Shifts in US monetary policy could reshape the outlook for key sectors, according to Jack Caffrey, co-manager of the JPM America Equity fund.

Investors should remain alert to changes at the Federal Reserve, as “people are policy” and new appointments may influence how it tackles inflation and growth.

In this interview, co-manager Jack Caffrey explains how blending investment styles, maintaining a forward-looking view and leveraging deep research have helped the fund deliver top-quartile returns against the IA North America sector over five and 10 years, gaining 334.2% over the decade.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

Please describe the process of the fund. 

The JPM America Equity fund brings together two different portfolio managers with different basic underlying styles – growth and value. I focus on the value sleeve while Felise Agranoff leads the growth sleeve.

By bringing these style-driven processes together, we believe we can deliver a differentiated return path within a core equity approach and better anticipate whether the market might evolve, recognising that there is inherent cyclicality in terms of style capitalisation.  

How do you avoid concentration risk when you are benchmarked against the S&P 500?

The fund’s active share against the S&P 500 Total Return index has historically been somewhere between the mid-to-high 60% range – today it is around 58%. So while some of the largest positions in our fund can look very similar by nature to the concentration that we now see in the S&P 500, the reality is that we are expressing strongly different views within the portfolio.

That is because we are really leveraging our analysts and employing a deeply fundamental process that allows us to take strikingly different views.

Despite being more tilted to growth at 55% versus 45% to value, we are underweight technology and overweight financials, as we feel regulatory changes will benefit the latter. This is partially based on a view that the Federal Reserve is moving back towards an easing cycle, which should improve financials’ earnings power.

We also have an overweight in the energy sector, which has been painful in the shorter term but over the intermediate term it has been additive to the portfolio. The inflation-driven move towards higher energy prices has benefited the value side. 

What are your thoughts on the macro picture in the US?

We must remain cognisant of the macro. Inflation remains higher than on a typical basis and the employment situation seems to have weakened at the margin over the past four or five months – we are also still missing some data that might confirm or deny concerns.

We recognise that the membership of the Federal Reserve board will be changing several months from now and, ultimately, people are policy. The [Trump] administration is very vocal about what it would like to see coming out of the Fed and that, as a result, it is likely we will see some personnel changes to favour certain views.

The US economy has operated on an A-shaped exposure for the past 30 years. In particular, things that have touched artificial intelligence (AI) have done exceptionally well, while things touching the broader economy have been forced to digest an extended drawdown of inventories on the overall system.

To the extent that businesses have been less willing to try to build inventory until they have gotten some clarity as to what tariffs and tax frameworks may look like, this leaves parts of the industrial economy looking fairly cheap.

Tariffs are high but not as bad as they could have been. It does mean that, at the moment, companies can’t give you specifics when you ask them where they think their business will be in three to five years’ time. But they can give you the goal posts for what they are aiming for.

What has been one of your best calls over the past 12 months?

We added a new name to the healthcare sector, HCA Healthcare (HCA), in December 2024 and have been adding to the position this year.

The company provides healthcare services through a network of hospitals and healthcare facilities across the United States, with substantial market share in urban markets.

It has demonstrated reliable earnings and margin improvement through volume growth and cost controls, while also benefiting from stable demand for healthcare services and supplemental Medicaid payments.

Stock price performance since December 2024 (in dollar terms)

Source: FE Analytics

As of 30 September, HCA represents 2.4% of the fund’s holdings.

What has been one of your worst calls over the past 12 months?

UnitedHealth Group (UNH) was a long-term holding this portfolio, and we viewed it as a leading managed care company with a history of premium valuation and superior performance relative to peers.

In 2024, it continued to outperform competitors in the Managed Care space. However, in 2025, it became apparent that efforts to accelerate growth led to mispricing and significantly higher-than-budgeted healthcare costs.

Although the company reinstated a former chief executive who is committed to restoring operational discipline, the timing and effectiveness of this turnaround remain uncertain, which has reduced our conviction in UNH. Furthermore, the premium valuation that UNH historically enjoyed may no longer be justified given these uncertainties.

Following many meetings with the management team, we had concerns around the potential for improved execution over the medium to long term and exited our position in May 2025.

Stock price performance YTD (in dollar terms)

Source: FE Analytics

What do you do outside of fund management?

I enjoy reading about history and psychology and I am involved in managing sailing racing.

Clueless, wrong, and proceeding with cataclysmically poor judgement: this is how the faithful contestants of this year’s Celebrity Traitors will be remembered.

For those yet to watch the BBC television series, please stop reading now – there are spoilers ahead.

As a keen watcher of the show, it is rare to see the same traitors remain intact for the entire series. Typically blind luck eliminates one early, with recruitments required to replenish the treacherous pool.

But in the celebrity version, Jonathan Ross, Cat Burns and Alan Carr performed so well in their ne’er-do-well adventure that they never needed reinforcements. Two of the three made it to the final episode, with Carr ending up scooping the entire prize pot for his charity: Neuroblastoma UK.

Part of this was thanks to how expertly they played their roles, but the other reason was the sheer ineptitude of the faithful, who grasped at straws, rarely stuck to one theory and were swayed by what happened in the short term, rather than thinking about the longer game.

Even Nick Mohammed, who seemed the most logically minded of the group (sorry Joe Marler), was swayed at the end by dumbfounding logic, leading to him voting for Marler instead of Carr.

The game itself is one of social deduction. It is, at its heart, an experiment on the human psyche.

Is investing not the same? We convince ourselves we know more than others, but in reality we can be easily swayed by momentum and are prone to making short-term decisions that are much higher risk.

While it can lead to a big winner, it can (and I would argue is more likely to) also lead to failure. This is the case in the Traitors too. Although going big with accusations can get a traitor out, more often than not it leads to eliminating more faithfuls from the game, as was evidenced in this series in particular.

So what can investors learn?

The Traitors is a fascinating insight into how people think. When it came to voting, many around the table were sheep following the herd. Similarly, investing can feel like too many people crowding around the same ideas.
That is not to say they cannot be right. After all, the artificial intelligence (AI) boom has been extremely beneficial for anyone who invested heavily early on.

Now, however, it feels much more risky to follow the crowd.

Like with dwindling numbers in the Traitors, the more money goes into one theme, the greater the need to make better choices. Investing now could still be worthwhile, but the risk of getting it wrong will be far more pronounced.

Stock markets are also a large game of human psychology. To win, sometimes it is beneficial to step back from the herd and the short-term noise and to focus on the evidence in front of you.

However you invest, basing your decisions on fundamentals, research and empirical data will lead to far better outcomes than going along with the whims of others.

The faithfuls may have been outplayed, but investors don’t have to be. Keep your emotions in check, avoid the herd, and remember: in markets as in murder games, it pays to think one step ahead.

The government has decided to abandon a planned income-tax increase in the upcoming 26 November Budget, the Financial Times revealed overnight.

The move comes after weeks of chancellor Rachel Reeves signalling that higher taxes could help curb inflation, rebuild confidence and bring down the UK’s elevated borrowing costs.

Following the news, 10-year gilt yields reached 4.57% (an increase of 0.13%) and two-year yields were up 0.06% to 3.82%.

Kallum Pickering, chief economist at Peel Hunt, said the “significant reversal” was underpinned by “fears that increasing income tax rates would further anger the public as well as Labour MPs”, but creates a major hole in the public finances and raises fresh questions about fiscal credibility.

The reversal also leaves Reeves with a substantial fiscal shortfall to address.

“Raising the 20% income tax rate to 22% could have raised £15–20bn,” Pickering noted. Without it, the government must now find alternative ways to close what could be a £30bn gap.

Attention has shifted to other possibilities, for example cutting the thresholds at which workers start paying income tax while keeping the rates unchanged.

Extending the freeze on thresholds beyond 2028 was already expected to generate about £8bn and could still function as a disinflationary tool, but it also risks further backlash.

“Reducing tax thresholds may have the same effect” as raising the tax, Pickering said.

If Reeves opts against raising tax rates or lowering thresholds, she could be forced into “a haphazard patchwork of smaller anti-growth tax increases”, an approach that “would add to uncertainty, further damage the government’s already tarnished credibility and complicate any Bank of England judgement to potentially offset tax rises with rate cuts”.

Neil Wilson, UK investor strategist at Saxo Markets, said the Treasury’s retreat from an income-tax rise has broader implications for policymaking, leaving a deeper challenge for the chancellor.

“Markets are now trading on the political as well as the fiscal,” he said. “But the chancellor is riding a tiger – by trying to do anything and everything to please markets, Reeves is now at their mercy. Appeasement never works.”

He warned that the government risks entering what he called a “doom loop scenario”, where efforts to avoid unpopular tax rises could erode confidence in its ability to manage the public finances. “Moreover, the market thinks you lack credibility in terms of filling the black hole and raising headroom,” he said.

“This neatly shows how the chancellor is between Scylla and Charybdis – please markets or please the people. Please the markets and the party and people revolt, please the party and markets go vigilante.”

Chancellor Rachel Reeves is reportedly considering introducing a £2,000 cap on salary sacrifice pension contributions as part of her autumn Budget at the end of this month, in a move that could raise up to £2bn a year for the Treasury.

However, doing so could result in a £22,000 dent in savings by retirement, research by AJ Bell suggests.

Salary sacrifice enables employees to exchange part of their salary for employer pension contributions in a bid to reduce their income tax and National Insurance (NI) liabilities. This allows employees to build their savings or contribute more to childcare costs and student loans and is also beneficial for the employer, as it reduces their NI contributions for employees.

Although capping salary sacrifice isn’t an explicit tax increase – meaning Reeves could still cling to Labour’s manifesto pledge – the result would be less in employees’ pockets and pension pots.

Charlene Young, senior pensions and savings expert at AJ Bell, said: “Our analysis shows that someone aged 35 earning £50,000 a year could face a hole in their pension of £22,060 by age 65 under these plans.”

This figure assumes the individual already has a pension fund of £30,000 and saves an overall contribution of 5% personally, with another 3% coming from their employer.

However, the black hole rises to over £37,000 – or even nearly £50,000 – if they are a higher earner on £75,000 or £100,000 respectively.

AJ Bell outlined the example of an employee who earns £55,000 a year and wants to make higher personal contributions to their workplace pension of 10% a year, with their employer offering salary sacrifice as an option.

As shown in the table below, a £2,000 salary sacrifice cap would mean an extra £525 annual NI bill for her employer and a £118 cut in take-home pay.

If salary sacrifice was then removed as an option, the extra costs would be £441 and £825 respectively.

Source: AJ Bell

It would also be bad news for employers. “The savings on offer [through salary sacrifice] are bigger for employers – as employer NI of 15% would have been payable on the amount of pay that is sacrificed,” said Young.

“Some employers like to reward employees by sharing all or some of this saving and use it to boost pension contributions even further. But asking businesses to absorb yet another cost might be one step too far, particularly at a time when the number of people out of work is already at its highest rate since the pandemic.”

HMRC-commissioned research earlier this year outlined different scenarios for reforming pensions salary sacrifice. Employers reacted negatively to all of them, arguing that removing reliefs would wipe away the financial benefits of salary sacrifice and also result in lower pension savings at a time where retiring in poverty is increasingly a concern.

Rachel Vahey, head of public policy at AJ Bell, said: “Any potential changes to pensions salary sacrifice should not only take account of the immediate impact but also consider what it means for the future of pension savings and Brits’ retirement income.

“Given the significance of this issue, it makes sense to leave such a major decision until the Pensions Commission has concluded its work.”

Equity markets have become even more concentrated over the past two years than they were in 2023, Trustnet analysis has revealed, but despite fears that the ‘Magnificent Seven’ US stocks have become too important to the American (and global) market, they do not represent the biggest concentration risk among major markets.

Two years ago, we examined the most concentrated equity markets and found the FTSE 100 took the throne. At the time, the 10 largest stocks on the index accounted for nearly 46% of the overall market capitalisation in the UK.

Over the past two years, markets have become even narrower across the board, with the top 10 stocks representing a greater percentage of most global indices, except in the Euro STOXX and FTSE 100, which has since lost its top spot.

Source: London Stock Exchange, Nikkei, S&P Dow Jones, MSCI, STOXX

Now, Japan’s Nikkei 225 is the most concentrated market, with its top 10 accounting for 48% of its total value.

Tech companies lead the index, with semiconductor testing company Advantest and multinational conglomerate SoftBank ranking as the two largest stocks within the index. With each having a double-digit allocation, more than 20% of the Nikkei is now invested in just two names.  

Fast retailing and Tokyo Electron follow in third and fourth place, after which point weighting drops to just 2.6%.

