it as “one of the best-resourced teams operating in the region”. Furthermore, Rothbarth draws on BlackRock's wider resources to manage risk, using the firm's risk and quantitative analysis team as well as its extensive portfolio monitoring tools, he added.

Infrastructure, renewable energy, property and private equity trusts are among the investments that could benefit from falling UK interest rates, according to analysts.

Falling interest rates are broadly supportive for equities, but certain investment trust sectors stand to gain more due to their sensitivity to bond yields and discount rates.

Below, analysts from Deutsche Numis, Winterflood Securities, Shore Capital and Peel Hunt identify the trusts they believe are positioned to re-rate as yields decline and sentiment improves.

Infrastructure

Colette Ord, head of real estate, infrastructure and renewable funds research at Deutsche Numis, pointed to infrastructure trusts as a key beneficiary of lower interest rates and singled out International Public Partnerships.

“Lower risk core infrastructure cashflows should perform well, as these are often seen by investors as bond proxies, although we also believe the market often overlooks the ability for infrastructure investment trusts to grow earnings through active management,” she said.

“We like International Public Partnerships, which displays a number of our preferred risk-adjusted return characteristics, along with exposure to some key infrastructure growth trends such as the energy transition.”

Ord added that the trust’s 22% discount to net asset value (NAV) does not reflect the trust’s return potential, while the fully covered 7.7% yield means it could pay a growing dividend for at least a further 20 years.

Performance of trusts vs sector over 5yrs

Source: FE Analytics

Ashley Thomas, analyst at Winterflood Securities, agreed that infrastructure is a sector to watch in falling rates as falling gilt yields cause lower discount rates, which in turn lead to higher valuations today.

“This discount rate effect would be more meaningful for longer life, lower risk ‘core’ economic infrastructure assets such as the water, energy, transport and accommodation investments held by one of our picks, HICL Infrastructure, where nearly 90% of portfolio revenues are contracted or regulated,” he added.

Winterflood estimates that a 1% reduction in HICL’s 8.1% discount rate would increase its NAV by around 11%, adding around 5% to the share price, given its stock currently trades at a 24% discount.

Renewable energy

Rachel May, research analyst at Shore Capital, said: “The pure-play solar funds are currently trading on the widest discounts on record despite a growing number of disposals at values consistent with funds’ balance sheets, demonstrating the ongoing discount between public and private valuations.”

She chose Foresight Solar, which is trading on a 30% discount with a 10% yield, because of its holdings in solar assets located across the UK, Spain and Australia, with a development pipeline of Spanish battery energy storage systems and more solar projects.

It has a high proportion of long-dated, inflation-linked revenues (88% of revenues are contracted for the current year), which provides good visibility over future cashflows, and the dividend is expected to be more than fully covered.

Performance of trusts vs sector over 5yrs

Source: FE Analytics

Markuz Jaffe, analyst at Peel Hunt, likes Greencoat UK Wind, as a pure play on UK onshore and offshore wind assets with a strong track record of cash generation. Its dividends are explicitly linked to UK inflation and form part of the trust’s total return profile.

“As a result of its geographic focus, Greencoat UK Wind is clearly exposed to sterling base rates through the combination of changing gilt yields driving underlying asset valuations, investors’ dividend yield expectations influencing the share price and any potential reductions in financing costs,” he explained.

Winterflood’s Thomas pointed to Bluefield Solar Income as another that could benefit from lower long-term gilt yields and therefore discount rates. He predicted that a reduction of 1% in the discount rate would increase NAV by around 12%, adding around 18% to the share price given the 21% discount.

Property

Emma Bird, head of investment trusts research at Winterflood Securities, said property investment trust discounts have closely tracked UK gilt yields, widening as yields rise and narrowing as they fall. Falling rates should improve sentiment, support asset valuations and help reduce current discounts, she argued.

Performance of trust vs sector over 5yrs

Source: FE Analytics

Bird went for Custodian Property Income REIT as her pick in this space, as it has 18% of its borrowings subject to a variable rate linked to the sterling overnight index average rate (SONIA).

A cut in the Bank of England base rate should correspond with a reduction in SONIA, reducing debt costs for funds with unhedged floating rate debt using it as a reference rate. This should mean higher earnings for trusts like Custodian Property Income REIT as SONIA falls.

Private equity

Deutsche Numis’ Ord said portfolios of ‘jam tomorrow’ stocks that were hit hard when rates rose but could rally when they start to come down again, giving the Private Equity and Growth Capital sectors as examples.

She likes Seraphim Space Investment Trust in the current climate: “Perhaps more significant than the change in interest rates is a focus on defence spending, which will be positive for a number of portfolio companies which provide services such as satellite constellations with near-real-time imagery, satellite communication antenna and logistics and waste management.”

Peel Hunt’s Jaffe went for HarbourVest Global Private Equity, which offers global exposure to private companies through a fund-of-funds structure.

It currently trades on a wider-than-average discount of 43% but Peel Hunt thinks this could narrow as interest rates come down and the trust’s initiatives to maximise returns (a doubling of the allocation to its distribution pool, a simplified investment structure and the introduction of a continuation vote) start to take effect.

The great Chinese book on strategy, Sun Tzu’s The Art of War, was written 2,500 years ago and its wisdom has stood the test of time. Whether Donald Trump’s The Art of the Deal is as enduring remains to be seen.

In his book Trump boasts that he understands the Chinese mind. But he might have benefited from a quick re-read of The Art of War before announcing his astonishing tariffs. Sun Tzu cautions: “Who wishes to fight must first count the cost”. 

