The biggest challenge facing funds-of-funds is not identifying good stock pickers but portfolio construction, according to Lisa Wang, senior vice president and head of EMEA investment strategy at Franklin Templeton Investment Solutions.

Wang, whose team builds multi-asset portfolios using both internal and third-party funds, said the fund-of-funds model creates structural problems that are difficult to resolve.

“When you're putting different active managers together, one of two things can happen, both equally frustrating,” she said.

“You can either double down on certain exposures, because many of them are actually in the same names and before you know it your portfolio is so much based on that idea; or, if you try to allocate to managers with really diversified views, you end up with a benchmark portfolio but now you've paid active fees for what is really very similar to a benchmark.”

The problem stems from the fact that active managers come as they come; investors can't choose just the elements they like. To Wang, that's “one of the biggest challenges”.

Even when an active manager has genuine stock-picking skill, other portfolio decisions can overwhelm it. For example, an overweight position in a good company may not come through in the overall performance because of certain portfolio construction decisions or poor market timing.

Wang is particularly disappointed by managers who claim to be bottom-up stock pickers but then overlay top-down macro calls, usually when they think they should be underweight beta or over- or underweight a sector.

“If they made the wrong call, that one wrong call completely overcomes the idiosyncratic stock-picking performance," she said.

Portfolio construction within active funds can also create unintended exposures, Wang continued, if manager is too enamoured with their bottom-up perspective that they lose perspective on the broader picture.

This can cause unconscious tilts towards certain sectors, countries or style factors and end up with unintended exposures in the portfolio, making it difficult to control risk at the fund-of-funds level.

The alternative – using passive funds as the core of a portfolio – brings its own problems.

"Historically when you think about the core-satellite approach, you're going to put a bunch into passives as your core, but your passives are not going to earn anything for you – they're going to be a perpetual fee drag even though they're cheap," Wang said.

This leaves portfolio constructors wanting exposure to fundamental stock-picking skill but without the baggage of unintended tilts or poor timing decisions.

Wang believes the active versus passive debate has become unhelpful, with investors taking entrenched positions when the answer likely lies somewhere in between. The real issue is how best to deploy a limited budget, both in terms of fees and active risk.

"You have a limited risk budget versus the benchmark, a limited active risk budget and limited fees or expenses that you can incorporate into the portfolio," Wang said. "What is the best balance to drive returns?"

While studies show most active managers underperform over the long term, those in the upper quartile do deliver outperformance consistently, Wang noted. The challenge is identifying those managers while managing cost and risk exposure.

"It's about selecting the right manager, but at what price?" she said. "You want to make sure that in your core you're not using up any of that price or risk that you could use for the really, really good manager that you may want to pay the additional risk and price for."

Franklin Templeton has been expanding its Core Enhanced Equity suite, originally launched in October 2025 and designed to address these structural problems.

The approach isolates fundamental stock-picking skill from portfolio construction decisions by using a systematic multi-factor framework that scores stocks across quality, value, sentiment and alternative factors, then overlays a ‘conviction factor’ derived from analysing the holdings of active managers with proven stock-picking skill.

Performance of funds against sector since beginning of data

Source: FE Analytics

The strategies aim to extract only the stock selection component while neutralising unintended sector, country or factor tilts, delivering what Wang describes as sitting "right in between passive and active" – the core working harder than a passive tracker without the full cost and volatility of concentrated active bets.

Gold’s most volatile quarter in modern memory is not a sign of instability but a symptom of structural transformation that could result in higher prices, according to WisdomTree head of commodities and macroeconomic research Nitesh Shah.

The yellow metal hit an all-time intraday high of almost $5,600 per ounce on 30 January 2026, after its largest monthly gain since September 1999, before reversing to an intraday low of $4,402/oz within days. By 23 March, prices had fallen further to around $4,100/oz, but then rebounded above $4,600/oz within a week.

“We have rarely observed such pronounced volatility in the gold market as in the first quarter of 2026,” Shah said.

Performance of gold over 2026 to date

Source: FE Analytics. Total return in US dollars between 1 Jan and 8 May 2026

However, WisdomTree’s thesis is that this volatility reflects something more significant than short-term turbulence, with Shah arguing gold is “in the process of transitioning towards a new, higher, steady state, driven by a broadening investor base”.

Chinese insurance companies and Indian pension funds have entered the market in recent years and gold ETF inflows in both countries have grown significantly over the past year.