Source: Nikkei

Meanwhile, the concentration in the FTSE 100 has only increased by 0.1 percentage point over the past two years, but the market's composition has shifted with Rolls-Royce and Barclays joining the top 10 since 2023.

While the UK blue-chip index has also posted a strong return this year (up 25.1% year to date), outperforming the MSCI ACWI (up 16.2%), experts recently said that a handful of exceptional performers have led this charge.

Meanwhile, the S&P 500 and MSCI ACWI have both experienced rises in concentration risk due to investor enthusiasm for the ‘Magnificent Seven’. These high-growth tech stocks have performed very well in recent years and have continued to attract investor capital.

As a result, they now dominate the top 10 of global and US indices, causing concentration risk to creep higher. Compared to 2023, the weighting towards the top 10 is 5.2 percentage points higher in the S&P 500 and 7.3 percentage points higher in the MSCI ACWI.

Finally, in both the MSCI Asia ex Japan and MSCI Emerging Markets, more than 30% of the total value is in the top 10 companies, with the latter’s concentration up by 8.7 percentage points compared to 2023.

Simon Evan-Cook, fund of funds manager at VT Downing Fox, said: “The trend towards ‘big’ has been in place for a long time, and despite the odd reversal, has only picked up speed this year.”

The rising dominance of a handful of global stocks in each market is partially due to the enthusiasm for passive investing, he said. 

Index trackers have become a popular way to access equity markets in recent years as active funds have struggled to outperform. Indeed, just 30% of equity funds have outperformed a passive alternative over the past decade, according to data from AJ Bell.




Source: AJ Bell Manager versus Machine reports 2021 through to 2025

Evan-Cook said the rise of trackers has “naturally driven capital to those companies at the top of the index, which will appear in more indices and ETFs [exchange-traded funds]”.

Additionally, markets are also reflecting the “shifting macro power balance”, which favours the bigger companies.
 
Businesses have no limit on how large they can get, meaning a “winner-takes-all” system has developed where bigger stocks face less competition and are “better positioned to beat their remaining small rivals”. 

On top of this, political views seem to favour these larger firms, with smaller competitors regarded as “mere annoyances that make the world harder to manage and regulate.”

Quantitative easing (QE), where central banks started buying both corporate bonds and government bonds, is an example of this “bigger is better” push. This drove down the yields on bonds, which allowed “large companies to borrow at considerably lower rates than smaller competitors” to finance their growth plans. 

These advantages have contributed to bigger businesses taking even greater chunks of market share, which is why global markets have become even more concentrated in their top 10, Evan-Cook said.

The “winner-takes-all economics” and emphasis on larger companies are reflected in valuations, meaning the largest stocks are now expensive. This trend means that investors could diversify by looking for opportunities further down the market-cap spectrum, he said.

“Small and mid-cap companies are available on highly appealing valuations, with less attendant risk too. I personally feel more comfortable having lower exposure to mega-caps than you’d find in a classic index, which means actively finding a way to move down the market cap scale,” he concluded.

Relations between Washington and Beijing have been increasingly volatile, swinging between fragile truces and renewed flare-ups.

US president Donald Trump and China’s president Xi Jinping’s recent agreement to lower tariffs and suspend Chinese export curbs on rare earths temporarily calmed markets but, if the past few years have taught investors anything, this impasse is fragile and periodic tensions are likely to persist.

As with any global disruption, winners and losers will emerge, with companies racing to localise production, diversify sourcing and ensure supply chain resilience as the two superpowers draw new lines in the sand.

For investors, this means new opportunities are emerging as companies position themselves to benefit from these trends.

For example, Frederik Bjelland, portfolio manager of SKAGEN Kon-Tiki, sees Shenzhou International – one of the world’s largest integrated apparel makers – as benefiting from ongoing US-China trade tensions. Around 80% of its sales come from global brands such as Adidas, Nike, Puma and Uniqlo.

“The company is Hong Kong-listed and its shares have tended to sell-off when Chinese tariffs are deemed to be high despite its broad manufacturing footprint, with production facilities across Asia, including Cambodia and Vietnam where most of its products are made,” Bjelland said.

Only 17% of Shenzhou’s sales come from the US, with a similar proportion from Japan, 20% from Europe and around a quarter generated domestically.

Earlier this year, the company opened a joint venture apparel manufacturing facility with US materials science and manufacturing company Avery Dennison in Vietnam.

“We believe the company’s geographic expansion, R&D and automation efforts position it to gain further share with existing clients and attract new customers,” he said.

The company also reported strong results for the first half of 2025, achieving a 15.3% increase in sales and 7.9% increase in gross profit.

Shenzhou’s share price is up over 15% year-to-date but has almost halved over the past five years.

“Its valuation therefore offers a margin of safety and looks compelling,” Bjelland said.

Shares are trading at 12 times 2026 earnings and offer a 5% dividend yield.

Stock price performance YTD

Source: Google Finance

Meanwhile, Daniel Lurch, portfolio manager of the JSS Sustainable Equity Strategic Materials fund, sees opportunities in strategic materials.

“The global landscape for strategic materials is increasingly tense,” he said.

“The US imposed tariffs on steel aluminium and copper imports, while China leveraged its dominance in rare earth production to restrict exports and the European Union also proposed significantly cutting the import quotas on steel.”

Against this backdrop, he said that companies in the strategic materials value chain are poised to benefit.

As such, his first stock pick is Lynas Rare Earths – one of the world’s largest non-Chinese rare earth producers, which stood out to him for its processing capabilities, especially for heavier rare earths.

“The company has a strong track record of production, with sites in Australia and processing facilities in Malaysia,” he said, adding that a new rare earths processing facility is also under development in the US.

“While other non-Chinese companies are developing rare earth projects, they have yet to demonstrate the ability to process heavier rare earths at scale, [whereas] Lynas’s capabilities make it a leader in the sector,” Lurch said.

“By contrast, Lynas’s closest peer, MP Materials, which is listed in the US, continues to rely on Chinese processors.”

The company’s share price is up over 111% in the year to date and over 320% over five years.

Stock price performance YTD

Source: Google Finance

Lurch’s second pick was mining equipment company Metso.

As a provider of critical equipment, Metso is “well-positioned to benefit from the rush to secure access to essential materials through localisation of critical material production and supply chains”, he said.

“Additionally, the company’s focus on environmental sustainability, including reducing water usage and carbon emissions, makes it an attractive player in the industry.”

In particular, Metso’s exposure to crucial metals for batteries, such as copper and lithium, also positions it for growth in the renewable energy sector and broader global electrification efforts, he said.

Last month, the company introduced a new life cycle services (LCS) framework, which includes solutions for parts, equipment and process island scopes.

The company’s share price is up 59.1% year-to-date and almost 120% over five years, with a current dividend yield of 2.6%.

Stock price performance YTD

Source: Google Finance

When considering entrusting your hard-earned money to an active fund manager, there are lots of different factors that should play into the decision – investment process, fees, size of the fund – but few resonate with ordinary investors more than the concept of a fund manager having skin in the game.

Unfortunately, that’s almost impossible to track here in the UK where there are no rules requiring fund managers to disclose their personal holdings of the fund(s) they manage, meaning we’re reliant on goodwill – and others doing the research for us. 

Step forward Investec, which produces an annual audit of skin in the game in the investment company sector – highlighting the good, the bad and the ugly.

It should be noted here that, in our view, the structure and transparency within the investment trust universe provides investors with more data on skin in the game than within the open-ended fund industry.

The high-level overview is that investment trust boards and management held a total of £5.7bn in the trusts they oversee, as at 28/05/2025, with 51 board members and 87 management teams holding more than £1m worth.

We’ll sound a word of warning first: skin in the game is good, but too much of it can lead to unintended consequences. There are examples where management companies with large stakes in the trusts they run have worked against what seemed to be shareholders’ best interests.

Still, when structured well, skin in the game can be a real boon: giving the managers a stake in the success of the trust over and above just collecting their management fees, and providing confidence to shareholders that management believes in their abilities and the trust’s future.

One of the trailblazers here, in our view, is Ashoka India Equity, where the management team owned £10m worth of shares and the four-strong board of directors owned £926,477, with each of the directors’ individual shareholdings worth more than five times their annual fees.

This can largely be attributed to the fee structure of the trust, which is designed specifically to align the interests of the managers with those of shareholders. WhiteOak Capital, Ashoka India Equity’s investment advisor, does not charge the trust a traditional management fee. Instead, it has in place a performance fee, meaning the managers only accrue charges should the trust outperform its benchmark.

Crucially, that performance fee is paid in shares, which we believe demonstrates the managers’ commitment to the ongoing success of the trust. It also accounts for management’s meaty stake in the trust.

Ashoka India Equity provides access to the exciting growth of the Indian market, with a bias to the thriving small and mid-cap space and has put in impressive performance since its 2018 IPO.

There’s plenty of opportunity, too, within the UK smaller companies space, where Rockwood Strategic stands out. Harwood Capital LLP and the management team, including Richard Staveley, own £21.7m of shares and all three board members have investments in excess of their annual fee.

Harwood Capital’s stake adds up to 19% of shares in circulation, which it argues indicates a fully aligned and focused fund management team. We should also point out that their voting is restricted to 10% to avoid conflicts of interest.
Richard’s active approach to management has yielded impressive results: Rockwood Strategic has the best performance track record among its UK smaller companies peer group over the past five and 10 years, with annualised net asset value (NAV) total returns of 22.6%, justifying its premium rating.

Elsewhere in the sector, Charles Montanaro, his family, and the broader management team of Montanaro UK Smaller Companies, own around £17m worth of shares. While some of the board have investments that amount to less than their annual fees, chair Arthur Copple’s stake equals £309,000, the equivalent of seven years of annual fees, the same amount of time he has been a member of the board.

We would also highlight Cordiant Digital Infrastructure, where, at the time of the Investec report, all four board members held shares worth more than one year of annual fees, adding up to £282,875, while the management team had a combined stake worth £12.6m.

That has only increased since May, as directors and management have been adding to their holdings. Steven Marshall, executive chairman and co-founder of Cordiant Digital Infrastructure Management, has bought more than £900,000 worth of shares since June alone. Company insiders now own 2.17% of the trust’s share count.

Shares have risen 60% since their nadir in October 2023, suggesting Marshall and the rest of the company insiders are confident of further upside as they’ve been buying into the share price rise.

That said, Cordiant Digital Infrastructure, which specialises in digital infrastructure assets such as data centres, a key part of the artificial intelligence supply chain, remains on one of the widest discounts in the infrastructure sector, at c.24%, despite our belief that it has some of the strongest capital upside potential of peers.

A trio of trusts where both management and board shareholdings are significant are AVI Global, CT Private Equity and Baillie Gifford US Growth. Indeed, the latter’s management held £2.5m in shares, with the board not too far behind at £1.3m – all board members held investments of more than four years’ worth of their annual fees.

AVI Global and CT Private Equity have similar shareholders, with management owning £4.7m and £4.2m respectively, and the boards holding £730,000 and £740,000 respectively.

Investing in funds or trusts where the managers have skin in the game certainly isn’t a silver bullet – there are plenty of nuances at play. It can, however, be a good way of tilting the odds in your favour and improving your chances of finding an investment where your interests as a shareholder are aligned with management.

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

India has become the world’s “anti-AI market”, according to Gaurav Narain, manager of the India Capital Growth trust, who argued the country’s recent underperformance could mask one of the most powerful domestic growth turnarounds among emerging markets.

“There are multiple themes in India,” he said. “The only one it’s not playing is artificial intelligence [AI]. We have a thriving services economy but no real AI play. Some people say India has underperformed because of that, but others call it the best anti-AI market.”

Narain said India’s story has shifted dramatically over the past year. After a period when it matched US markets, as the charts below show, Indian equities have been flat more recently while emerging peers surged, leaving India behind by as much as 25 to 50 percentage points. “This is unprecedented,” he said. “The last time it happened was 50 years ago.”

Performance of indices over 10 and 1 yr
Source: FE Analytics

The reason for this weaker recent performance, he explained, is due to a post-Covid growth slowdown. Real GDP, which had been expanding near 9% a year, slipped to around 6.5% – still the fastest among large economies but a disappointment for investors used to stronger momentum.

“From an India perspective, when you are anticipating 7% plus growth, 6.5% felt much like a recession,” he said. Corporate earnings growth followed the same path, dropping from above 20% to single digits.

Several factors coincided. Elections absorbed government bandwidth for months, delaying public investment. The central bank, concerned about overheating, tightened liquidity and capped unsecured lending, bringing credit growth from 16% down to 10%. Then external pressures hit, as US tariff policy under Donald Trump delayed private-sector capex plans.
Yet since mid-year, authorities have moved aggressively to revive growth. “In the post-election Budget in February, they slashed income tax rates across the board and ramped up capex on infrastructure – this first half is already up about 40%,” he said. 