China’s president Xi Jinping understands short-term pain for long-term gain and Trump seems to have given him a unique opportunity that he will undoubtedly attempt to exploit.

Trade grievances between China and the US are not a new phenomenon. The first treaty between the two countries was as far back as 1844. The Treaty of Wangxia was a lopsided deal that gave the US better access to Chinese goods, like tea, silk and porcelain.

Even back then, Americans desired more of what China could produce than the Chinese wanted in return. America found a way to balance trade – by exporting opium. 

Over the past few decades there has been a fairer balance underpinned by a stable US that forged alliances, particularly in Asia, to counter Chinese aggression.

It now seems we are entering a different world order with a more volatile US trampling over long-standing partnerships and a China attempting to step into the void as the ‘reliable’ alternative.

What that means for investors is uncertain but there is one thing on which Trump and Sun Tzu agree. “The worst of times often create the best opportunities to make good deals,” wrote the US president’s ghostwriter. “In the midst of chaos, there is also opportunity,” proclaimed Sun Tzu. And maybe the better opportunities currently lie in China.

Investors in global equity trackers will have around two-thirds of their assets in the US and only 3% in China. There is some justification for that. The most profitable companies in the world are American. It’s the world’s biggest economy – add up all the goods and services it produces in a year and it comes to $30trn; China comes second at around $18trn.

No other country is close. But a better figure for comparison is economic output per person. Here the differential is much greater. The average person in the US produces an astonishing $69,000 in economic output each year – nearly five times as much as in China. (In the UK the figure is nearer $50,000, which might surprise some people.)

Of course, China is a controlled economy and presents political risk. But given what has been happening in the US in the past few months, some would argue that the US is not without political risk either.

US stocks still looks richly valued, even after recent falls. China looks cheap. And there are steps that China can take to close the productivity gap quite substantially and to power its economy forward.   

Around 2.3% of China’s GDP is subject to US tariffs, which is not insignificant but not as great as it was. The US share of Chinese exports has fallen to under 15% from 19% in 2017. This trend will continue.

In the short term, Xi needs to accelerate his drive to transition the Chinese economy from a manufacturing powerhouse to a consumption powerhouse – where the Chinese themselves buy the goods they are producing.

There is plenty of scope to do this. Private consumption accounts for just 40% of GDP in China – much lower than most countries. It is nearer 70% in the US.

In the West, consumers save around 7% of their income; in China it is nearer 35%. Unleashing household excess savings is clearly a focus with the equivalent of $6trn in pent-up savings.

The government is making the environment for businesses and consumers more supportive. Whilst the US is entering a period of extreme policy uncertainty, China has been taking steps to reduce the regulatory burden. It has reduced the number of industries closed to foreign investment. It has announced its commitment to delivering stimulus packages to offset the impact of tariffs and is expected to reduce interest rates. 

The Artemis SmartGARP program has been pointing us towards Chinese equities and away from the US for some time. They are less than half the price of their American counterparts and, as we have seen with the rise of the Chinese electric car producers, this is now a country that offers plenty of tech opportunities as exciting as those in the US.

The Chinese economy is expected to grow by about 4% this year – twice that of the US, where the risk of recession has increased substantially by most accounts. Few economists doubt the threats that tariffs pose to Americans themselves.

Inflation is expected to rise to 3% this year, compared with less than 0.5% in China, where the government is actually looking to increase inflation.

This feels, then, like fertile ground. As more people come to realise this and tilt their asset allocation – even if only gently – from the US towards China we could see both its economy and its equities market flourish. As Sun Tzu wrote: “Opportunities multiply as they are seized." 

Raheel Altaf is manager of the Artemis SmartGARP Global Equity Fund and the Artemis SmartGARP Global Emerging Markets Equity funds. The views expressed above should not be taken as investment advice.

“Scottish Mortgage is not for everybody”. That was the message from Tom Slater, manager of the highly popular investment trust, who defended the portfolio’s volatility in recent years.

The growth trust has been a rollercoaster for investors, topping the charts in 2020 with a 110.5% return. Since then it has been less stellar, producing below-average returns in 2021 and 2023 against its IT Global sector and making a 45.7% loss in 2022 – the worst performance of its peer group.

Performance of trust vs sector and benchmark over 5yrs

Source: FE Analytics

Despite this, Slater said he “makes no apology” for the trust’s volatility, adding that this trust – and equities in general – may not be suitable for investors who are concerned about big price drops.

“There are less volatile instruments you can invest in,” he said. “You have to accept volatility in equity markets and be return-seeking rather than risk-minimising.

“One thing the board has really helped us with over the past 20 years is identifying what we do in people’s portfolios and why they should own Scottish Mortgage. But the flipside of that is why some people shouldn’t own Scottish Mortgage,” he continued.

“I think that is almost the test for any fund: whether there is a certain set of people that it is appropriate for and others that it is not.”

He pointed to the trust’s track record of picking winners over the long term as justification for his belief. The trust has invested £65m into chipmaker Nvidia over its lifetime but has pulled out some £3.5bn.

There was a similar gain from car manufacturer Tesla, where a total investment of £322m has resulted in the trust netting a £4.5bn return.

Slater’s rationale has been tested recently in the “uncertain world” we now live in. US president Donald Trump’s ‘Liberation Day’ tariffs and subsequent rollback of measures spooked markets and caused elevated volatility. This, coupled with the outbreak of war across the world and a sluggish economy could give investors pause for thought.