Digital asset issuers have also become notable buyers. Tether provides the clearest illustration of this shift: WisdomTree estimates the stablecoin issuer bought between 60 and 70 tonnes of gold during 2025, which puts it alongside some of the world’s largest official-sector buyers, including Kazakhstan, Azerbaijan’s sovereign wealth fund and Turkey.

These newer participants act as ‘amplification agents’, according to WisdomTree, potentially exaggerating price moves in both directions. Shah suggested this contributed to January’s outsized rally, which he described as excessive in magnitude even if directionally justified.

One of the most counterintuitive episodes of 2026’s first quarter was gold’s behaviour when the US/Israel-Iran conflict broke out in February. Prices fell rather than rose, despite the metal’s traditional role as a geopolitical hedge.

Shah attributed this to a well-documented pattern: gold often records an initial negative reaction to geopolitical shocks before ultimately moving higher.

“The mechanics are relatively consistent. A geopolitical shock tends to trigger sharp declines in risk assets such as equities. This, in turn, generates margin calls, forcing investors to raise liquidity quickly. Gold, as a highly liquid and cash-like asset, is often sold to meet these obligations,” he explained.

“This creates temporary downward pressure on prices. It’s important to note that the amplitude and duration of the drawdown and subsequent recovery are never the same and clearly depend on what else is influencing gold at the time.”

WisdomTree cited multiple historical precedents, including the 9/11 attacks, the dot-com crash, Black Monday in 1987 and the Russia-Ukraine war. In the current episode, additional selling pressure likely emerged from households in affected Middle Eastern regions liquidating gold to fund urgent expenditures.

Central banks are not immune to this dynamic. Turkey mobilised approximately 58 to 60 tonnes of gold within two weeks to support the Turkish lira, using a combination of outright sales and swaps.

Shah said this should not be taken as a rejection of gold during a crisis but as further proof of its role as a trusted reserve asset, noting that Turkey rebuilt its reserves in the months following significant gold sales in 2023.

“Crucially, this type of selling should not be interpreted as a loss of confidence in gold. Rather, it reflects gold’s role as a source of liquidity in times of stress,” he said. “Historically, once these forced-selling dynamics subside, gold prices tend to recover and move higher as the underlying geopolitical risk premium becomes the dominant driver.”

By late March, gold had begun to trend higher again despite a stronger US dollar, elevated bond yields and reduced expectations of Federal Reserve rate cuts – all of which are traditional headwinds for the gold price.

The fact that these factors did not push prices down pointed to a powerful underlying tailwind, which Shah identified as elevated geopolitical risk becoming a structural rather than transient feature of the market.

Two additional factors underpin WisdomTree’s view that gold will remain well supported over the coming year.

The first is Federal Reserve uncertainty. The nomination of Kevin Warsh as Fed chair candidate in late January reduced immediate concerns about political interference in monetary policy and the Department of Justice’s decision to end its criminal probe of current chair Jerome Powell put Warsh’s confirmation on firmer ground.

However, some uncertainty remains over Powell's plans to continue as a Fed governor and whether further nominations from US president Donald Trump could extend political influence over the board. A Supreme Court ruling on the attempted removal of Fed governor Lisa Cook was also pending at the time of writing, with a decision expected by mid-2026.

The second is fiscal pressure. The Supreme Court’s February ruling against using the International Emergency Economic Powers Act (IEEPA) for tariffs reduced expected tariff revenues, while tax cuts, fiscal expansion and rising military expenditure pointed to a widening US deficit and an elevated term premium on treasuries. Shah argued this environment favoured gold, noting that the historically inverse relationship between gold and bond yields had continued to weaken in recent years.

WisdomTree gave three price scenarios for the year ahead, with Shah explicit that all three should be treated as a lower bound.

Under the consensus scenario, gold rises to $5,493/oz by 2027’s first quarter, driven by improving sentiment and inflation running at 2.8%. This would represent a new all-time high on a closing-price basis, given that January’s intraday spike to $5,600/oz was only briefly sustained.

In the bull scenario, inflation rises to 4%, driven by the energy crisis, supply chain disruption and fiscal expansion. With the Federal Reserve refraining from tightening, the US dollar falling a further 7% and higher speculative positioning, gold reaches $5,872/oz.