“The central bank unbound all the liquidity-tightening measures and cut interest rates by 100 basis points, almost twice what people expected.”

The most striking shift came last month with ‘GST 2’, a major overhaul of India’s indirect tax regime. “From a four-tax structure, we moved to two,” he said. “Items previously taxed at 28% mostly moved to 18%, and those at 18% or 12% came down to 5%. That’s done wonders for sentiment and brought prices down across the board.”

The timing coincided with the festival season, giving a visible boost to consumption. “During Diwali, automobile sales hit all-time records, up 20% over the previous year,” Narain said. “Retail sales were up between 25% and 40%. Even with tax cuts on 400 items, indirect tax collections still grew about 5%, reflecting the volume uptick.”

These steps have set the stage for a rebound. “The economy’s inflexion has happened,” he said. “The earnings growth downgrade cycle is behind us and we’re back on the upgrade cycle.” 
He expects double-digit GDP and earnings growth ahead, supported by recent upgrades from global rating agencies and forecast increases from the IMF and World Bank.

Another key shift is who owns the market. “India has become a purely domestic-driven economy,” Narain said. Foreign investors have been net sellers, withdrawing roughly $30bn over the past year, while local inflows have remained resilient.
“In the past five years, domestic funds have seen inflows of about $205bn, while foreigners have pulled out about $8bn. Yet markets have stayed flat,” he said. “Foreign ownership is now at a decade low – just about 16%.”

Strong local participation has transformed market dynamics. “Thanks to technology and digitisation, retail investors are flooding into equities, having historically preferred physical assets and gold,” Narain said. 

The boom has fuelled a vibrant IPO market: “A third of all global IPOs are happening in India,” he noted. “Last year $20bn was raised, and this year should be much higher, with 90 IPOs already – nine or 10 of them over a billion dollars each.”
The breadth of listings is another source of optimism. “Global firms like Hyundai and LG Electronics are listing 100% of their Indian businesses because they find the market so attractive,” Narain said. “It’s a very vibrant market, offering many opportunities, especially in the mid-cap space.”

He admitted volatility remains high, with individual holdings swinging between sharp losses and outsized gains. “Half our stocks have fallen between 0% and 30%, but we’ve had big winners too,” he said. “What’s really driving stocks this year is earnings growth. Companies able to deliver or surprise positively are doing exceptionally well.”

Among those, Narain highlighted CarTrade, an online automobile marketplace and one of the trust’s top performers. “It’s the number one portal in India, with a 95% share,” he said. “It doesn’t advertise. Growth is organic. Its margins have gone from 16% to 30% since we bought it.”

After a year of stagnation, Narain believes the combination of policy easing, structural reform and domestic liquidity is setting India apart. “It’s a volatile but very exciting market,” he said. “We’re identifying companies that can keep delivering earnings growth. I’m fairly confident this will be a good year for India.”

At £149.2m of assets under management, India Capital Growth is the smallest trust in the four-strong IT India/Indian Subcontinent sector and trades on the largest discount of 11.4%.

Performance of fund against index and sector over 5yrs
Source: FE Analytics

Yet it has beaten the sector average over the long term and was the top trust over the past 10 and five years, although it has slipped to third and fourth position over the past three years and 12 months respectively.

Rachel Reeves may be preparing to go further on capital gains tax (CGT) in the Budget, with experts warning that any increase would hit a wide range of investors, not just the wealthy.

As the chancellor searches for new revenue sources, she “may be tempted to engage in a more full-blooded attack on asset gains”, according to Laith Khalaf, head of investment analysis at AJ Bell.

“Equalising capital gains tax rates with income tax rates has been widely touted for a while and may lead the Office for Budget Responsibility to forecast a few extra quid coming into the Treasury as asset prices rise,” he said.

Reeves increased CGT rates in her first Budget, but the fiscal outlook has since deteriorated, with pressure mounting on the Treasury to plug gaps left by soft growth and higher borrowing costs. Khalaf said this could make another rise more likely – even if it carries long-term risks.

“By announcing the tax ahead of its implementation, the chancellor can almost certainly boost short-term tax receipts as investors crystallise gains before higher rates of tax come in,” he said. “However, there is some doubt over whether raising capital gains tax is good for tax revenues in the long term.”

Higher rates tend to change investor behaviour rather than raise sustainable income, encouraging more people to shift money to vehicles that exempt, like ISAs, gilts and primary residences.

“It also discourages entrepreneurship and investment in productive assets – something which cuts across the chancellor’s plans to boost economic growth and the UK stock market,” Khalaf added.

He also warned of unintended demographic effects. Since capital gains tax does not currently apply on inheritance, higher rates could prompt older investors to hold onto assets longer rather than sell them, in order to pass them on.

“Of course, it’s possible Reeves might choose to close that loophole too,” he added. “But after increasing inheritance tax on pensions and farms, that might be a death tax too far.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, said that for many investors, further CGT hikes would add to an already punishing few years of tightening tax rules, “adding insult to injury” for investors who have already had to deal with the dramatic cuts to the tax-free allowance and a hike to the rate on stocks and shares.

The shrinking allowance also means even middle-income savers can now be caught.

“This isn’t just a tax for the mega wealthy. Someone on an average income who has invested carefully throughout their life can easily face a tax bill when they rebalance their portfolio or sell up to cover their costs later in life,” she said.

“In fact, cutting the allowance has hit smaller investors harder, because it used to cover a much larger proportion of their gains.”

What investors can do

There are several strategies to limit exposure, but Coles warned that these depend on current rules that may not stay unchanged.

She suggested using the annual allowance of £3,000 to realise gains gradually over the years or the Share Exchange process to move assets into a stocks and shares ISA.

“You can also offset any losses against your gains or give assets to a spouse or civil partner so they can use their annual allowance too.”

Holding assets until death remains one way to avoid paying CGT altogether, since gains currently reset to zero. “It just remains to be seen whether this will remain the case after the Budget,” Coles said.

UK GDP fell 0.1% month-on-month in September, below expectations, following a flat August, according to the latest data from the Office for National Statistics. The decline left growth at just 0.1% for the third quarter, its weakest pace since January.

The slowdown was disappointing, according to Kallum Pickering, chief economist at Peel Hunt, but not a sign that recent fiscal jitters are undermining the economy. “While policy uncertainty is a headwind to growth, the underlying picture does not suggest that worse-than-expected Budget worries are the cause of the weakness,” he said.

Although household consumption picked up slightly, government spending growth slowed sharply and business investment fell 0.3% in the quarter. Industrial output also declined 2% in September, dragging down overall activity.

Pickering said: “Preliminary data need to be taken with a pinch of salt as they are often prone to heavy revision, but the weak third-quarter print tilts the risks to our call for 1.5% growth in 2025 to the downside."

Even so, Pickering said the figures strengthened Peel Hunt’s view that the Bank of England will cut interest rates by 25 basis points to 3.75% at its 18 December meeting. “Falling inflation should open the door for benchmark interest rates to decline substantially as the Bank eases its monetary policy,” he said. “While tax increases will slow growth, lower rates can be a powerful offset.”

Other analysts pointed to specific shocks behind the weaker September data. Nicholas Hyett, investment manager at Wealth Club, said the cyberattack on Jaguar Land Rover “slammed the brakes” on industrial activity.

“A shrinking economy is not what any chancellor wants days before a Budget,” Hyett said. “The massive knock-on effects of events at a single company show how vulnerable the UK economy is at the moment. Large national champions are great, but they need to form part of a diverse economic ecosystem. The government should be looking hard at supporting small businesses in particular in the Budget.”

Danni Hewson, head of financial analysis at AJ Bell, said the figures add to the “immense weight on Rachel Reeves’ shoulders” as she prepares her second Budget later this month.

“Growth was held up by this government as the way to build back public services without increasing taxes,” she said.

“But the sums never seemed to add up, and the chancellor is now faced with breaking manifesto commitments while trying to foster the confidence needed to deliver growth.”

With its concentrated exposure to high-growth US stocks, the £2.9bn Baillie Gifford American fund can dominate a portfolio – for better or worse.

It is a high-conviction, bottom-up fund that seeks to invest in exceptional US growth companies.

This approach has largely paid off, with the fund in the first quartile for returns in the IA North America sector over one, three and 10 years – gaining 393.7% over the decade – but it dropped to the fourth quartile over five years, gaining just 8.5% versus the sector average of 82.1%.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

Although it remains popular, the heavy US growth bias, concentration risk and high volatility mean that the fund ultimately works best as part of a diversified portfolio of more value-driven funds with less concentration risk, according to fund experts.

As such, they have outlined their suggestions for funds to hold alongside Baillie Gifford American.

Ben Yearsley, director at Fairview Investing, said: “As everyone should know, Baillie Gifford takes a high growth approach, so it’s quite easy coming up with complimentary funds.”

He first suggested pairing the Baillie Gifford fund with the £2.5bn Polar Capital Global Insurance, noting that the fund normally benefits from higher interest rates, in direct contrast to Baillie Gifford American.

The fund invests in 30 to 35 quality companies, leading to a bias towards small- and mid-cap companies more focused on underwriting than larger insurance names.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

As for another options, Yearsley said investors could explore funds that offer more small-cap exposure, such as De Lisle America, or equity income funds, such as BNY US Equity Income.

“Both funds complement Baillie Gifford America as neither invests in large-cap, high-growth stocks,” said Yearsley.

“But the BNY fund is for the more cautious investor, whereas De Lisle is for those seeking much closer exposure to the domestic US market and economy.”

The £603.2m De Lisle America was launched in 2010 and aims to achieve capital and income growth over five years. It has been managed by Richard De Lisle since launch, with top holdings including toy retailer Build a Bear Workshop.

The larger and value-oriented BNY US Equity Income – which has £1.2bn in assets under management – targets a yield of at least 50% in excess of the S&P 500, with between 30 and 60 holdings which include well-known financials, such as JPMorgan Chase and Bank of America.

Both funds delivered first quartile returns in the IA North America sector over five years, with the BNY fund gaining 116.1% and the De Lisle fund making 112.9%.

Performance of the funds vs sector over 10yrs

Source: FE Analytics

Jason Hollands, managing director at Bestinvest, said he would first look to funds that are underweight the US to ensure diversification.

First up, he suggested the unconstrained $1.8bn value fund Ranmore Global Equity.

It has an FE fundinfo Crown Rating of five out of five and has been managed by Sean Peche since its launch in 2008.

Hollands pointed to its diverse mix of holdings, which include ecosystem brand Haier Smart Home, UK fast food chain Greggs and American toy manufacturer Mattel.

The fund managed top-quartile returns in the IA Global sector over one, three, five and 10 years, gaining 264.1% over the decade.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

“Another unconstrained fund that could work alongside the Baillie Gifford fund would be Fiera Atlas Global Companies,” said Hollands.

Managed by Simon Steele, the $1.1bn fund was launched in 2022 and aims to deliver annualised returns of 10% or greater – with lower risk of capital loss than broader global equity markets – over the long term.

“If you look at the top 10, none of them are the usual names and it’s not got a market cap weighting bias,” said Hollands. “None of those top holdings would appear in an index fund.”

These include technical product and services supplier Diploma, supplier of critical aircraft components and aerospace systems HEICO and financial technology company Tradeweb.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

Hollands also suggested the £1.4bn IFSL Evenlode Global Income because it targets high-quality, dividend paying companies and is also underweight the US.

It has a Titan Square Mile ‘AA’ rating, with the analysts noting they have “a favourable view of the outcome-oriented focus and ultimately believe the preference for reliable income compounders should not give investors too many surprises”.

When pitted against the rest of the IA Global Equity Income sector, the fund has languished in the fourth quartile for returns over one, three and five years.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

Meanwhile, Alex Watts, senior investment analyst at interactive investor, suggested holding Neuberger Berman US Multi-Cap Opportunities.

He pointed to the “flexible” investment strategy, which allocates across three buckets of stocks: proven companies with consistent free cashflow, less-in-favour value opportunities, and special situations.

“On aggregate, the fund has retained a relatively neutral stylistic exposure through the years,” said Watts.

“While the allocation to technology (around 21%) is substantial, in contrast to the S&P 500 benchmark the fund leans towards the financials sector (25%), while also being overweight industrials (12.3%) names.”