But Slater said investors should not overreact and should take their time rather than making rash decisions.

“What I think is really important is that you make slow decisions not fast ones. It is easy to get spooked by the market into making decisions too quickly without gathering enough evidence and taking your time and being sure what you want to do,” the Scottish Mortgage manager said.

“Broadly you see people destroy so much value by selling low and buying high. If I look through some of the companies whose share prices were hit the most on Trump’s ‘Liberation Day’, those share prices are back to where they were the day before the announcement.”

While narratives can be noisy – and market reactions can be furious – investors need to “step back” and “think about the long-term trends”.

It is for this reason the trust continues to back its winners, such as SpaceX, which is the largest position at nearly 8%, and Mercado Libre, which stands at nearly 6% of the portfolio.

“Where we find these exceptional growth companies, we’re prepared to back the management teams for the long run. Where we see the opportunity growing and the likelihood of success increasing we will let those positions become big positions,” said Slater.

“We think that is how you make long-term returns in stock markets. It is the small handful of big winners that you manage to hold onto, that you don’t chip away at in the name of risk reduction or risk control but instead you carefully analyse the upside and you stay true to those positions.”

As such, he does not “try to guess” what the impact of tariffs will be, instead accepting that he does not know the answer and that the “situation is just too dynamic”. “The economy is a complex system and predicting outcomes is almost impossible,” he said.

One way the manager can reduce risk is through diversification. Not only does the trust look across the globe, but it is also willing to dive into private markets to find the best returns.

This latter part was key to Scottish Mortgage’s success in the 2010s and will continue to be a staple part of the portfolio. Indeed, Slater noted that he no longer considers whether a company is public or private, instead looking at the quality of the business.

“One evolution of the approach over the past 15 years is that we have had to go into private companies to maintain our opportunity set. There are a number of companies that would have listed in another era, which are not public today,” the Scottish Mortgage manager said.

UK-based investors ditched bond funds at the fastest pace since the start of the Covid pandemic last month while buying into the US stock market despite its heavy losses, new data from Calastone shows.

April was a turbulent month for investors after US president Donald Trump unveiled (then eventually walked back on) extensive trade tariffs on most countries. This sparked hefty falls in the stock market and rising bond yields.

Calastone’s latest Fund Flow Index reveals that investors pulled a net £1.24bn from fixed income funds in April, the second consecutive month of strong selling and the second highest level of outflows in the index’s history.

April’s outflows were focused on government bond funds, which were hit with net redemptions of £621m – the worst on record for this category of funds.

Source: Calastone Fund Flow Index – Apr 2025

Edward Glyn, head of global markets at Calastone, said: “Bond markets have whipsawed as investors try to price the impact on the global economy of ever-changing US policy announcements on trade, as well as threats, both made and rowed back on, to undermine the independence of the US Federal Reserve.

“The US dollar is also under pressure, harming confidence in US government bonds, which form by far the largest share of the global sovereign bond market. The turmoil in US bond markets has in turn pressured yields around the world.”

April’s outflow from bond funds was still some way below the £3.37bn of net redemptions that they suffered in April 2020, when large parts of globe went under unprecedented lockdowns to curb the spread of Covid-19.

However, the outflow in April was 46% higher than the third worst month (September 2024) and followed a “very weak” March, which was the fourth worst month on record for the sector.

Source: Calastone Fund Flow Index – Apr 2025

The picture is very different for equity funds, though, which garnered a net £1.52bn inflow in April. This was the fourth consecutive month of net inflows for the category.

Funds investing in North America (mainly the US) were the biggest beneficiaries, with a particular focus on index trackers. A net £1.51bn went into North American equity funds and the buying started in earnest on 8 April, when investors started to speculate that Trump would delay some of the tariffs he announced less than a week before.

Global equity funds, which tend to have a significant weighting to the US, also captured strong inflows, taking in a net £1.48bn last month.

Glyn said: “The interest in US equities in April may simply be a ‘buy the dip’ tactic. Certainly inflows tailed off at the end of the month by which time the US stock market had recovered half the peak-to-trough losses it had suffered between the middle of February and early April.”

However, there was strong selling of emerging market and Asia-Pacific equity funds, with respective net outflows of £591m and £534m. This marks the worst month for emerging markets on Calastone’s record.

“Emerging markets are vulnerable to financial instability and are heavily weighted to China,” Glyn said. “With China singled out for Trump’s harshest tariffs, concerns over economic growth are clearly the reason for investors to draw down their emerging market and Asia fund holdings.”

Many fund managers have been warning for months, if not years, that US equities were too expensive but it took the shock of Donald Trump’s extreme ‘reciprocal tariffs’ last month for that to become something of a consensus view.

The tables have turned on relative regional equity market performance this year and investors are now faced with the question of whether less steeply valued equity markets outside of the US offer better prospects.

Below, fund managers explain where they are finding value and how they interpret current stock market valuations.

Redwheel: It’s as if tariffs never happened

Nick Clay, head of Redwheel’s global equity income team, believes US equity valuations and earnings growth expectations are still far too high. “Given how stretched the valuation gap had widened to by the end of 2024, the most recent moves in markets have done little to close the valuation gap,” he said.

Furthermore, stock markets have “done a round trip” since 2 April and are acting “as if tariffs never happened”.

Performance of regional stock markets since 2 April

Source: FE Analytics

“Given that the markets worldwide have recovered their ‘Liberation Day’ wobbles, it would seem that consensus believes nothing much has happened to upset the trends hoped for at the start of the year – continued American exceptionalism,” he observed.