“If inflation rises towards 4% while the Fed refrains from tightening policy, the central bank may face accusations of policy error or political capitulation. In such a scenario, gold sentiment is likely to strengthen significantly, as the metal is increasingly viewed as a hedge against fiat currency debasement,” Shah noted.

The bear scenario, which Shah described as the least likely outcome, sees the Fed successfully return inflation to its 2% target. Higher policy rates drive significant dollar appreciation, speculative positioning collapses and gold retreats to $4,634/oz, broadly returning to levels seen at the start of 2026.

“For long-term investors, periods of volatility may therefore present opportunities rather than risks,” Shah said.

“Gold has experienced a highly volatile start to 2026. The expansion of the investor base is likely contributing to a transition towards a higher steady state.”

Unquestionably, the advancement of AI capabilities will change – indeed in many cases, is already changing – the way the world works. People will search for information differently. They will engage with tasks and tools differently.

Workflows, interactions and the way software intersects with other applications will evolve and, against this backdrop, fears have centred around the disintermediation of existing digital business models.

As with any technology shift there will be casualties, so in some cases these fears will be correct; however, there are certain companies we believe have been unfairly caught up in this general sell-off.

One such company is UK-listed credit bureau Experian, which we own in our UK portfolios. The bear case posits that Experian’s position as the world’s largest credit bureau is under threat, as AI will eventually be able to replicate its consumer credit datasets and offer an alternative, cheaper credit score or some new way for global lenders to assess credit risk.

Experian’s share price fell as much as 32% in the first quarter of this year and failed to meaningfully recover even on the publication of a strong set of results in February.

The company is growing revenues at 8%, with solid performance across all divisions – consistent with not only the company’s guidance but also with its pattern of growth over the past few years.

The share price reaction, therefore, appears to suggest that there is a material and imminent threat to Experian’s dominant market position and future growth prospects. There are three key reasons why we do not agree.

Firstly, the core asset at the heart of the business is a collection of hard to replicate datasets of consumer credit information stretching back to the company’s inception in 1963.

These are uniquely broad and deep – Experian collects data on 345 million consumers in the US alone – and constantly updating with new data (1.1 billion bits per month).

This comes from sources that it is impossible for others to access, or for an AI model, however sophisticated, to replicate from nothing. For example, Experian’s business-to-consumer segment offers people the chance to improve their credit scores by supplying the company with ‘permissioned data’, i.e. a view of their spending habits and bill-paying behaviour.

This extremely valuable information feeds back into Experian’s pool of data but this isn’t ‘something for nothing’ – consumers only offer their data in exchange for receiving a benefit to them. Why would they offer their data to ChatGPT for nothing?

Secondly, as a key player in the lending ecosystem, Experian operates in one of the most tightly regulated industries globally, navigating a highly complex compliance and regulatory burden, with expertise built up over decades.

Crucially, Experian’s lending clients also face the same burden and so require a high level of trust in the data, products and services they pay for. The balance here is very much tipped in favour of risk avoidance: lenders recognise that the fines and sanctions they could be subject to potentially amount to billions of dollars.

Thirdly, and most importantly, credit scores are now only a very small part of Experian’s business. These have been overtaken by much more valuable, much stickier software, tools and products, available across a proprietary platform called Ascend, which have been built out of Experian’s differentiated cache of credit data.

The ‘hero product’ is Sandbox, which offers a view across the credit industry using anonymised data, allowing the customer to manipulate and deploy credit, fraud, mortgages, and lending models in an end-to-end, regulatorily compliant way. A key part of the offer is that it’s all under one roof, cutting out the complexity of having to deal with four or five separate vendors.

In our view, the most important figure in the recent set of results was Experian’s 9% growth in North America excluding mortgages, against a credit market growing at just 1%.

This indicates that there is no cyclical tailwind to Experian’s recent growth, and in fact the company is becoming less reliant on credit volumes and instead driven by the sale of increasingly sophisticated products, which are more valuable to customers and more firmly embedded in their workflows.

We note that Experian’s contract renewals are now extending to 4-10 years rather than the historically typical 3-year durations, indicating that the product suite is mission-critical and bringing more and more tangible value to its customers.

Perhaps the most critical overarching point, though, is that many investors seem to view AI only as a risk to the business models of companies like Experian or, indeed, Relx and London Stock Exchange Group.

The best case scenario, it seems, is that the businesses are able to weather the threat of AI – or to put it another way, the best case scenario is that their share prices recover to the levels they were before AI disruption risk gripped.