It has a good track record of returns against flex-cap peers but does fall short of its benchmark S&P 500 returns over many time periods, Watts said, “which is not a surprise given the lesser exposure to large- and mega-cap companies that have driven the index”.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

As Baillie Gifford American is a fund typically invested in faster growing and more richly valued companies, Paul Angell, head of investment research at AJ Bell, said he would look to counterbalance this in portfolios with the $4bn value-oriented and bottom-up Dodge & Cox US Stock fund.

The strategy, which has been in place since 1930, stands out for its high active share and low portfolio turnover.

Over 10 years, the fund is in the third quartile for returns in the IA North America sector, gaining 231.1% versus the sector average of 256.9%.

Performance of the fund vs sector and benchmark over 10yrs

Source: FE Analytics

Much ink has been spilled over the last 15 years on a single notion that has dominated the conversation regarding global stock market performance: ‘US exceptionalism’. It’s not altogether surprising. Performance has indeed been ‘exceptional’, in terms of both magnitude and duration. Including dividends, the S&P 500 has returned close to 600% over that 15-year period whilst, say, the FTSE All-Share has returned under 200%.

The US is the only country to have returned to its pre-pandemic potential growth path and has been the destination of choice for capital for some considerable time now. US stocks attained a peak of circa 75% of the MSCI World Index in February of this year (the next largest single country is Japan at under 6%). Investing globally has, essentially, become a bet on the US.

Bull markets don’t die of old age of course – there’s invariably a reason – and recent events (trade tariffs, valuations propelled to historically ‘uncomfortable’ levels, concentration risk concerns, artificial intelligence disruptions et al) are, needless to say, catalysing something of a rethink.

The S&P 500 has pushed to fresh record highs in recent weeks, yet much of that strength remains narrowly driven and richly valued, conditions that have historically left markets vulnerable. Against that backdrop, it is more than a little perplexing that one segment of the US market remains enduringly under-appreciated: mid-caps – and, more specifically, mid-cap value.

At the end of Q2 2025, mid cap stocks accounted for just over 20% of the market capitalisation of the Russell 3000 Index, which represents approximately 98% of investable US equities by market cap. Yet as a share of total U.S. equity assets, mid-caps made up only about 6% - less than a third of their ‘appropriate’ weighting. We use the phrase the “forgotten middle” with good reason.

The mid cap equity cohort represents a risk/return lifecycle ‘sweet spot’ within the US market. Below, we set out a ten-part rationale as to why now might be the time to rethink the addition of a strategic, dedicated US mid cap equity allocation to a broader portfolio of equity assets … a case made even stronger when examining the appeal of current relative valuations specifically.

1. Positioned to perform

Mid cap stocks have tended to outperform over time, with fundamentals – such as high return on invested capital (ROIC) or the ability to generate consistent, solid cash flows – proving to be a more reliable driver of returns than unfounded, or dare we say speculative, exuberance.

With an annualised return of 11.1%, the Russell Midcap Index has outperformed the large cap Russell Top 200 Index (10.7% annualised return), the Russell 1000 Index (10.8% annualised return) and the small cap Russell 2000 Index (9.2% annualised return) since the common inception date of 1st September 1992 (to 30 June 2025).

Taking the S&P 500, Russell 1000 and Russell 2000 indices over the 30 years to 30 June 2025, and then looking at one month performance, the Russell Midcap Index outperformed the other three indices in 26.1% of all one-month periods.

2. From alpha to beta  

Mid-caps have historically outperformed both large and small caps while maintaining comparable risk levels. Over the past three decades, volatility for mid-caps has been only marginally higher than for large caps, and their risk adjusted returns (as measured by Sharpe ratio) have matched or exceeded large caps while significantly outpacing small caps. This balance of higher returns without a proportionate increase in risk makes mid-caps a strong candidate for long-term allocations.

3. Do you have the exposure you think you have?

Investors – both active and passive – may have lulled themselves into an erroneous belief that they have achieved adequate exposure across the full market cap spectrum. Active buyers commonly seek mid cap exposure by coupling a large cap manager with a small cap manager on the assumption that the former will trade down sufficiently below the cap scale for the benchmark, with the latter seeking to do the reverse. This view is at odds with reality however: the average large cap core strategy has a weighted average market cap of over $800bn, suggesting a strong bias for mega caps, compared to less than $80bn for the average mid-cap core strategy, whilst the average small cap core strategy has a weighted average market cap of just over $5bn, some way short of the aforementioned $80bn exhibited by mid cap.

Similar issues arise when adopting a passive approach. Broad-based indices like the S&P 500 and Russell 1000 are market-cap weighted and, consequently, their returns are dominated by larger stocks. The Russell Midcap Index comprises the smallest 800 companies in the Russell 1000 Index but, being market-cap weighted, the largest 200 stocks represent circa 80% of the index with the five largest accounting for circa 25%.

4. Ripe for re-rating

The potential of mid cap stocks has long been recognised as attractive takeover targets for larger businesses keen to diversify, grow market share, acquire innovative technologies, product lines or services, access new markets or achieve synergies, commonly resulting in a significant re-rating of the share price. Mid-caps are typically of sufficient size to be of meaningful strategic interest to a more substantial company but small enough to be acquired within a reasonable timeframe and at manageable cost. A mid cap target manifesting good earnings growth can also represent the opportunity for an acquirer to enhance its own earnings and financial performance.

Over the last ten years, the volume of takeovers diminishes significantly as the transaction size increases, with the volume of transactions over $10bn representing less than 5% of all transactions. 

5. Under-analysed, not just under-owned

It’s long been the case that, relative to large cap stocks, mid-caps tend to enjoy markedly lower sell-side analyst coverage. For example, it’s not uncommon for institutional mandates to restrict investment in mid-caps, leading to less attention from institutional managers. While large cap stocks are heavily traded by institutional investors – and are often fully valued –market inefficiencies are more pronounced in the mid cap space. This allocation ‘blind spot’ results in wider variance in mid cap valuations and, as a result, a greater opportunity for the active investor to generate alpha.

6. Value is still inexpensive

As a sub-set of the broader mid cap space, valuations remain seductive for value stocks – indeed, value hasn’t been this cheap relative to growth since the bursting of the tech bubble, other than the outlier pandemic years of 2020 and 2021. As at the end of 2024, the Russell Midcap Value Index traded at 17.5x FY1 estimated earnings whilst the Russell Midcap Growth Index trades at 33.2x, a spread of 15.7. Contrast this with the fact that the average and median valuation spreads have been 9.8x and 6.7x respectively over the past 25 years.

It's by no means certain when, and to what extent, the valuation premium for large cap and growth stocks will recalibrate but it’s safe to say that the current differential stands mid cap value in good stead going forward.

7. A bigger pond to fish in

The size of an investment universe has a direct and obvious bearing on the likelihood of identifying stocks which fulfil one’s selection criteria. As ever, examining the index make-up is illuminating.

The variation in the number of constituent stocks within the Russell Midcap Growth and Russell Midcap Value indices over the last 20 years is dramatic. The number of stocks within the growth universe is 288, its lowest point over that period, and indeed ever, whilst the value universe has 713 stocks, currently almost 150% larger than 20 years ago.

8. A confrontation with concentration

Concentration risk is not an unfamiliar phenomenon these days – at the country, sector or stock level. An analysis at the sector level, for example, highlights important disparities. The Russell Midcap Growth Index now has a c 30% weighting to technology, the highest ever, and more than three times higher than its value equivalent. It’s difficult not to see this as a risk for allocators … but one that can be readily reduced by revisiting mid cap value where concentration levels remain in line with historic experience.

9. When the going gets tough …

A particularly desirable trait of mid cap value stocks is their resilience, and one need only cast one’s mind back to the dot-com bubble for validation. Prior to the bubble bursting, large cap growth stocks had overwhelmed their mid cap value counterparts; in the aftermath, however, mid cap value held up significantly better and then went on to produce a decade of impressive performance. Given the extent of large cap’s outperformance over the last ten years and the enduring enthusiasm for technology stocks, we’d argue that we are not in dissimilar territory today.

10. And finally …

There is good cause for optimism on a number of fronts. Analyst projections show mid cap earnings growth inflecting to the upside, with current year estimates exceeding large caps and, importantly, at lower valuations. Whilst key elements of the Trump administration’s policy remain difficult to predict, tariffs and other trade initiatives designed to stimulate US-based production are likely to prove advantageous, given that most US mid-caps are domestic. Similarly, whilst the prospect of declining corporate tax rates would bolster all US stocks, incremental tax breaks for US production would further benefit the mid cap cohort.

It's time to look again at that ‘forgotten middle’.

Mark Giambrone is the manager of the Barrow Hanley US Mid Cap Value Equity fund. The views expressed should not be taken as investment advice.

Investors who think active bond funds need to be taking big bets against the index to outperform are making a mistake, according to Ales Koutny and Sarang Kulkarni, co-managers of the Vanguard Global Credit Bond fund.

Active funds’ higher fees cause managers to think the fund should look significantly different from the index to justify their costs and outperform, but this can backfire, said Koutny.

“Some managers are searching for the highest amount of returns at all times, even when the opportunity set is scarce, because they have a high fee to meet and so they think they need to keep producing these results non-stop.”

In pursuit of this, some strategies are constantly chasing opportunities that make them more like “low volatility equity products” in terms of their risk.

This was the case during the Covid-19 pandemic, with funds that were “supposed to be globally diversified” having around 80% in high yield because the managers were attempting to deliver supranormal returns. However, this resulted in many funds underperforming common benchmarks such as the Bloomberg Global Aggregate Credit index, he said. 

Indeed, in the IA Global Corporate Bond sector, more than 50% of the peer group underperformed the index during 2020, according to FE Analytics data.

Instead, active funds should resemble the index they are measured against, Koutny said. If active funds behave like the benchmark “within reason”, this creates a strategy that doesn’t rely on certain big trades to make or break performance and allows the fund to generate outperformance through a series of smaller trades that may not add a lot of value on their own, but “add up day in and day out”.

Creating a fund like this means that risks are diversified across different areas, so the amount a single mistake can cost the fund is limited. 

“The core of our philosophy is that we know we're going to be wrong, so the best thing we can do is build a budget for it,” Kulkarni said.

This is preferable to building a fund that makes a supranormal return one year but has “tumbleweeds blow through the portfolio for the next three”.

“Nobody buys bonds to become a hero,” he said.

Vanguard’s is not the only fixed-income team to draw attention to the value of having funds that resemble their benchmark. 

David Roberts, head of fixed income at Nedgroup Investments, agreed that it is a “good way to increase certainty for clients”.

Investors buy bonds because they provide security. “If a client needs a bond fund, why buy a fund taking quasi-equity or currency risk?” he asked.

“There are so many small wins available to bond investors, it seems sensible to target a 'sleep easy' style”.

Thomas Hanson, high yield manager at Aegon AM, was less convinced of the benefits, as closely following the benchmark is “a suboptimal endeavour and a poor substitute for true active fund management”.

Part of this is due to the construction of benchmarks in fixed income markets, where the biggest weighting goes to the most indebted companies with “no regard given to underlying fundamentals and their expected direction of travel”.

On top of this, there is no natural meritocratic rebalancing mechanism in bond indices like there is in equity indices, Hanson stressed. In equity markets, companies that are performing well have higher weights in the index, but “in the fixed income world, the opposite is true”.

As a result, using benchmarks as a blueprint for portfolio construction is “unlikely to lead to good outcomes for investors”. Extracting the most value in fixed income involves constructing a genuinely differentiated, high active share portfolio, he concluded.

HANetf has launched the Future of Defence Screened UCITS ETF to offer exposure to NATO-based defence and cyber-defence firms while meeting SFDR Article 8 criteria.

The ETF invests in companies expected to benefit from the long-term increase in defence spending across NATO but excludes those involved in controversial weapons and limits constituents to those headquartered in NATO member states. These countries are bound by shared defence commitments and established arms export controls.

This is HANetf’s second Article 8 defence ETF, following the Future of European Defence Screened UCITS ETF, which was the first of its kind in Europe. The firm said the new launch responds to investor demand for defence exposure with more stringent screening.

The ETF enters the market amid growing NATO budgets, following the alliance’s agreement to raise defence spending to 5% of GDP by 2035.

In 2024, NATO members spent a record $2.7trn on defence. Analysts expect further expansion of defence contracts in response to geopolitical instability, including the war in Ukraine and ongoing conflict in the Middle East.

HANetf now offers four defence-focused ETFs: Future of Defence UCITS ETF and Future of Defence Indo-Pacific ex-China UCITS ETF, both classified as Article 6, and Future of European Defence Screened UCITS ETF and the new Future of Defence Screened UCITS ETF under Article 8.

The flagship Future of Defence UCITS ETF has reached $3.13bn in assets under management.