“We believe that is wishful thinking. Therefore, in the TM Redwheel Global Equity Income team, we continue to favour investments outside of the US, in Europe including the UK and Asia, where we think valuations are more forgiving and expectations not so high.”

The TM Redwheel Global Equity Income fund had 32.6% in the US as of 31 March – an underweight that has contributed to the fund’s significant outperformance this year.

Performance of fund vs sector and benchmark YTD

Source: FE Analytics

JP Morgan Asset Management: Opportunities exist not in cheapness but in mispricing

Given that valuations reflect consensus expectations about an equity market’s prospects, the main thing to watch out for is not attractive valuations per se, but “where our expectations diverge from this consensus”, said Natasha May, global market analyst at JP Morgan Asset Management.

For instance, at the start of this year, the MSCI Europe index’s price-to-forward-earnings ratio was a little below its own long-run average and every European sector traded at a larger-than-average discount to its US counterpart. These valuations reflected investors’ expectations that Europe’s underwhelming economic performance would continue, she observed.

“We believed European policymakers would rise to the challenge of a less friendly US and therefore expected fiscal, monetary and regulatory policy to turn more supportive than investors anticipated. As this policy shift has begun to play out, European equity valuations have risen,” May explained.

“The scale of the rise has been limited by trade-related uncertainty but we believe the magnitude of Europe’s policy shift should provide further support to European equity valuations going forward.”

Forvis Mazars: US earnings growth is still worth paying for

At the other end of the spectrum, some asset allocators are taking a fresh look at the US, now that stock market falls have taken the sting out of toppy valuations.

Forvis Mazars went from underweight to a neutral position in US equities during its 18 April rebalance, said chief investment officer, Ben Seager-Scott. “The dramatic moves over the first three-and-a-half months of 2025 saw valuations fall and markets potentially overweighting the most extreme tariff scenarios, meaning we saw a tactical opportunity of a potential overreaction.”

By most measures, US equity valuations still look expensive but they have “come down from extreme levels”, he observed. Meanwhile, fundamental earnings growth is still strong and “worth paying for”.

“Earnings expectations for this year have fallen: but from a punchy 14% to a ‘mere’ 8%. Bearing in mind the UK and Japan are expected to see earnings fall 3% this year and Europe to grow just 1%, the US can still justify a bit of a premium – and growth for next year is expected to be around 12%,” he explained.

If tariffs plunge the world into a global recession, the US is better placed to weather the storm due to the relatively closed nature of its economy, he continued.

“Much of the US economy is driven by services which aren’t impacted directly by tariffs, wages are growing faster than inflation and employment is still tight, even if hiring levels are dipping. That, coupled with the likely successful implementation of tax cuts means that the outlook is actually pretty reasonable.”

The US equity exposure within Forvis Mazars’ balanced model, which has 54% in stocks, has increased from 15.8% to 18.6%; within the overall equity allocation, the US has gone from 29% to 34%.

Surging market volatility and heightened uncertainty mean that most of the US equity funds that made last year’s biggest gains slid to the bottom of the performance table in 2025, according to Trustnet research.

Uncertainty hangs like a shadow over the US. Since president Donald Trump’s inauguration, he has imposed reciprocal tariffs on all major trading partners, paused said tariffs, feuded with the Federal Reserve and kicked off a trade war with China, sending shockwaves through equity and bond markets.

Rob Morgan, chief analyst at Charles Stanley Direct, said: “The second presidency of Donald Trump has certainly been a colourful one for investors so far. That colour being mostly red.”

Trustnet examined how the best-performing funds in the investment association (IA) last year have done so far in this year of heightened volatility. We looked specifically at the performance of the top-quartile funds of 2024 in each sector.

In the IA North America sector, 41% of 2024's highfliers are crashing back down to earth, falling from the top to the bottom quartile. Additionally, 34% have slid into the third quartile, meaning 75% of 2024’s best US funds are now underperforming.

The table below shows the 25 funds that were in the top quartile in 2024 but fell into the bottom quartile in 2025.

Source: FE Analytics

Several passive products are struggling as the S&P 500 has been on a mostly downward trend since Trump’s inauguration. Despite rallying recently, the S&P 500 is still down 7% year-to-date, a sharp downturn from its status as the best-performing market in the past year.

The Lord Abbett Innovation Growth fund is having a particularly challenging start to the year. At the end of 2024, the fund was up 45.9%, the third-best performing portfolio in the entire sector. As of 6 May it is down 11.3%, a total fall of 57% from its peak. This may be the result of holding six of the Magnificent Seven within its top 10 allocations, all of which have posted negative returns so far this year.  

Other big names that had a poor start to the year include the £2.6bn Baillie Gifford American fund, which is co-managed by FE Fundinfo Alpha Manager Tom Slater, who also runs the £11bn Scottish Mortgage Investment Trust.  It is down 12.8% this year, having made a 30.9% gain in 2024.

Morgan noted the US equity market has been suffering because of uncertainty around tariffs, as many are afraid that the US consumers and businesses will be the ones feeling the pinch through higher prices.

Darius McDermott, managing director at Chelsea Financial Services, added that this market rotation indicates the danger of blindly picking funds based on past performance.

“Much of recent performance, both this year and last, has hinged on whether you are underweight or overweight the Magnificent Seven (Apple, Nvidia, Microsoft, Tesla, Alphabet, Amazon and Meta). Sentiment has shifted from an aggressive risk-on stance to a risk-off-possible-recession-coming stance,” he explained.