What doesn’t seem to register is the idea that AI could actually be a tailwind for these businesses, if they are able to harness AI’s power to enhance and take their products to the next level.

We believe that Experian’s products and services could be substantially boosted by the application of AI technologies and recognise that the company has been developing and introducing AI capabilities for some time.

In fact, Experian has been able to demonstrate concrete examples of AI innovation already, becoming available across product sets and platforms. These include ‘Experian Assistants’ within the Ascend Platform; AI-powered model risk management features; strong market adoption of the AI-led Patient Access Curator in Healthcare; and even a consumer-facing agentic AI assistant, ‘EVA’.

Clearly, these are nascent technologies and the company needs to prove that they can become sustainable growth opportunities – as is the case for all developers of AI products.

But we can absolutely see a future in which opinions change and Experian’s ability to layer productivity-boosting AI over its unique dataset has it judged as a beneficiary rather than a victim.

That is why when we look at Experian’s share price today, we are not thinking about how it can return to the highs that it reached in the summer of 2025, but how the company can surpass that by delivering on its potential as a truly world-class secular growth business.

Madeline Wright is co-portfolio manager of Finsbury Growth & Income Trust. The views expressed above should not be taken as investment advice.

Active funds managed by Schroders, Fidelity and Jupiter have been able to largely avoid falling in the emerging market and Asian equity sector’s fourth quartile over the past 10 years, Trustnet research shows.

In this series, Trustnet is looking at the quartile rankings of every fund in the Investment Association universe in each quarter of the past decade to find those that avoided the fourth quartile in every one of them.

Here, we turn to the IA Global Emerging Markets, IA Asia Pacific Excluding Japan, IA Asia Pacific Including Japan, IA China/Greater China, IA India/Indian Subcontinent and IA Latin America sectors.

The results from the IA Global Emerging Markets sector can be seen in the table below, which shows all the funds with fewer than five quarters in the bottom quartile, ranked by their 10-year total returns.

Source: Finxl. All funds have a minimum track record of 10 years. Total return in sterling between 1 Apr 2016 and 31 Mar 2026

As we saw in the global, UK and developed market regional sectors, passive funds dominate the list.

Vanguard Emerging Markets Stock Index is the only fund in the peer group to have a record of completely dodging the bottom quartile, although its 125.9% total return over the decade puts it in the third quartile.

Analysts at FE Investments said: “Vanguard has grown rapidly to become one of the world’s most influential passive product providers. Its ethos is focused on team collaboration with independent risk monitoring, to deliver a number of high-quality core yet low-cost solutions to the investment marketplace – which is echoed across their product range.”

The fund tracks the MSCI Emerging Markets index – like many of the funds in the above table – so counts the likes of Taiwan Semiconductor Manufacturing, Samsung Electronics, Tencent, SK Hynix and Alibaba as its largest holdings.

Schroder Global Emerging Markets is the first active fund on the list. It has been in the sector’s fourth quartile in just two quarters and made a first-quartile total return of 163.1% over the decade under review.

Co-manager Thomas Wilson is an experienced emerging markets manager, having specialised in the asset class since 2004 and serving as the head of Schroders’ emerging markets equity team since August 2016. Robert Davy, the fund’s other co-manager, has been a global emerging markets fund manager since 2000 and was a founding member of Schroders’ Latin America team in 1990.

GS Multi-Manager Emerging Markets Equity Portfolio is the only other active fund in the IA Global Emerging Markets sector to make the shortlist, while Dimensional Emerging Markets Core Equity sits between pure index tracking and traditional active management. Dimensional uses a systematic, evidence-based approach that overweights UK stocks with higher expected returns, while excluding smaller growth companies with low profitability.

Just outside of the table are more active funds: FTF Templeton Global Emerging Markets, Ninety One Emerging Markets Equity, JPM Emerging Markets Opportunities, GAM Multistock - Emerging Markets Equity and Wellington Emerging Markets Research Equity have spent only five quarters in the bottom quartile.

Source: Finxl. All funds have a minimum track record of 10 years. Total return in sterling between 1 Apr 2016 and 31 Mar 2026

Fewer funds in the IA Asia Pacific Excluding Japan and IA Asia Pacific Including Japan have spent four or fewer quarters in the bottom quartile, but most of these are active funds.