Hector McNeil, co-founder and co-chief executive of HANetf, said: “Investors increasingly recognise that security and sustainability are not opposing forces – they are interlinked. A well-equipped and responsibly governed defence sector is essential to maintaining peace, stability and the rule of law.

“With a more focus, screened defence ETF, we aim to give investors confidence that their capital supports NATO defence capabilities while adhering to robust responsibility standards. Importantly, these enhancements also make the ETF more accessible to investors in regions where exposure to certain defence-related activities has previously been restricted from a legal and regulatory perspective, widening the opportunity to participate in the growth of defence.”

Future of Defence Screened UCITS ETF is listed on Xetra and Borsa Italiana, with listings on the London Stock Exchange and SIX to follow. The fund has a total expense ratio of 0.49%.

With the Budget looming later this month, chancellor Rachel Reeves is reportedly weighing a bold move to shake up the country’s investing culture: scrapping stamp duty on shares.

Currently, investors with stocks and shares ISAs pay a 0.5% levy when they buy UK-listed shares – a cost that is hidden within transaction fees and eats into their returns. This means they are effectively penalised for backing UK-listed companies, even as they are shielded from income and capital gains tax.

However, the issue of sacrificing the revenue that comes from this stamp duty will be a major factor influencing the chancellor’s decision, as she scrambles to fill the Treasury coffers.

Axing stamp duty on shares entirely would cost the government millions, but AJ Bell has predicted that just removing the tax from UK shares held in an ISA would amount to a more digestible £120m.

Richard Stone, chief executive of the Association of Investment Companies (AIC), said the removal of stamp duty on shares purchased within ISAs and pensions “would encourage private investors and pension funds to hold more UK shares and remove the self-defeating bias that the UK tax system currently creates in favour of overseas equities”.

Indeed, an interactive investor poll of 1,000 retail investors earlier this year found that 72% said removing stamp duty on UK shares and trusts would incentivise them to invest more in UK assets – whereas just 7% said they would invest more into the stock market if the government follows through on plans to slash the annual cash ISA allowance.

Stone also made the case for the chancellor to remove the tax from investment company shares.  

“Competing products such as open-ended funds are not taxed, which distorts the market,” he said. “The current approach is also an example of double taxation, since investors pay stamp duty when they buy investment company shares and then the investment company pays it again when it invests in UK companies.”

In addition, it has been reportedly suggested that the Treasury may give a stamp duty holiday to new London stock exchange listings to reinvigorate a flagging stock market.

Laith Khalaf, head of investment analysis at AJ Bell, said: “Granting an exemption on newly listed companies would reduce a significant barrier to investing in the UK and potentially attract a broader pool of investors.

“It would also encourage more companies to list, knowing there is less of a tax deterrent in their first few years on the market.”

The Financial Conduct Authority has previously relaxed listing rules by introducing measures empowering company management over shareholders and introducing a sunset clause allowing companies to go public with dual class shares – meaning they can sell shares that carry different voting duty weights.

Adding a three-year stamp duty holiday alongside such measures “might be considered another step on the journey towards greater retail participation in the UK stock market”, Khalaf said.

However, Mark Campbell, head of wealth proposition at Isio, pointed to the counterargument, which is that stamp duty raises around £4bn annually.

“Removing it would favour the wealthy and provide little incentive to increase trading volume,” he said.

As such, Campbell said it is hard to see how its removal would materially influence behaviour - and there is also the question as to how Reeves would replace that lost revenue stream.

Global dividends rose to an all-time high of $518.7bn in the third quarter of 2025, up 6.2% from the same period last year, according to Capital Group’s latest Dividend Watch report.

Across the globe, 88% of companies either increased dividends or held them steady in the third quarter, with median dividend growth standing at 5.7%.

Christophe Braun, equity investment director at Capital Group, said: “The third quarter continued the strong growth in global dividends, extending an unbroken four-year sequence of quarterly highs.”

Quarterly global dividend payouts

Source: Capital Group’s Dividend Watch

The financial sector drove nearly half of the quarterly growth, with core dividend increases of 11%. This was twice as fast as the remaining sectors combined (5.5%).

Within financials, insurers posted the fastest rise at 18.6%, followed by general financials at 16.1% and banks at 8%. Between January and September, those three groups added $44bn in dividend payments globally.

Software and transport were also highlighted by Capital Group for strong dividend growth during the quarter while mining and chemicals were weak spots.

In the US, payouts reached a record $179.3bn. Although core growth slowed to 5.7%, dividends remained resilient; over the past 15 years, there have been only two quarterly declines, both during the Covid-19 pandemic.

Europe’s core dividend growth stood at 6.1% year-to-date. Poland and Spain accounted for half the region’s third-quarter gains by growing more than 10%, while France and the Netherlands underperformed.

UK companies paid £20.2bn in Q3, up 1.4% on a topline basis due to favourable currency movements. On a core basis, dividends fell 0.9%, the second-weakest performance among major markets (after Australia).

Cuts in commodity and telecom firms outweighed gains in industrials and domestic financials. Roughly 90% of British companies either held or increased their payouts during the quarter.

In Asia, Japan reported 13% core dividend growth, though its seasonal distribution patterns meant a smaller impact on global totals. Hong Kong payouts rose 15.4% in its peak season, with no cuts reported. China saw no core growth and around one-third of firms reduced distributions.

Emerging markets posted 11.2% core growth, led by India, Saudi Arabia, South Africa and Mexico. In contrast, Australia saw a 7.4% decline due to cuts from mining and energy companies, placing it at the bottom of major markets in 2025 so far.

Capital Group expects Japan to play a larger role in the fourth quarter, with continued support from European banks and Pacific markets. However, dividend cuts are possible in India and Brazil.

Braun said: “For investors, diversifying globally can unlock real benefits. It can ensure access to enduring sources of dividend growth such as the US, where consistency and resilience are underpinned by the diversity of its stock market and robust profit momentum, to global sector trends like the current strength among financials, or to regions experiencing periods of significant growth like Europe.

“Firms that consistently pay and grow their dividends typically show solid earnings, healthy cash flow and disciplined management. Dividends can be an anchor in times of uncertainty and by tracking dividend trends, investors gain deeper insights into a company’s performance and its resilience.”

Multi-asset portfolios are usually designed as diversified one-stop shops that mitigate risks and behave differently than the overall market. Yet these funds have shown a high correlation to the S&P 500 over the past three and five years, data from FE Analytics shows.

This means that the average multi-asset fund has grown and fallen in tandem with the US market most of the time, leaving those who own both (as many DIY and beginner investors do) with synchronous gains and losses, to a level they might not have expected.

As investors are now increasingly aware of how exposed their portfolios truly are to the risks in the US market, this article reveals the Investment Association sectors that had highest and lowest levels of correlation to the American market over the past five years, to see which have provided on average better diversification.

Of course, the IA North America sector has the highest correlation with the S&P 500, at 0.97, as would be expected. Not only do its members tend to focus on the US over Canada, but around a fifth of funds are index trackers.

Technology mega-caps make up a vast part of the S&P 500, with just the top five names (Nvidia, Microsoft, Apple, Alphabet and Amazon) representing around 30% of the index. In turn, the US market constitutes about 70% of the global market.

It is therefore unsurprising that the fund sectors with the highest correlation to the US beyond IA North America were IA Global (0.92) and IA Technology and Technology Innovation (0.85).

Source: FE Analytics

These were followed by the IA Unclassified sector (0.84). Although this is not an homogeneous peer group, as it is home to funds that do not easily fit into other sectors, it does hold many strategies with a pure equity or equity-heavy mixed asset approach.

Just below was the multi-asset IA Flexible Investment sector. Here, fund managers can allocate freely across asset classes, meaning they often aim at the higher returns that equities can provide, potentially explaining the high correlation to the US equity market.

The average multi-asset flexible fund has a correlation of 0.83 with the S&P 500 over the past five years. The figure remains the same in the IA Mixed Investment 40-85% sector, where equities can’t exceed 85% of portfolios.

The same was also true for the IA Volatility Managed sector, another multi-asset sector with the objective to manage returns while maintaining specified volatility parameters.

IA Global Equity Income, IA North American Smaller Companies and IA Financials and Financial Innovation completed the top 10 of sectors with strong correlations to the index.

The IA Mixed Investment 20-60% Shares and 0-35% Shares sectors also were highly correlated, at 0.77 and 0.71 respectively.

The only equity sector with a negative correlation to the S&P 500 was IA China/Greater China, with the average fund growing when the US fell and vice versa, to the beat of a -0.02 correlation.

UK direct property strategies were even less correlated at -0.03, highlighting the potential diversification benefits of alternatives such as real estate.

Money market funds were also at the foot of the table, at between 0.03 and 0.05, as illustrated below.

Source: FE Analytics

Funds investing in government bonds of different regions (including US, Europe and emerging markets) were sandwiched in the middle of the table, with levels of correlation spanning 0.16 and 0.33.

UK gilt funds were the outlier: at 0.51 correlation, they moved together with US equities over half the time – slightly more than global corporate bonds funds, which averaged at about 0.50.

Other equity sectors with low correlations were IA India/Indian Subcontinent (0.3), IA Latin America (0.38%) and IA Asia Pacific Excluding Japan (0.45). Europe and Japan were in the middle ground, at 0.65 and 0.6 respectively.

The data in this study applies at broad sector level, illustrating of how funds have behaved on average in the past five years. From next week, we will continue this correlation study at a funds level, revealing which strategies were able to buck the trend of their wider peer group.

Emerging markets and developed markets seem to be converging this year, as the characteristics which separate them have become more blurred, according to Raheel Altaf, manager of the Artemis SmartGARP Global Equity fund.

Theoretically, the two types of market are distinguished by levels of GDP, economic maturity and stability, but this definition has been less clear this year.

“When you look at some developed markets this year, they seem to have characteristics of emerging markets, such as political instability and currency volatility,” the FE fundinfo Alpha Manager said. One does not need to think hard to find examples, with France having gone through five different prime ministers in the past two years and the US dollar in decline.

Across the globe, governments have started to “load up on debt”, with the US having a $1.77trn national deficit.

All of these are characteristics usually associated with less mature markets, Altaf said.  

By contrast, some emerging markets now have the qualities of their developed market counterparts, such as comparative economic stability and better levels of growth.

For example, many emerging markets now have much less debt than some Western countries. According to data from the International Monetary Fund (IMF), general government gross debt is 72.7% (as a percentage of GDP) in emerging markets, compared to 110.2% in advanced economies.

Government debt as a percentage of GDP

Source: International Monetary Fund. The red line represents emerging markets, the blue line represents advanced economies, and the yellow line represents the global average.

Many emerging market companies are also more “fundamentally sound” than investors initially think, Altaf said, as they benefit from a “benign economic backdrop”, including young working populations, urbanisation, a growing middle class and good domestic consumption.

On top of this, countries such as China are “aggressively” stimulating their economies, while others like Korea are introducing reforms to make companies more shareholder-friendly.

Some emerging countries are much less constrained in terms of monetary policy and could cut rates “quite aggressively” to promote better growth.

“This is a very different dynamic when compared to the western world, where you’ve got cost of living issues, inflationary pressures and unemployment concerns,” Altaf said.

The convergence of these types of markets is part of why emerging markets seem to be finally “turning the corner”, after being among the worst places to invest for decades. Over the year to date, the MSCI Emerging Markets index is up 26.5% in sterling terms, outpacing the MSCI World, which tracks developed markets, as the chart below shows.

Performance of indices YTD

Source: FE Analytics

Altaf has remained bullish on emerging markets this year, maintaining a 27.8% allocation to the region within his portfolio. This is a relative overweight compared to its benchmark, the MSCI ACWI, which has around 10% exposure to emerging markets.

Part of Altaf’s enthusiasm for emerging markets comes from the share price of companies, which are priced in a way that “is hard to believe”. Businesses trade at substantial discounts to what similar companies are priced at elsewhere, giving several opportunities for value investors, he continued.

For example, the manager has found opportunities in Taiwan this year, which is one of the emerging markets that “is closest to being a developed market”.

He holds semiconductor manufacturer TSMC as one of his top 10 holdings and recently added to Elite Material, which makes components for data centres, giving it a “meaningful role” in the artificial intelligence trend.

Both trade on discounts to other tech stocks, with TSMC on a 23.9x price-to-earnings (P/E) ratio and Elite Material on 35x compared to Nvidia’s 54.7x P/E ratio, according to Google Finance.

Chinese businesses have several tailwinds this year, including being better positioned for tariffs than many investors think.