Even beyond these mega-cap tech names, McDermott argued the US was in "unmistakable bubble territory" in 2024, which is now starting to burst. For example, sectors such as consumer staples also had “eye-watering valuations”, with both Costco and Walmart trading at higher valuations than five of the Magnificent Seven last year.

The US market was so highly valued that the best North American funds had much further to fall when the situation finally turned, McDermott concluded.

However, despite a rough start to the year, nine funds have held their ground, delivering top-quartile results in both 2024 and 2025, as seen in the chart below.

Source: FE Analytics

The $3.2bn MFS INVF US Growth is up 1.4%, making it the only top-quartile US fund of 2024 to post a positive return this year. It is led by a six-strong team at Morgan Stanley and features Tesla as the only member of the Magnificent Seven in its top 10 holdings. It has recovered much better from ‘Liberation Day’ than the average IA North American fund, which is down 9%.

More broadly, IA North America is not the only sector where last 2024's winners have become this year’s losers. Four other sectors (IA India/Indian Subcontinent, IA Infrastructure, IA Latin America and IA Global Equity Income) experienced a larger percentage of their funds falling into the bottom quartile this year, as seen in the chart below.

Source: FE Analytics

Both IA Latin America and IA Global Equity Income particularly struggled, with half of the top-performing funds of 2024 falling into the bottom quartile so far this year.

Baillie Gifford has bought shares in controversial taxi company Uber for the first time, with managers of the Monks investment trust taking a stake in the business.

The firm has held competitors, such as Lyft, but has shied away from Uber until now. FE fundinfo Alpha Manager Helen Xiong explained the company has historically been a “good product but a terrible business”, but expressed confidence in chief executive Dara Khosrowshahi, who took the helm in 2017.

The trust had the opportunity to invest in Uber when it was private and again when it first listed but has “always passed” on the opportunity as the team “could never quite get comfortable with the cultural side of things” and the way the business operated.

However, Khosrowshahi has “changed that and cleaned up the culture” and also “addressed a lot of the low-hanging fruit”, meaning it is now “not just a good product but also a good business”, the Monks deputy manager said.

Perhaps more importantly, Uber has been trading on a more reasonable valuation so far in 2025. Shares peaked in October 2024 and dropped sharply heading into this year, giving the Baillie Gifford team a chance to pick up the stock. Since then, it has rocketed back to its all-time high, as the below chart shows.

Share price of Uber Technologies over 1yr

Source: FE Analytics

Many have questioned the company’s viability in a world of autonomous driving, with the likes of Tesla and Waymo creating self-driving taxi services.

“We have gotten a lot more comfortable with that and Uber has the potential to be quite a significant player in that environment. The scepticism around that question right now is giving us an opportunity,” said Xiong.

Uber is part of a plan by Monks’ managers to upgrade the portfolio over the past year, buying cheaper stocks that have higher growth forecasts than incumbent portfolio holdings.

“The portfolio is now trading on a very modest valuation premium to the market for a much superior growth profile and I think that provides a strong platform to deliver for shareholders,” said Xiong.

“We’ve been using the market volatility to upgrade the portfolio and there has been no shortage of opportunities. We have bought a lot of companies even this year including Uber, where we think the market is underappreciating its potential to become a major player in the autonomous economy.”

Another recent purchase is Salesforce – part of the trust’s thrust into artificial intelligence (AI), which as a theme makes up around a quarter of its assets across the supply chain spectrum.

Previously owned by Baillie Gifford in another fund but subsequently sold, this purchase marks the Edinburgh-based firm’s re-entry into the cloud-based software developer, which is perhaps best known for its customer-relationship management (CRM) systems.

“A lot of the [AI] winners to date have been hardware, such as Nvidia, and the hyperscalers. It has been a very narrow set of winners,” said Xiong.

After the development of the initial technology, the next phase will be its implementation. At present, this has focused on AI being an answer engine, used as an alternative to traditional search engines such as Google, she said, something akin to “an AI assistant, if you like”.

“The next stage, and we are probably there already, is AI collaborators. Rather than asking AI a question you collaborate with it to produce something,” the Monks deputy manager said.

After that is ‘agentic AI’, which is using the technology as an autonomous agent to do stuff for users. Salesforce is looking into this as a way to sell “digital labour”, which she said could have “huge potential” for the business.

On the firm’s website, it advertises Agentforce, which it describes as able to allow customers to “boost productivity with AI agents that assist with tasks and take action”.

Both purchases are examples of why she does not believe that incumbent players in industries will be wiped out by start-ups with advanced technology.

While this is a possibility, as she believes AI will be a “democratising, broadening force” across industries, there should be a “competitive advantage” to those with strong distribution and data.

“It could be the new start-ups that really benefit, but we think there is a world in which the incumbents benefit,” she concluded.

The notion of the ‘star manager’ in asset management, especially in fixed income, is fading. While some may find this a provocative statement, it reflects a profound evolution that’s underway in our industry.

The market of today, and certainly the one of tomorrow, requires more than individual flair and historical outperformance. Sophisticated clients are looking under the bonnet, demanding transparency, robustness and repeatability. They want to understand how performance is achieved, not just that it has been.

Upon joining Aviva Investors last year, I was attracted not just by the scale and depth of the platform but by the opportunity to evolve our offering for a future that will look very different from the past.