Fidelity Asia sits at the top of the table owing to just a single quarter in the bottom quartile and 156.5% return over the full decade, which puts it in the second quartile of the IA Asia Pacific Excluding Japan sector.

Managed by Teera Chanpongsang since 2014, the fund focuses on medium- and larger-sized companies that trade below their intrinsic value, skilled management teams, strong franchises and resilient business models.

Analysts at Titan Square Mile said: “As with any actively managed strategy, the manager's willingness to stay true to his philosophy and maintain positions can lead to short­-term setbacks, for instance, when markets are chasing certain themes or are influenced by external events rather than company fundamentals.

“However, the manager’s experience of investing through different economic conditions gives him the edge one needs to run this type of strategy and we believe this fund may be an attractive core choice for investors with a long­-term horizon.”

Quilter Investors Asia Pacific boasts the highest return of the seven Asian equity funds on the shortlist, making 219.7% over the full decade. It’s managed by Jupiter, which also has Jupiter Merian Asia Pacific in third place.

The approach used by the Jupiter team on this fund is based on the belief that investors’ psychological and behavioural biases often cause stocks to deviate from their fundamental value. It therefore uses quantitative research to identify these potential mis-pricings and build a broadly style-agnostic portfolio.

On Jupiter Merian Asia Pacific, Rayner Spencer Mills Research analysts said the fund should perform in a consistent way through market cycles and is a potential core holding. “The fund is designed to generate outperformance in all market conditions over reasonable timeframes,” they added. “It is more likely to outperform in trending markets and lag in narrowly led, style-driven market rallies.”

In the more focused emerging market equity sectors, only two funds have been in the bottom quartile in four or fewer quarters: Barings Hong Kong China and Fidelity India Focus. No IA Latin America funds made the cut.

Local elections this week have raised the age-old question: does politics matter to markets?

On the one hand, markets hate uncertainty and the results coming in today bring about plenty of that, with Saxo Bank senior UK investor strategist Neil Wilson describing the results so far as looking “very bad for Labour”.

That’s a bit of an understatement. At the time of writing, the Labour party has lost control of eight councils, although we are very early into the count.

You know things aren’t going brilliantly when the prime minister has to come out before all of the election results are known to state that he is “not going to walk away”.

Theo Bertram, director at think tank The Social Market Foundation, said Labour is “running out of time” to fix things.

One potential option mooted by almost everybody is a change in leadership. Jason Hollands, managing director at Evelyn Partners, noted that speculation has been “brewing for months” that the prime minister could face a leadership challenge and the latest election results are hardly going to quieten those opinions.

If Starmer’s seat was hot before this week’s local election, I would imagine it is now scalding. He may not walk away, but his party may oust him before the fire on his seat spreads to the entire government (assuming it hasn’t already).

Political instability has been a real problem for UK stocks, despite what many will tell you. Although some are quick to remind investors that the UK stock market is not the same as the domestic economy and that domestic politics are less crucial to companies that generate most of their earnings from overseas, this doesn’t stand up to scrutiny.

Since the Brexit referendum in 2016, investors have been net sellers of UK equities, citing political instability as one of the main reasons to avoid the market.

While investors who stayed in the UK market have made reasonable absolute returns (the FTSE All Share is up 135.8% over the past decade), they would have been better off investing elsewhere; the MSCI World index is up 260.3%, almost double the UK index during this time.

During this time even the best UK fund – Artemis SmartGARP UK Equity with a 259.2% return – has underperformed the global index.

For anyone still harbouring hope that things will change, it is time to finally admit that you are not investing based on reason, but gambling on the UK outperforming with little to back this up.

There is a chance it happens, so it’s not worth selling out entirely, but there are steps investors can take. The UK makes up just 3.7% of the MSCI World index, but I would wager is a much larger percentage of people’s portfolios.

When you can get better returns from most other markets – at the very least it might be time to consider bringing the allocation down to more in-line with the index.

For most of the past decade, running a UK equity income fund meant relying on a narrow group of large-cap dividend payers. A handful of mega-caps dominated the yield available in the market and managers who wanted to grow their dividend had limited room to manoeuvre. That has changed, says Alan Dobbie, manager of the £583m Rathbone Income fund.

“The fund yields about 4.1% and we’ve increased the dividend in 31 of the last 33 years,” he said. “It’s now a healthier environment, with income more evenly spread across sectors and market caps, giving us more choice.”