After the first Trump presidency, Chinese companies understood they were “in the firing line” of another wave of tariffs and so took measures to reduce their US exposure, Altaf said. This included focusing more on the domestic market and other emerging markets so that now, just “3% of their revenues are directly exposed to the US”.

Chinese cobalt producer CMOC Group was one of the portfolio’s best-performing holdings this year.

The focus on emerging markets has contributed to the Artemis SmartGARP Global Equity fund’s strong performance this year. Since the start of 2025, the strategy has surged 29.9%, outpacing the MSCI ACWI as well as its peers in the IA Global sector.

Performance of fund vs sector and benchmark YTD

Source: FE Analytics

Spreads are tight – the three words you will invariably hear when you discuss fixed income with any fund manager or industry professional at the moment. In fairness, it is completely true. Take high yield, for example, where spreads are in the tightest 5% of readings over the past 25 years*. Logic says they are likely to widen from here, but when is a different question – and one that perhaps many are overlooking.

Figures from the Investment Association’s sterling high yield bond sector show the average fund has returned north of 7% in the past 12 months – yes, global equities are higher (the MSCI World index has returned 14%), but without the same degree of volatility**. The kicker for high yield is the income, where investors can expect high single-digit returns at the moment.

That return from high yield - in a market where we can expect greater volatility and therefore dispersion - is nothing to be sniffed at. The question is whether this is sustainable and I’d argue there are plenty of reasons to suggest that it is.

The reality is that spreads can stay at these tight levels for prolonged periods, particularly if there is economic stability. History shows current levels to be tight, but this is distorted by periods such as the global financial crisis and Covid, where spreads widened to over 2,000 and 1,000 basis points respectively for US and European high yield bonds*.

Firstly, I’d point to the outlook for the global economy being relatively stable. Recent updates from the OECD indicate that global growth proved more resilient than expected in the first half of 2025, especially in many emerging markets but also in the United States***. Figures from the International Monetary Fund point to a slowdown in the global economy from 3.2% in 2025 to 3.1% in 2026, citing trade tensions and policy uncertainty, among other risks****. In a nutshell, the global economy looks relatively benign, which potentially supports this environment for tighter spreads.

Rate cuts are also a boon for the high yield market as they tend to have shorter maturities. Janus Henderson portfolio manager Brent Olson says in this environment fixed yields become relatively more valuable and floating rate assets less attractive. He says: “Spreads may be tight, but if corporate conditions remain robust and interest rates on cash and yields on shorter-dated government bonds are falling, then it becomes easier to reconcile why the market is chasing the higher yield from high yield bonds and is prepared to accept greater credit risk. An extra 2.5%-3% of yield (provided you can avoid defaults) above government bonds has its attractions.”

Defaults are obviously the concern, but figures actually show they have been on the decline. Annual US high yield default rates have averaged 2.5% pa since 2008, but since the pandemic they have averaged less than 1% a year (0.68% in 2025 so far)^. There are other fundamentals which support the stability of the market – not only is the market higher quality (at the end of June 2007, only 41% of the index was rated BB — the highest sub investment grade rating — today, that figure is around 60%, while CCC has halved from 15.7 to 7.9%); but the global high yield bond market is also six times larger than it was 25 years ago. It is also a more global market, with US issuers now accounting for 60% (compared to 80% in 2000)^^.

I’d also argue that trade uncertainty has resulted in many high yield companies bolstering corporate balance sheets. High-yield issuers have chosen to focus on boosting working capital and keeping debt levels manageable as they wait to see how the tariff and trade picture settles. This perhaps reflects the low levels of new issuance.

A research update from Alliance Bernstein says new issuance has largely involved rolling over debt and refinancing, benign corporate actions that have kept spreads sticky and the high-yield universe relatively clean^^^. “Even in the event of an external shock, they wouldn’t expect the high-yield markets to buckle, because market excesses have largely been wrung from the system”, it adds.

There are risks around further geopolitical volatility, as well as the potential for a recession, but perhaps the biggest concern is whether the global high yield market can withstand the pain of a falling dollar. Artemis Global High Yield Bond co-manager Jack Holmes says unlike the corporate and government bond markets, the high yield market has tightened in recent years and does not have excess bonds (therefore there is no need for a marginal buyer). Secondly, while the high-yield market has been contracting, large institutional investors have been increasing their allocations. He says the market is now led by pension funds and insurers, who take a more buy-and-hold approach to the asset class^^^^.

Jupiter Monthly Income Bond manager Hilary Blandy says spreads on high yield remain pretty tight – but feels that on a granular level (for example looking at Euro B/BB grade) there is still some value. She says: “We don’t have our foot on the gas in terms of capturing more upside in terms of spreads, but I don’t think they are crazy tight. What I want to own in high yield is high-conviction credit and as much as I can in short-dated carry trades. Where I haven’t been able to find that kind of paper I’ve been looking at more defensive BB than I usually would.”

High yield is the realm of the active manager in my eyes and I believe we are now in an environment where this is particularly true. There remain plenty of opportunities at sector and company level, with attractive returns and yields on offer. Investors may want to consider the likes of the Aegon High Yield Bond fund, a style-agnostic portfolio which aims to generate long-term outperformance by exploiting global high yield market inefficiencies which range across issuers, sectors and geographies. Those preferring a closed-ended option might look to the Invesco Bond Income Plus investment trust. Manager Rhys Davies can invest across the fixed income spectrum, but tends to focus specifically on the high yield market in Europe and the UK.

Darius McDermott is managing director of Chelsea Financial Services and FundCalibre. The views expressed above should not be taken as investment advice.

*Source: Janus Henderson, 3 October 2025

**Source: FE Analytics, total returns in pounds sterling, 21 October 2024 to 21 October 2025

***Source: OECD Economic Outlook, September 2025

****Source: IMF, World Economic Outlook, October 2025

^Source: Insight Investment, 17 September 2025

^^Source: T. Rowe Price, August 2025

^^^Source: Alliance Bernstein, 15 August 2025

^^^^Source: Artemis, 11 June 2025

With two weeks left to go before the UK Budget, experts have found themselves divided on rumours that chancellor Rachel Reeves could be considering slashing the annual cash ISA allowance by as much as £10,000.

At present, ISA savers can freely allocate an annual £20,000 across a Stocks-and-Shares and a Cash ISA account, where the money grows tax-free. By capping the cash allowance to £10,000 (or a number between £5,000 and £12,000, according to different sources), Reeves is hoping the money would flow from cash to UK-based investments.

However, industry experts have challenged this assumption. Cecilia Mourain, chief savings officer at Moneybox, said: “There is mounting evidence that reducing the cash ISA allowance would fail to achieve the chancellor’s goal of stimulating investment.”

Just 9% of savers would consider increasing their investments if the savings product was cut, Moneybox research has found (although AJ Bell has this number higher, at 20%).

Additionally, the cash ISA is one of the UK’s most “trusted and widely used financial products” – cutting it at a time of economic uncertainty risks “undermining momentum and eroding trust”, which are “essential to enable the industry to intelligently guide and support people on their journey from saving to investing,” Mourain said.

Tom Selby, director of public policy at AJ Bell, was also sceptical. While he agreed that encouraging people to invest is the “right policy goal”, reducing the Cash ISA allowance is the “wrong way to achieve it”.

Instead, he suggested merging cash ISAs and Stocks and Shares ISAs into a single hybrid product, which would “simplify the landscape and make it easier to transition into long-term investing”.

But other experts were more bullish on the prospect of reducing the cash ISA allowance.

Michael Healy, UK managing director at investment and savings platform IG, said: “The chancellor is absolutely right to tackle the UK’s overreliance on savings, starting with a product that does nothing for long-term wealth creation – the cash ISA.”

IG analysts estimated that if the allowance were cut by £10,000 and 28% of the 2.8 million cash ISA holders who currently save more than £10,000 a year moved the excess into stocks and shares ISAs, around 780,000 people could boost their returns by a total of £7.2bn over the next five years (based on projected interest rates falling to 3% by 2028/29).

“The reality is that this reform is sensible, proportionate and long overdue. We urge the chancellor to stick to her guns,” Healy concluded.

European equity markets have not always been an investor’s top choice, with the strength and massive growth of the US market tempting many.

However, over past year, the region has enjoyed increased attention as investors look for stable markets outside of the US.

But with volatility still lurking and broad market gains far from guaranteed, investors may be better served by funds where manager skill – not market momentum – has been the driving force.

In a continuation of an ongoing series, Trustnet identified funds in the IA Europe ex UK sector with the highest information ratio score over the past five years.

This score calculates the extent to which a fund’s performance derives from natural market fluctuations versus manager skill by dividing the portfolio’s active return by the tracking error, with a score of 0.5 or higher indicating a better risk-adjusted performance.

To allow for comparison between funds across the sector, we selected one of the most common indices – MSCI Europe ex UK – against which to calculate scores.

We found that 36 funds scored 0.5 or higher but, when honing in on actively managed funds, this number fell to 12.

Source: FE Analytics

Top of the table is the £1.3bn Artemis SmartGARP European Equity, with an information ratio score of 1.

The fund, which has an FE fundinfo Crown Rating of five out of five, has been managed by Philip Wolstencroft since launch and seeks to provide capital growth by investing in between 70 and 90 stocks attractively valued companies with the potential to grow. The top 10 companies – which include Societe Generale and Engie – represent around 30% of the fund and individual holdings are limited to 5% of net asset value.

Utilising Artemis’ SmartGARP quantitative analysis tool, the management team screens the financial characteristics of prospective investee companies, identifying those that are valued materially lower than their growth prospects merit.

RSMR analysts said the fund’s investment process is “clearly defined and rigorous and the quantitative approach is overlaid by the actions of the manager to ensure the quality of the underlying investments and the level of diversification within the fund”.

It has delivered top-quartile returns in the sector over one, three, five and 10 years, gaining 221.4% over the decade.

Performance of the fund vs sector and benchmark over 5yrs

Source: FE Analytics

In second place is MGTS AFH DA European Equity, which managed an information ratio score of 0.8.

The £444.8m fund utilises a multi-manager approach, meaning the portfolio is split into sleeves run by different teams.

AFH Wealth Management, as the fund’s investment adviser and overseer of the strategy, sets the European equities-focused approach and monitors performance, adjusting allocations and sub-managers when necessary.

By blending different strategies under different managers, the idea is to ensure diversification and smoother returns.

As of October 2025, the sub-managers of the fund are Wellington Management, Goldman Sachs Asset Management, MFS International and JPMorgan Asset Management – the latter of which joined the sub-manager team in May 2025.

It has delivered top-quartile returns in the sector over one and three years. 

Performance of the fund vs sector over 5yrs

Source: FE Analytics

Rounding out the top three is the £2.2bn Liontrust European Dynamic – also with an information ratio score of 0.8, alongside a total five-year return of 132.9% and volatility of 15.3%.

Managed by James Inglis-Jones and Samantha Gleave, the fund looks to provide long-term capital growth through a concentrated portfolio of investments, holding 30 stocks and an active share typically above 90%. The majority of the fund is invested in industrials (28.8%) and financials (26.5%).

RSMR analysts said the investment process is “very distinct, well-documented and implemented in a consistent fashion by an experienced and highly competent team”, adding that the managers continually look to improve the investment process.

Performance of the fund vs sector and benchmark over 5yrs

Source: FE Analytics

Meanwhile, WS Ardtur Continental European – also with an information ratio score of 0.8 – delivered the second-highest five-year returns of the 190.1%. However, the £387.3m fund is the most volatile of the 12 at 18.9%.

Launched in 2011 and managed by Oliver Kelton since 2015, its top holdings include Shell, Deutsche Bank and Orange.

It has managed top-quartile returns in the sector over one, three and 10 years – gaining 248.6% over the decade.

In contrast, the 168.2m  Waverton European Dividend Growth has the lowest volatility of the 12 funds at 11.5%, alongside an information ratio score of 0.7.

The fund aims to deliver long-term income and capital growth by investing in a diversified portfolio of European stocks that the managers believe will deliver dividend growth over a rolling three-to-five-year period.

It has been managed by FE fundinfo Alpha Managers Charles Glasse and Chris Garsten since its launch in 2005.

Its top three holdings are engineering and technology company Technip Energies, Swiss multinational pharmaceutical corporation Novartis and Smurfit Westrock, a global sustainable paper and packaging business.

With a five-year return of 116.8%, it beat the Waverton European Capital Growth across the three assessed parameters. The Waverton dividend fund has also delivered top-quartile returns over three and 10 years.

Performance of the fund vs sector and benchmark over 5yrs

Source: FE Analytics

Rounding out the table of 12 actively managed funds with the highest information ratio scores are JPM Europe (ex-UK) ESG Equity, JPM Europe Dynamic Ex UK, HSBC GIF Euroland Value, Janus Henderson European Focus, Schroder European Recovery and Quilter Investors Europe (ex UK) Equity Income.