A new investor sophistication

What’s driving this change? Institutional investors, especially those allocating to fixed income, are becoming increasingly analytical and data-driven in how they assess asset managers. It’s no longer enough to present a glossy pitch deck or to showcase a single portfolio manager's past accolades. As one client recently put it to me: “Don’t tell me. Show me.”

Today’s allocators want proof of process, evidence of how alpha is sourced, how risks are managed and how culture underpins consistency. A recent eVestment study backs this up, finding that fixed income strategies with more predictable alpha generation – lower standard deviation of excess returns – were 40% more likely to receive new institutional mandates than peers with flashier peak performance but greater inconsistency.

And they’re right to ask for that. We’re operating in a far more complex environment: multi-polar geopolitics, persistent inflation volatility, rapid technological change and a structural transition toward more sustainable investing. To navigate this effectively requires more than a single strong voice. It requires collective expertise, team stability, systems integration and institutional memory.

Culture and collaboration over cult of personality

At Aviva Investors, we’re leaning into this reality. One of my core focuses has been reinforcing a culture that promotes open debate, shared accountability and team-driven success.

Culture isn’t about occasional social outings or vague value statements. It’s about how people show up every day – how they challenge each other constructively, how they make decisions together and how they learn from missteps.  According to Morningstar, by 2023, more than 60% of active fixed income funds in Europe were team- or co-managed, up from less than 40% a decade earlier. The trend is clear: team depth and systematic delivery are now front and centre.

We’ve built cross-functional pods across our fixed income platform that spans investment-grade credit, high yield, emerging markets, rates, liquidity, and bespoke solutions. This ensures that ideas flow and diverse perspectives are heard. And we’re backing that up with tech enablement, strategic use of data and operational structures that institutional clients can rely on.

Predictability, not personality

One of the key expectations from allocators today is predictability of alpha generation. That doesn’t mean we’re trying to sterilise creativity or eliminate the art from investing. But it does mean our process has to be repeatable, our rationale for positioning explainable and our data analytics embedded deeply within our investment decisions.

In that light, technology plays a critical role. From portfolio construction tools and risk engines to Sustainability integration frameworks and scenario modelling, we’re leveraging a comprehensive digital stack. Not because it’s fashionable but because it’s necessary for delivering durable outcomes across varied market conditions.

Looking ahead: Meeting the demands of tomorrow

It’s clear to me that the future of fixed income management will be shaped not by individual heroics, but by holistic teams with complementary skill sets and a shared commitment to excellence. It will be shaped by managers who can not only articulate their process but demonstrate its effectiveness, its resilience and its scalability.

As bonds regain their place in diversified portfolios, clients are rightly demanding more. They want strategies that can weather market transitions, solutions tailored to outcomes and partners who think beyond next quarter’s returns. For any successful manager nowadays, that’s not a challenge but as a mandate.

The star manager era may be ending, but what comes next – anchored in process, powered by technology, and delivered by teams – is not only more durable but more exciting. It’s an evolution that better serves clients, strengthens our industry, and ensures we’re ready for what lies ahead.

Fraser Lundie is global head of fixed income at Aviva Investors. The views expressed above should not be taken as investment advice.

The UK equity market is enjoying a winning streak at present after several years in the doldrums. The FTSE 100 and FTSE All Share indices have regained all their post-Liberation Day losses and are up 6.7% and 5.6% year to date as of 5 May, whereas the MSCI All Country World Index (AWI) has lost 4.8% in sterling terms.

The UK is home to several “truly world-class” companies, according to James Thomson, manager of the £3.9bn Rathbones Global Opportunities fund. There are “little pockets of success” in the UK that investors should be proud of and that offer vibrant opportunities for stockpickers, he said.

The FE fundinfo Alpha Manager has 7% of his fund in the UK, which does not sound like much but is double the MSCI ACWI’s 3.4% allocation.

Below, he highlights three examples of these world-class UK businesses: retailer Next, property portal Rightmove and kitchen manufacturer Howdens Joinery.

Next

Next is fundamentally strong, with a resilient balance sheet and a growing international and online sales platform. These factors have been essential to helping the business beat targets and impress investors, Thomson said.

 Its share price has risen 30.2% this year to 2 May, including a leap at the end of March when it posted profits of more than £1bn. This builds on strong long-term performance, including a 158.5% surge in its share price over the past five years.

Share price performance of Next over 5yrs

Source: FE Analytics

Thomson also praised the leadership of chief executive officer, Simon Wolfson, who he described as open and candid with investors and customers. With the UK market facing headwinds such as increased national insurance contributions and global uncertainty, this clarity from the management team has further contributed to recent performance, he said.

“You need to be prudent with the street to ensure investors' expectations don't get carried away. When investors’ expectations are managed, it is much easier to outperform. There are a few management teams in the UK that are extremely good at this and Next is one of them,” he concluded.

Rightmove

Thomson identified Rightmove as another compelling UK business. While it shares many of the same qualities as Next, the property portal’s unique selling point is its pricing power.  “In terms of all factors common in outperforming companies, pricing power is near the top,” he said.

Rightmove has more than 90% of the property portal market share and enormous brand recognition that has made the company a household name.

“Rightmove’s customers are not people like you or me, they are estate agents who know they have to show their property on Rightmove,” Thomson explained. This level of market influence and recognition gives Rightmove an enormous amount of pricing power, which is reflected in its share price.

Despite taking an initial hit following the announcement of ‘Liberation Day’ tariffs, the stock is up 17.1% so far this year as of 2 May. Over the past 12 months, it has surged by 42.3%

Share price performance of Rightmove over 1yr

Source: FE Analytics

Howden Joinery

Finally, Thomson identified kitchen supplier Howden Joinery as another genuinely impressive UK company. “I just think it is an incredibly well-run business," he said.