After Covid, many large-caps cut dividends and did not restore them to previous levels. Shell now yields around 3.5%, BP 4.5% and Lloyds 4.5% – not the 6% or 7% yields the sector used to depend on. Income has spread down the market-cap spectrum, which suits a fund that currently holds just under a quarter of its portfolio in mid-caps.

Rathbone Income returned 22.96% in 2025, ranking 24th out of 65 funds in the IA UK Equity Income sector and ahead of both the sector average of 18.67% and the FTSE All Share return of 24.02%. Year to date in 2026 it has returned 4.7%, ranking 13th against a sector average of 2.3%.

Below, Dobbie explains the fund’s risk framework, where he is finding income today and why the top 13 stocks in the FTSE All Share are at uncomfortable valuations.

Performance of fund against index and sector over 1yr

Source: FE Analytics

What is the process behind Rathbone Income?

We call it winning by not losing. It’s about trying to keep the ball in play, avoiding unforced errors. Mistakes are an inevitable part of investing, but if we can minimise both the frequency and the magnitude of those mistakes, rather than trying to find the next 10-bagger, then we can perform very well.

We think about risk through three lenses: business risk or the chance of loss from investing in companies with poor models, highly competitive industries or weak management teams; financial risk, i.e. the chance of loss from companies having inappropriate leverage; and price risk. You can own the best business in the world, but if you pay the wrong price, you can still lose a lot of money. We saw that in 2022 when interest rates rose and a lot of quality compounders fell despite operating very well.

The fund has just under a quarter in mid-caps. Why are you finding more opportunities there?

The market has been led by the largest stocks. The top 13 now account for half of the FTSE All Share, up from 36% five years ago, and those stocks are more expensive. The top 13 are up about 155% over five years, while the median stock is up about 12%. Most of the index has gone nowhere.

We’re seeing more opportunities in mid-caps and further down the spectrum. Having the ability to rotate around style and market cap is important. Ultimately, we want to own the best businesses we can if they’re trading at attractive prices.

You’ve been adding to Relx and Experian after the AI-related sell-off. Aren’t those businesses at risk from AI disruption?

It’s very stock specific. If we look at Relx, we would view it more as a content owner than a software company. They have proprietary information that lawyers or scientific researchers rely on, built up over hundreds of years. The part with more risk of being commoditised is the software and analytical tools, but we’re less concerned because the value of the company is in the proprietary, trusted, verifiable information.

We had been reducing Relx until last summer, down to just over 1% of the fund. The sell-off in February meant we could increase it and it’s now almost 3%. Relx and Experian are two areas where UK income funds don’t generally have large exposure, but you could buy Relx on an attractive dividend yield in February.

What were your best calls over the past 12 months?

The largest contributor over the 12 months to the end of March was GSK, up 47% total return, contributing 1.7 percentage points to the fund. AstraZeneca was up 33%, contributing 1.3 percentage points. Both benefited from a weak starting point due to tariff concerns. GSK also improved its delivery, consistently beating and raising guidance. AstraZeneca continued to deliver through its oncology pipeline.

Utilities were another big driver. SSE was up 68%, contributing 1.7, and National Grid up 31%, contributing 1.2. These companies are key to the UK’s energy transition, with large capex programmes and regulated returns. They now have genuine earnings growth, which wasn’t always the case. BAE Systems was up 44%.

And the worst?

Relx was the largest detractor, down 36% total return, contributing minus 0.84 percentage points to the fund. It’s still a great business but sentiment shifted from AI winner to AI loser. We had reduced it as valuations rose and bought back in during the sell-off.

The second largest detractor was Breedon, down 31%, contributing minus 0.75%, due to weak demand in UK housebuilding.

What do you do outside of fund management?

I’ve got a young family, so I spend most of my time watching their sporting activities. If I get time, I play golf and tennis, but mostly it’s family.

Adventurous multi-asset funds sit at the top end of the risk spectrum due to their higher equity exposure. While this can boost returns on the upside, these funds are also more vulnerable when markets turn.

Unlike the more balanced and cautious multi-asset sectors, IA Flexible Investment funds have greater freedom in how much equity risk they take and how they express it.

To identify the most reliable performers in this wide-ranging sector, Trustnet compared each fund’s discrete annual return with the sector averages between 2016 and 2025.

The eight funds in the table below achieved this in at least eight years.

Source: FE Analytics. Figures highlighted in red represent years in which a fund underperformed the IA Flexible Investment sector average.