UK-based investors withdrew a net £3.6bn from equity funds during October in the largest single-month outflows on record, according to Calastone’s Fund Flow index.

This means the cumulative outflow from equity funds since June has reached £7.4bn, with all equity categories experiencing net selling. Investors have been selling equity funds for five months straight.

Source: Calastone Fund Flow Index, Oct 2025

UK equity funds were hit with £1.2bn in redemptions, contributing to a total of £10.4bn withdrawn since pre-Budget jitters began earlier in the year.

Global funds posted a record £911m outflow for the month, while North American equity funds shed £649m. Technology-focused funds accounted for nearly all of the £220m withdrawn from sector-based strategies.

However, money market funds took in £955m, the highest monthly inflow ever recorded by Calastone, as investors moved capital into low-risk assets.

Fixed income funds had £589m in net inflows, primarily directed toward corporate bonds and flexible mandates. Sovereign debt funds remained out of favour.

Edward Glyn, head of global markets at Calastone, attributed the equity sell-off to two factors: investor caution over high equity valuations, especially in the US, and concerns over potential tax changes in the UK’s upcoming Budget.

Investor nerves about global equity prices, especially in the US, are viewed as the driving force behind outflows from global, US and tech funds.

This also explains why money market and fixed income funds both had a strong month - the cash coming out of equity funds has to be reinvested elsewhere, especially for investors who want to retain the tax protection of an ISA or pension wrapper.

Glyn added: “The other force stems from growing concern about Rachel Reeves’s Budget and the anticipated tax implications. For some, it’s a simple matter of crystallising capital gains in case rates go up. This drove a huge uptick in selling this time last year and it’s clearly round two in 2026.

“For many others, it’s about pensions. The tax-free lump sum that over 55s may draw from their pensions is such a vital part of most people’s retirement planning that the risk it will be scrapped or drastically scaled back is simply too concerning for many diligent pension savers in their 50s and beyond to contemplate.

“Speculation on policy has made this drastic step the only rational choice for many, even if it may ultimately harm their longer-term financial goals.”

Calastone’s Fund Flow index is based on real trading data from UK-based investors and captures more than 85% of UK fund flows. It excludes fund-of-funds to avoid duplication and uses FE fundinfo data for classification.

Investing comes with risk, even among funds that are designed to limit the downside. As such, combining low-risk funds to create diversification can add another layer of protection.

In this series, we have looked at correlations between funds with a top FE fundinfo Crown Rating of five in different sectors. A score of 0.7 or below means they are sufficiently lowly correlated to one another.

For the ultra-cautious, Ninety One Diversified Income is a standout pick in the IA Mixed Investment 0-35% Shares sector, with a low correlation to two other top performers.

Managed by John Stopford and Jason Borbora-Sheen, the £761m portfolio aims to generate a 4% yield while limiting risk by being at least 50% less volatile than the FTSE All Share index.

It does it by investing in a mixture of equities, bonds and alternatives, with analysts at FE Investments noting it provides a “strong solution to investors with an income target only”.

“Due to its mixed-asset – but also defensive – approach, we have been impressed by the capacity of the fund to generate this stream of income, irrespective of the directions of equity and bond markets. This is a key differentiator to its peers, which have relied too much on equity markets to generate income and capital returns.”

It is lowly correlated to both the £38m EF New Horizon Cautious and £22m VT Freedom Defensive, with correlations of 0.67 and 0.68 respectively.

These are the only combinations of top-rated funds to score below our 0.7 correlation threshold in the sector, which holds 10 portfolios with a five-crown rating.

Moving up the risk scale slightly, in the IA Mixed Investment 20-60% Shares there are a plethora of combinations among the 18 funds with a five-crown rating that have a correlation below 0.7.

The only fund to do this across every fund included in the study is the £1.7bn PIMCO GIS Strategic Income fund, managed by FE fundinfo Alpha Manager Daniel Ivascyn.

It invests primarily in bonds and dividend-paying stocks, giving it an income tilt. It has been a top long-term performer, more than doubling investors’ money over the past decade, although its three-year numbers to the end of October are weaker, up 20.8% - one of the worst in the peer group.

At present, it sits at the lower end of the equity allocation spectrum, with just 24.4% in stocks and 71.7% in bonds.

The fund has an average correlation score to all other top-performing funds of 0.53, although its lowest score is to the £533m Schroder MM Diversity fund (0.29).

Run by Robin McDonald, Joe Le Jéhan and Geoffrey Challinor, the latter is more equity heavy (33.2%) but also invests 32.5% in alternatives and has some 17.9% in cash.

Recommended by analysts at RSMR, they said it is “a good solution for investors looking to build a diversified cautious portfolio that can provide income and capital growth ahead of inflation over the longer term, whilst maintaining some protection during market downturns”.

Schroder MM Diversity was the next-best in terms of correlation with other top-ranked funds. It scored less than 0.7 to 14 of the 17 funds in the table below, with an average correlation of 0.6.

In third place, with a lower correlation to eight of the 17 other top-rated funds, is Artemis Monthly Distribution. The £1.4bn portfolio is run by the four-strong team of Jacob de Tusch-Lec, James Davidson, David Ennett and Jack Holmes, although the former is the only member of the team to have worked on the fund prior to 2021.

Included in interactive investor’s ‘Super 60’ best-buy list, analysts at the firm said that the managers, despite not working together formally for long, are “well-established within their respective teams and have long track records within their asset class specialism”.

“The focus on income leads to above-average allocations to riskier fixed income assets, such as high yield, which may result in greater drawdowns during periods of economic weakness, but performance remains impressive even when adjusted for higher than average risk.”

Orbis Global Cautious is the only other fund on the list with a correlation of below 0.7 to five or more funds (six). Managed by Alpha Manager Alec Cutler, RSMR analysts said its “active hedging and flexible asset allocation make it a compelling option for investors seeking active management beyond a traditional 60/40 portfolio, with three-to-five-year investment horizon”.

There are many other combinations of funds with low correlations, however, and we have included the full table below.

Source: FE Analytics

This is the fourth article in our series looking at lowly correlated top-rated funds. Previously, we have looked at the US, UK sectors and the IA Global peer group.

The backdrop for UK assets is more nuanced than recent bearish news flow suggests, according to Fiona Ker, fund manager at Ruffer, who said the domestic market is “most exciting equity market stories” but also “one of the most misunderstood”.

Although the UK has faced challenges such as sticky inflation, higher taxes and “some accusations of government incompetence”, this has not deterred Ruffer.

Across the entire firm, around 13% of total assets is invested in UK stocks – despite the asset manager not housing a dedicated UK portfolio. This is the highest exposure to any single equity market in the company.

This is significantly ahead of the MSCI World, where UK companies make up just 3% of the index. At such a low weighting, Ker said global equity managers have been able to “ignore the market”, leaving it underappreciated.

Yet there are nuances and opportunities in the UK market, Ker said, for those willing to look. One such nuance is inflation. While higher than the Bank of England target rate, Ker said she expects it to come down.

“Clients say inflation cannot come down, that there is no reason for things to get any better, but I think that could be the big surprise of next year,” she said.

While inflation has remained “persistently high” at 3.5% this year, this has been due to some “specific idiosyncrasies” that are unlikely to last over the long term.

For example, higher-than-average food inflation, minimum wage increases and changes in rates have contributed to above-average inflation in 2025, she said. By the end of next year, when these short-term influences have been removed, data from the International Monetary Fund (IMF) suggests inflation should drop closer to 2%.

“I think if inflation starts to come down, it will be a lot easier for people to have faith in the economic backdrop,” Ker said.

On top of this, the UK consumer is in a “decent position”, with robust household balance sheets and household debt levels declining. Indeed, data from the IMF shows household debt as a percentage of GDP has fallen by 14% over the past five years.

Paired with the potential for further interest rate cuts from the Bank of England, declining rates and inflation could serve to reignite investors' confidence in assets with more domestic exposure, she said.

Yet a “revival of the consumer” is not in market expectations, meaning it will not take much to “surprise on the upside”, Ker said. “You don’t need to be massively bullish to get a good return out of UK equities next year, you need to be a bit optimistic.”

As a result, Ruffer has increased its exposure to some of the more domestically sensitive companies in the UK market, such as housebuilder Barratt Redrow.

While its share price fell by 30.5% in the past five years, this is an “attractive value opportunity” for investors.

Share price return of Barratt Redrow over 5yrs

Source: FE Analytics

On a price-to-book level, housebuilders are trading on levels close to those of the global financial crisis (GFC) but are far stronger businesses with better balance sheets and lower levels of debt than they were during this period, Ker said.

This is an “exciting base” to start with, particularly for investors who believe that the government will make good on its commitment to try and address the housing market shortage, she continued.

Additionally, these companies should benefit from falling interest rates, making borrowing more affordable and increasing the demand for mortgages.

Another UK sector Ruffer has increased exposure to is banks. For a long time, they were considered an unattractive asset class as low interest rates made returns unappealing, while latterly as rates have risen, investors have yet to shake off that they were at the “epicentre of the problem in the GFC.”

However, the FTSE All Share Banks index has delivered a 246.3% return over the past five years, outperforming the wider FTSE All Share.

Performance of indices over 5yrs

Source: FE Analytics

The Ruffer team argued that UK banks still have further to run, even after their recent rally. They are also unlikely to experience the same crisis as in 2008 because they have become one of the biggest owners of government debt at a time when government borrowing has swelled. This has made them “much more valuable utilities of the state”, Ker said.

Coupled with much stronger fundamentals and a more volatile interest rate environment, banks are demonstrating that they have the potential for “sustainable growth over a longer period of time”.

“They remain an exciting opportunity,” Ker concluded.

Scams have become one of the fastest-growing threats in the financial system. They are no longer occasional risks that can be dealt with through a warning email from your bank. Today, scams are organised, professionalised and fuelled by new technologies that make them more convincing than ever.

The impact is significant. Authorised push payment (APP) fraud, where victims are tricked into sending money to criminals, has surged across the UK. Losses now run into the billions.

In recognition of the scale of the problem, regulators are changing the rules. Since October 2024, UK banks and payment providers have been obliged to reimburse customers who fall victim to APP fraud, unless they can show gross negligence.

This shift places the onus firmly on financial institutions to offer meaningful protection, not just generic warnings.

The scale of the risk was underlined by the Marks & Spencer breach earlier this year. Criminals used social engineering techniques to gain access, deploy ransomware across hundreds of systems and disrupt the company’s online operations for weeks.

Customer data was exposed, and the retailer was forced to issue a profit warning of around £300m. It was a clear example of how fast-moving scams can bypass technical safeguards and cause financial damage on a very large scale.

Why do scams work?

Part of the problem is psychological. Fraudsters exploit urgency, fear, or trust to get people to act before thinking. A message that looks like it comes from a colleague or a call that seems to be from a bank official can override natural caution.

Criminals are now using artificial intelligence (AI) to sharpen their methods further. Deepfake voices can impersonate family members. AI-generated texts and emails can mimic legitimate communication styles. Fraudsters no longer need to be sloppy – their tools make them sound credible.

Traditional countermeasures are not enough. Awareness campaigns and standard warnings do little to change behaviour in the moment. By the time the message has been read or the button clicked, it is too late.

What is needed is real-time, embedded protection that works where customers make decisions.

The investment opportunity

Regulatory pressure, customer expectations and the sheer cost of scams are forcing change. Banks are recognising that prevention is far more effective than reimbursement after the fact.

From an investment perspective, this creates strong demand for companies, which can combine behavioural insight with scalable technology. As scams grow more sophisticated, tools that provide real-time, educational protection will be essential.

Scams may be getting smarter, but so too are the solutions. The Commonwealth Bank of Australia recently announced its scam-checking tools had cut scam losses by 76% in 2024 – a clear signal that smart interventions can deliver real impact.

By backing businesses that help both banks and their customers, we are investing in the future of fraud prevention – one where education and technology work together to tip the balance back in favour of consumers.

Falkin: Embedding scam protection directly into customers’ digital experience

This is where Falkin, one of our portfolio companies, is making a difference. Falkin offers banks and other financial institutions a platform that lets their customers check messages, websites and numbers for safety.

If you get a suspicious text, an email, or a dodgy website link, you can upload it, forward it or screenshot it into the system. Falkin will assess whether it’s risky, explain why and flag any psychological tricks being used, like urgency or emotional manipulation.

While traditional fraud technology focuses on payment transaction monitoring, Falkin helps banks to look for fraud before payments are made, as prevention is better than intervention.