The most important thing when building a new kitchen is availability and ease of access to products. You do not want to have to wait up to six months for your new cooker, he explained.

In the case of Howden Joinery, all its inventory is available in its own supply chain, which means it can deliver products much faster than any competitor. As a result, it is thriving because it offers a reliable and more predictable service than its peers, Thomson said.

This builds on a good run for the stock over the long term, with the share price up by 50.3% over the past five years.

Share price performance of Howden Joinery over 5yrs

Source: FE Analytics

However, it has struggled over the past year, as people worried it would offset the rise in national insurance by cutting staff. Nevertheless, he argued recent declines do not negate strong fundamentals, great long-term potential and competitive advantages that will allow the company to grow long-term.

Thomson concluded: “In terms of businesses coiled to capture any recovery in consumer confidence in the UK, I would put Howden Joinery at the top of that list.”

Performance of stocks YTD vs FTSE All Share

Source: FE Analytics

Volatility is becoming a familiar part of stock markets in 2025. While Donald Trump’s announcement of tariffs on most trading partners on 2 April was a pivotal moment, it has been a tough year for stock markets more broadly.

While markets are regaining momentum after the announcement of a 90-day pause on tariffs, investor uncertainty remains high. Indeed, indices such as the MSCI World and S&P 500 are posting significant losses year-to-date despite their recovery in recent days.

Performance of market indices year-to-date

Source: FE Analytics

In this clouded market environment, investors might find themselves turning safe-haven assets that can protect investors' capital over the long term and may even benefit from market volatility, or value-focused managers who attempt to bake in a margin of safety.

Below, Stuart Clark, manager of the Quilter WealthSelect managed portfolio service, highlights three managers across asset classes such as gold, US equities and global equity income, who have proved their mettle during this chaotic start to this year.  

BlackRock Gold and General’s Tom Holl

One of the “obvious winners” so far is BlackRock’s Tom Holl, who manages the BlackRock Gold and General fund with Evy Hambro and the Quilter Investor Precious Metal Equity mandate for Clark’s team.

Holl’s strategies have done well this year as investors have rushed into safe-haven assets following recent volatility, making the two strategies some of the best-performing funds in 2025’s opening quarter.

As gold surged during April, peaking at more than $3,500 per ounce, Holl's strategies have continued to outperform, with the BlackRock mandate up 31.4% while the Quilter mandate surged 30%

Performance of funds vs sector and benchmark YTD

Source: FE Analytics.

However, Clark conceded that the funds did experience “some initial volatility” in the immediate aftermath of 'Liberation Day' as investors got nervous and sold out of gold in pursuit of greater liquidity.

Square Mile Investment Consulting & Research, which has given the BlackRock mandate an A rating, also praised Holl’s management.

“We believe the fund benefits from one of the most highly regarded natural resources teams in the industry,” Square Mile’s analysts said.

“Whilst Hambro's responsibilities stretch far beyond this fund, we take considerable comfort that the fund is run on a co­-manager basis, with Holl very capably working in this capacity.”

BNY Mellon US Equity Income’s John Bailer

Despite the fact all IA North America funds have made a loss year-to-date in sterling terms, Clark argued that some US equity funds have still managed to differentiate themselves.

For example, he identified John Bailer, manager of the BNY Mellon US Equity Income fund and the Quilter Investors US Equity Income fund, as a standout US manager this year.

“The way [Bailer and his team] think about portfolio construction, the discipline they have when identifying companies and being comfortable to stick to their philosophy even when value or income is underperforming, is attractive,” he said.

While these strategies have slid since ‘Liberation Day’, Clark argued that “in a reversal, Bailer’s focus on value and quality is a comparative outperformer this year”. Indeed, while Bailer’s funds are down more than 7.7% since 2 April , this is four percentage points better than the average IA North American fund and the S&P 500.

Performance of funds vs sector and benchmark YTD

Source: FE Analytics

Bailer’s funds have delivered first-quartile results in the IA North America sector over five years, further increasing Clark’s conviction in the manager and his approach.

Redwheel Global Equity Income’s Nick Clay

Finally, Clark pointed to Nick Clay and his team at Redwheel as another great choice during the recent market volatility.

Clay runs the Redwheel Global Equity Income fund and its Quilter variant, the Quilter Global Equity Value fund, which are down 0.3% since ‘Liberation Day’. However, these are strong results compared to the IA Global Equity Income sector, which slid 1.4% in the same period.

Indeed, Clay’s strategies are two of just 23 funds in the peer group to deliver a positive return this year as of 6 May

Performance of funds vs sector and benchmark YTD

Source: FE Analytics

“To be honest, it has been a tougher set of years for Clay recently due to being underweight the Magnificent Seven,” Clark conceded.

However, this underweight has paid off in 2025 as some of these tech giants have struggled. "By sticking to his philosophy and process, we have seen a strong relative performance [from Clay] while this drawdown has been happening," Clark said.

His proven ability to outperform during stock market drawdowns makes Clay’s approach a “key winner” this year, Clark concluded.

Small UK companies are even cheaper than Chinese stocks, while UK large-caps are the cheapest of any developed market.

Despite the FTSE 100’s strong performance this year, its 12-month forward price-to-earnings (P/E) ratio of 11.8x was only just above emerging market stocks (11.6x) as of 30 April 2025, data from AJ Bell reveals.