While these funds have proven consistent over the long term, the year-by-year results highlight how successful adventurous strategies can diverge from one another across different market conditions.

Across the table, 2021 proved a strong year, with all eight strategies landing in the first quartile of the sector. In particular, BNY Mellon Multi-Asset Growth and Courtiers Total Return Growth were standouts, featuring in the top 10 best-performing funds in the whole sector for that year, gaining 19.6% and 19% respectively.

By contrast, in 2020, WS IM Global Strategy and BNY Mellon Multi-Asset Growth were the only two funds of the eight in the table to make it into the first quartile in the sector, reflecting the dispersion created by the Covid-19 recovery and the strong performance of large-cap growth stocks.

Among these eight funds, only one beat the sector average in every single year.

The £269m Barclays Global Markets Adventurous fund invests at least 70% of its assets in passively managed funds and undertakes currency hedging to reduce the impact of currency fluctuations.

It topped the table in both 2023 and 2024, gaining 13% and 15.1% respectively. Over the assessed 10-year period, it delivered a 161.2% return, lifting it into the IA Flexible Investment sector’s top 10.

The fund is managed by Finlay Macdonald, who took over in 2021 following the departure of former manager and chief investment officer for multi-asset strategies Will Hobson. BlackRock has been appointed as sub-manager to implement asset allocation through exchange-traded funds (ETFs) and passive mutual funds.

Year-to-date, Barclays Global Markets Adventurous has gained 4%, putting it in the second quartile in the sector.

Although the Barclays strategy proved the most consistent, M&G Managed Growth delivered the strongest 10-year return of the eight funds in the table, gaining 177.6% between 2016 and 2025. This was the fourth-best return in the whole sector, behind Contrarius Global Balanced, VT Price Value Portfolio and Liontrust Sustainable Future Managed Growth, which gained 202%, 191.4% and 178.3% respectively.

Managed by Craig Simpson since 2022 – taking over from Dave Fishwick – and supported by Tony Finding and Craig Moran, the £1.2bn portfolio holds around 20 high-conviction positions and has a historic yield of 2.08%.

The M&G fund has also demonstrated its ability to offer investors more downside protection. In 2022, it lost 0.6% compared with a 9% sector average decline. By contrast, WS IM Global Strategy and Unicorn Mastertrust were in the fourth quartile in that year, losing 13.3% and 13.6% respectively.

Year-to-date, M&G Managed Growth has returned 3.8%, placing it in the second quartile.

Two funds in the table also stood out for being run by FE fundinfo Alpha Managers – a designation awarded to managers who have delivered strong risk-adjusted returns consistent across market cycles.

The 124.1m Unicorn Mastertrust has been run by Alpha Manager Peter Walls since 2001. He entered into the Alpha Manager Hall of Fame in 2023 after maintaining his rating for seven consecutive years.

The fund invests primarily in investment trusts Walls believes offer strong growth potential and attractive valuations.

In February 2026, top contributors to the portfolio included BlackRock World Mining Trust, Strategic Equity Capital and Law Debenture.

Unicorn Mastertrust ranked sixth in the table for 10-year returns, gaining 143%. However, it was the best-performing fund in the table last year, returning 22.1% and placing it in the top 10 in the overall sector.

It was also one of only two funds – alongside M&G Managed Growth – to achieve first quartile status in 2017, gaining 19.3%.

However, year-to-date, the fund has slipped 0.2%, placing it in the fourth quartile in the IA Flexible Investment sector.

Meanwhile, BNY Mellon Multi-Asset Growth is co-managed by Alpha Manager Bhavin Shah, alongside Simon Nichols and Paul Flood.

The £2.5bn fund – one of the largest of the eight in the table – was launched in 1990 and counts large-caps such as TSMC, Shell and BAE Systems in its current top 10 holdings.

The fund sits within Newton’s multi-asset range, all of which have different risk profiles and levels of equity exposure. BNY Mellon Multi-Asset Growth invests almost exclusively in equities but there are no formal parameters.

Commenting on the whole suite, RSMR analysts said: “The Newton multi-asset funds benefit from a combination of Newton’s central global thematic analysis and global sector and asset class research teams and the flexibility for the fund managers to interpret this information within the context of the individual fund objectives and mandates.”

Of the funds in the table, BNY Mellon Multi-Asset Growth has also logged the strongest performance year-to-date, gaining 5.6% – a top-quartile performance. 