What makes Falkin’s approach stand out is its focus on education in the moment as a behavioural nudge. Rather than simply labelling something ‘fraudulent’, it shows users how the scam works and why it feels persuasive. Over time, this helps people recognise and resist similar attempts on their own.

The model is B2B2C: Falkin sells to banks and fintechs, which integrate the service into their customer apps and platforms. The long-term goal is to make this a standard internal feature running inside banking apps and fintech platforms, offering real-time protection seamlessly to anyone at risk of being scammed.

Sam Stone is an investment manager at Triple Point Ventures. The views expressed above should not be taken as investment advice.

Five years ago, markets jumped when pharmaceutical giants announced the first effective vaccines to combat Coronavirus.

The subsequent rally in stock markets prompted hopes that the global economy was on the path to recovering following the ramifications of nationwide lockdowns that dominated 2020.

However, no one could have predicted the volatile five years that followed, with conflicts in Ukraine, Israel and other regions, rampant inflation and geopolitical tensions making for a very rocky landscape for fund managers to navigate.

It has not all been bad news for investors, with some sectors and funds managing to sail through choppy waters to post impressive returns.

Below is a table showing the top 10 best-returning sectors over the past five years.

Source: FE Analytics

At the top of the table, funds in the IA Commodity/Natural Resources sector gained an average of 87% over the past five years.

Commodities tend to perform well in inflationary environments, as their prices will often rise with inflation – this has especially been the case since 2021, when inflation spiked globally due to pandemic-related stimulus, supply chains were disrupted and geopolitical tensions began mounting.

In addition, oil and natural gas prices rose in 2022 following Russia’s invasion of Ukraine, which benefited funds in the sector heavily exposed to energy commodities.

There have also been structural shifts due to the global energy transition, with mounting demand for metals like copper, nickel and lithium, which has bolstered the mining sector.

More recently, the sector has also benefited from a surge in gold prices, which is seen by investors as a safe haven asset and crucial hedge against monetary devaluation – particularly during periods of central bank easing and currency volatility.

Meanwhile, in second place, it is arguably unsurprising to see IA Technology & Technology Innovation, given the outperformance of the Magnificent Seven – which continue to demonstrate strong earnings growth – and the momentum behind artificial intelligence (AI), with AI-focused funds and exchange-traded funds (ETFs) surging in popularity.

The pandemic also accelerated the digital transformation as businesses moved to cloud-based infrastructure and e-commerce and remote work tools became essential.

Alongside AI, the sector covers other rapidly growing themes, such as cybersecurity, robotics and semiconductors.

Funds in the sector returned an average of 83.5% over the past half-decade.

It is worth mentioning IA North America in tandem with the IA Technology & Technology Innovation, given the sector’s high concentration in US tech stocks. IA North America funds returned a slightly lower average of 75.3%.

Sandwiched between these two sectors is IA India/Indian Subcontinent, with funds in the sector gaining an average of 77.7% over the assessed time period.

India has been one of the fastest-growing major economies globally, driven by demographic tailwinds – with a young and growing population – alongside a rising middle class with increasing disposable income paired with urbanisation and digitalisation which are boosting consumption and productivity.

For investors seeking emerging market exposure, India is seen as a strategic alternative to China. Indeed, funds in the IA China/Greater China sector significantly underperformed India-focused counterparts, losing 13.6% on average.

Also worth mentioning is that funds in the IA UK Equity Income sector managed a higher return average than IA Global Equity Income by around seven percentage points.

In contrast, the worst performing sectors were largely bonds, with IA UK Index-Linked Gilts, IA UK Gilts, IA EUR Government Bond and IA Global Government Bond all losing at least 10% on average over the past five years.

But which were the best performing funds overall?

The top two funds with the strongest returns across the IA universe do not belong to any of the aforementioned sectors.

Amundi Euro Stoxx Banks UCITS ETF and Algebris Financial Equity are both in the IA Specialist sector, meaning they have an investment universe or strategy too niche or diverse to be accommodated by standard IA sectors. Since November 2020, they have gained 351.1% and 259.2% respectively.

Source: FE Analytics

The Amundi exchange-traded fund tracks the EURO STOXX Banks index, which includes top-performing banks like Banco Santander, Societe Generale and BNP Paribas. Eurozone banks were well-positioned to benefit from post-Covid recovery and fiscal stimulus across Europe which supported loan growth, consumer activity and corporate investment.

Meanwhile, the €1.1bn Algebris Financial Equity fund, managed by Mark Conrad since 1 November 2020, also benefited from exposure to financials such as Santander, Barclays and NatWest Group. It aims to achieve capital appreciation in the medium to long term, primarily by taking long positions in companies in the global financial services sector and, to a lesser extent, the real-estate sector.

Of the actively managed funds, the $324.4m Schroder ISF Global Energy delivered the second-best returns, gaining 245% over the assessed period. It aims to provide capital growth in excess of the MSCI World Energy index over a three-to-five-year period by investing in the energy sector.

It was also one of the top-returning funds over three years since vaccine Monday, gaining 228% over that time.

Seven funds in the top 25 are in the IA Commodity/Natural Resources sector, with the small WS Guinness Global Energy being the top-returning actively managed fund in the sector, gaining 192.6% over the assessed period.

With just £46m in assets under management, the fund primarily invests in companies engaged in the production, exploration or discovery of energy derived from fossil fuels and the research, development and production of alternative energy sources.

As such, the top holdings are dominated by oil and gas majors, such as ExxonMobil, Chevron and BP.

Finally, despite the IA Technology & Technology Innovation sector’s overall strong performance, only iShares S&P 500 Information Technology Sector UCITS ETF made the top 25 for best returns across the IA universe.

Across the three main Investment Association sterling fixed-income sectors, 30 funds have posted a yield above cash while delivering best-in-class performance, according to Trustnet research.

Cash has been an appealing place for investors to put their money due to the high interest rates, but with an easing monetary policy, this high return may start to decline.

While the best easy-access savings accounts currently offer investors a 4.5% annual equivalent rate (AER), according to Moneyfactscompare (down from 4.75% earlier this month), many bond funds are offering competitive yields while providing opportunities for capital appreciation.  

Below, Trustnet examines the sterling bond funds that are beating cash returns, providing both income and a top-quartile return over the past five years in their respective sectors.

IA Sterling Strategic Bond

In the IA Sterling Strategic Bond sector, investors had 13 choices available to them, with PIMCO GIS Income topping the table with its 7.2% yield and 21.3% total return.

Source: FE Analytics. Data accurate to the end of October. Chart sorted by yield.

Led by FE fundinfo Alpha Manager Daniel Ivascyn and his team, the fund represents the group’s best ideas, as analysts at Rayner Spencer Mills Research (RSMR) said, and “should be able to outperform in a variety of market conditions”.

For investors who want an income fund with greater potential for capital returns, Royal London Sterling Extra Yield Bond may be a compelling choice. Its 42% total return is the top performance in the peer group and the fund's 6.5% yield also places it within the top quartile for income.

Managers Eric Holt and Rachid Semaoune currently emphasise bonds lower down the credit-rating spectrum, with just 4% of the fund invested in bonds rated A or higher.

Sector-wise, the fund is most exposed to financial services and industrials, with a preference for short-dated (0-5 year) bonds.

Schroder and Artemis had both two funds each on the list: Schroder Strategic Bond and Schroder Strategic Credit, and Artemis High Income and Artemis Short-Duration Strategic Bond.

IA Sterling Corporate Bond

Liontrust Sustainable Future Monthly Income Bond Fund leads in the IA Sterling Corporate Bond sector with a yield of 5.5% and a total return of 7.2% over the past five years.

Source: FE Analytics. Data accurate to the end of October.

The strategy invests in companies that are considered to benefit society and the environmentbut ensuring all additions to the portfolio are good investment opportunities first and foremost.Analysts at Titan Square Mile described it as a “corporate bond fund with a conscience”, with as much emphasis being placed on sustainability as credit and valuation.

Over the past 10 and three years, the fund has continued to post top-quartile returns.

Three funds from the Royal London team also had top returns and high yields - the Royal London Sterling Credit fund, the Royal London Corporate Bond fund and the Royal London Investment Grade Short Dated Credit fund.

IA Sterling High Yield

Finally, in the higher-risk category, Schroder High Yield Opportunities offers an 8.1% income with a 39.6% total return (the fifth-best performance in the peer group over five years).

Source: FE Analytics. Data accurate to the end of October.

Manager Daniel Pearson aims to provide an income and capital growth of 4.5% to 6.5% per annum. Although it is primarily a high-yield strategy, it also invests in some higher-rated bonds, with US treasuries appearing in its top 10 holdings.

Analysts at RSMR praised the funds' proprietary research, which helps managers develop a better understanding of business models, avoid value traps and reduce risk. This is demonstrated by the five-year volatility of 4.9%, which is in the second quartile for funds in the IA Sterling High Yield sector.

Offering a higher total return, FE fundinfo Alpha Manager Michael Scott’s Man High Yield Opportunities fund delivered a return of 54.1%, the best in the entire sector, paired with a 6.6% yield.

Scott was also highlighted as one of the most consistent managers in choppy markets, with top-quartile returns on both his current mandate and his previous Schroder High Yield Opportunities fund.

Very few strategies in the 574-strong IA Global sector have been able to maintain a standout performance across different market environments, with only 22 funds achieving top-quartile returns across all standard time periods (one, three, five, and 10 years), according to Trustnet research.

Over the past decade, the top option has been the iShares Gold Producers UCITS ETF, an exchange-traded fund that tracks companies involved in the exploration and production of gold. Helped by the gold rally this year, it has a 10-year return of 522.6% – the best performance in the IA Global sector – and beat its nearest competitor by 147 percentage points.

Source: FE Analytics. Data accurate to the end of October. Data is sorted by 10-year returns.

While the fund is in the top quartile over the other standard time frames, it did not consistently deliver strong performances. In four of the past 10 calendar years, it ranked as a bottom-quartile strategy in the IA Global peer group.

However, good returns in other years helped cover for these periods of underperformance. For example, it is the top fund in the sector so far this year, rising by 99.5% with the next closest fund up just 69% by comparison.

Performance of fund vs sector YTD

Source: FE Analytics.

Other passive funds performed well over multiple timeframes, with 11 trackers delivering top-quartile returns.

In theory, active funds should have the potential to outperform passives over the long term due to manager skill and the ability to avoid downturns, but this has not always been the case in the IA Global sector during this period.

Global markets are highly concentrated, with 20% of the MSCI ACWI invested in the ‘Magnificent Seven’. As these stocks have surged in recent years, any fund with high exposure to them, such as a tracker, has done very well, while active managers who were underweight struggled to keep up.

The MSCI ACWI (used here to represent the average passive fund) is up 237.2% while the average fund in the IA Global sector is up 179.2%, according to Trustnet data.

However, 10 actively managed strategies were able to deliver top returns over one, three, five and 10 years.

We start with FE fundinfo Alpha Manager Alex Tedder’s Schroder Global Equity fund, which has a total return of 290.5% in the past decade.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics.

It benefits from a high allocation to the top-performing tech stocks, with six of the Magnificent Seven featured in its top 10, although some are slightly underweight compared to the MSCI World.

The fund has beaten the sector average each calendar year over the past decade other than 2016, when it fell into the third quartile.

However, active funds did not have to invest in the most popular stocks to outperform, with some value-driven strategies also posting top returns in this period.

For instance, the Orbis Global Equity fund surged 279.1% over the past decade and has delivered further top-quartile returns in more recent time frames, despite holding no Magnificent Seven stocks within its top 10.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics.

It currently runs a 15% underweight in tech compared to the MSCI World and 41% of the fund is allocated towards the US, compared to 72% in the benchmark.

While this more contrarian approach has paid off in periods where growth struggled, such as earlier this year after the announcement of tariffs or during 2022’s bear market, it has resulted in some volatility in returns. For instance, in 2018, 2019 and 2021, the fund slid into the bottom quartile.

Sean Peche’s Ranmore Global Equity fund also made the list. However, this is primarily the result of a handful of strong recent performances. Before 2020, the fund’s style was out of favour, with bottom-quartile or third-quartile results each calendar year. Since 2021, the strategy has rallied with multiple top-quartile yearly returns, boosting the fund’s overall track record.

It is significantly underweight in the US, with just 21% of the assets invested in the region with Peche favouring Europe and Asia instead.

This approach has resulted in a 275.2% return over the past decade and further top-quartile returns over five, three and one years.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics.

This article is part of an ongoing series examining the funds in each market that have outperformed over all standard time frames. Previously in this series, we have looked at Europe.