Valuations of major stock markets, Apr 2025 vs Dec 2024

Source: AJ Bell, LSEG

The UK is still cheap relative to its own history as well, as the chart below illustrates.

Source: FTSE, IBES, LSEG Datastream, J.P. Morgan Asset Management. Forward P/E ratio is price to 12-month forward earnings, calculated using IBES earnings estimates. Shiller cyclically adjusted P/E (CAPE) is price-to-earnings ratio adjusted using trailing 10-year average inflation-adjusted earnings. P/B ratio is price-to-book ratio.

William Lough, a global equity portfolio manager at River Global, is particularly excited about the opportunity in “de-rated, high-quality small and mid-caps”.

“While much of the focus can often be on the very cheapest companies (so-called ‘deep value’) or the attention-grabbing high-growth companies, the best bang for your buck today is in companies such as Howden Joinery, with unassailable competitive advantages and trading at trough valuation multiples compared to the past decade,” he said.

The FTSE 100 is currently enjoying a revival. At the time of writing on Friday 2 May, it was on track to achieve a three-week unbroken run of gains, according to Neil Wilson, UK investor strategist at Saxo Markets.

Valuations tend to mean revert over the long term although it is hard to predict when that will happen or to pinpoint a catalyst, said James Klempster, deputy head of multi-asset at Liontrust. The UK has been cheap for some time, so he was confident valuations would adjust eventually.

Ultimately, what the UK equity market needed to spark a rally was more buyers than sellers, he continued. As investors have moved out of the US and sought a new home for their money, the UK has been a beneficiary.

The land of the rising sun

Yet the UK does not have a monopoly on cheapness and fund managers are finding attractive valuations in several other countries.

Liontrust gives regions a score out of five based on their valuations as well as other quantitative and qualitative metrics and the UK has a four, but so do Japan, Asia ex-Japan and the emerging markets.

In fact, Arun Sai, senior multi-asset strategist at Pictet Asset Management, argues that the world’s cheapest developed market is not the UK at all, but Japan.

Pictet uses a relative valuation framework to ascertain whether regions usually trade more expensively relative to other markets than they are currently doing. The framework has a 75% weighting to fundamentals (an average of price-to-book, 12-month P/E, P/E on trend earnings, price to sales, P/E to growth ratio and equity risk premium) then 25% consists of a tactical deviation-from-trend measure. These factors are tracked over a 20-year window and expressed as a percentile.

Japan has traded more expensively relative to other markets on the above measures for 76% of the time in the past 20 years, so it has a score of 76. The only region with a higher score – indicating it is even cheaper – is Latin America.

Relative valuation scores for asset classes and regions

Source: Refinitiv DataStream, Pictet Asset Management, as at 24 Apr 2025

Ben Seager-Scott, chief investment officer at Forvis Mazars, said Japan is the first place he would hunt for value.

“Japan is looking particularly cheap on a valuations basis and having endured several lost decades, does show signs of sustained (needed) inflation and economic growth, which really kick-started after the Covid-19 pandemic,” he explained.

Lough agreed: “We like the opportunity in Japanese equities, particularly cash-rich smaller companies. Japan is home to many companies which dominate under-the-radar niches, allowing them to earn attractive margins.

“We think the catalyst of corporate change, driven by the Tokyo Stock Exchange, will be long-lasting and valuations look particularly enticing following the tariff carnage, for those with a long-term perspective.”

Europe’s renaissance

Closer to home, Pictet believes Europe is attractively valued. “Continental Europe trades on a 30% discount to US peers after adjusting for sector composition differences,” Sai said.

“The key takeaway from the policy uncertainty in the US today is that global capital is incentivised to stay domestic and this should lead to a gradual re-rating of non-US assets, including European equities.”

Gabrielle Boyle, manager of the Trojan Global Equity fund, is seeing a lot of compelling value opportunities across her portfolio but “they don’t neatly fit into a regional pattern”. Even so, she has found several opportunities in Europe.

“As US markets soared in 2023 and 2024, we were finding more European opportunities in the form of companies such as LSEG and Amadeus IT. There has been a subsequent re-rating for some of these companies so far this year, but we believe the likes of LVMH, Heineken and Roche continue to offer excellent value for investors prepared to take a longer-term view,” she explained.

China is still attractively valued even after its rally

Elsewhere, Pictet recently upgraded China to an overweight position. “Valuation remains reasonably attractive despite the strong rally so far,” Sai said.

“Tariff uncertainty notwithstanding, we are confident that the economy is on the right path – consumption is recovering and the property market is stabilising. The fiscal headroom is large enough to act as a mitigating factor to any tariff-related weakness.”

Some managers are even finding opportunities in the US

In aggregate, US equity valuations are still elevated but there are pockets of value even here, especially after the recent sell-off.

Boyle said several of Trojan Global Equity’s large US technology businesses have de-rated this year and “now trade at historically low valuations”.

“Alphabet and Adobe are examples of companies where there is a widening disconnect between their resilient, high-quality growth and how they are perceived by investors. We have taken the opportunity to add to them,” she explained.

Mark Ellis, manager of the Nutshell Growth fund, believes US tech has become attractively valued following the recent sell-off. His fund had 72% in the US as of 25 April, up from an all-time low of 54% in January. Technology now accounts for more than half the fund (51.6%) and Microsoft has just become its largest position.

“Outside of tech, Novo Nordisk also stands out,” he continued. “It could arguably be considered a value stock now, with its projected price/earnings-to-growth (PEG) ratio falling below one.”