JOHCM UK Dynamic has been through a challenging period since the departure of longstanding manager Alex Savvides in 2024, with assets under management (AUM) falling sharply from £1.3bn in 2023 to around £400m as at the beginning of May 2026.

However, co-managers Vishal Bhatia and Tom Matthews – who have been at the helm alongside FE fundinfo Alpha Manager Mark Costar since 2024 – insist that the strategy has remained true to its philosophy.

“The flows are not really the issue for us as we don’t measure success by AUM. The main issue was taking ownership of the portfolio,” said Matthews.

“There were understandably some large institutional investors who were nervous about whether there would be a change in the process, but we were very clear that the market inefficiencies that this process is designed to capture remain the same.”

Bhatia added: “Yes, it is challenging when a fund goes from over a billion to roughly half that size in that time, but our focus is on maintaining the portfolio structure so that investors entering and exiting are treated the same from a size and risk perspective.”

Liquidity is key in these situations. As Paul Angell, head of investment research at AJ Bell, explained, the position “neither a fund manager or investors want to be in is where the fund’s highest-quality and most liquid assets have been sold to fund outflows, while the fund’s less desirable stocks remain”.

But with around 85% of the fund invested in stocks with over £2bn of market capitalisation – and this rises to 90% when including stocks above £500m – Bhatia argued JOHCM UK Dynamic remains a “highly liquid” fund.

“We are also quite nimble, as we can take the position size that we want,” he added.

Angell confirmed that a smaller fund size, providing outflows stop, can allow managers to be “more nimble in their allocations and trading”.

Instead of putting all their focus in stemming the outflows, the managers identified a more pressing concern upon taking control of the strategy: the level of risk in the portfolio.

“That is why there has been quite a bit of turnover in position sizes over the past two years,” said Matthews. This activity has been about reducing risk by bringing down leverage, reducing beta and improving the overall resilience of the portfolio.

In the past two years, Matthews said they have added 14 new positions to the portfolio and exited 16.

“For context, that compares against a current portfolio of just 38 stocks and the typical holding period for our business transformation ideas is between 3-5 years – but often longer,” he noted.

To reduce leverage, the managers monitor each holding following parameters including net debt and earnings before interest, taxes, depreciation and amortisation (EBITDA), as well as, where available, credit default swap (CDS) spreads and credit rating outlooks.

As shown in the chart below, the fund’s balance sheet risk since the beginning of 2024 is at its lowest level in 15 years.

The fund’s balance sheet risk change

Source: JOHCM, Bloomberg

Similarly, the fund’s forward-looking beta over the past three years was also lowered.

The fund’s predicted beta over 3yrs

Source: JOHCM

Fund Research Centre has recommended the fund after the change in leadership, citing the trio’s experience and the resilience of the established investment process.

Performance of the fund vs sector since 2024

Source: FE Analytics

Today, the JOHCM UK Dynamic portfolio is shaped by stocks which the managers can access for bargain prices, with Bhatia viewing the UK market as “the Costco of global equities”.

“You walk into Costco and you can buy high-quality items across global brands – and you can get them at very good prices,” he said.

“Similarly, we feel we are operating in a market where you can get access to global brands at valuations that are at a significant discount to their fair value and to their global peers.”

Bhatia pointed to British beverage business Diageo as an example, which has seen its share price more than halve over the past five years.

JOHCM UK Dynamic invested in Diageo after Debra Crew departed as CEO in 2025, replaced by interim chief executive officer Nik Jhangiani until former Tesco boss Dave Lewis took over the role in January 2026.

“There has been a clear commitment to a free cashflow-focused business that will address the balance sheet,” Bhatia said.

“We firmly believe the deleveraging story at Diageo is strong and underappreciated. While we do appreciate that in the long run there is a moderation trend, at the same time the valuation is sitting at a multi-decade low, free cashflow is in the high single digits and the balance sheet is improving.”

As such, Bhatia said that Diageo is at the start of a multi-year transformation.

He also believes online trading platform IG is in a similar position, following the appointment of former Paddy Power Betfair chief Breon Corcoran in 2024.

“[Corcoran] took over a business that was essentially accepting that the active user base would not grow forever – the new chief executive comes in and fundamentally challenges that,” Bhatia said.

A third example in the fund’s portfolio is British multinational advertising and communications company WPP.

“The market capitalisation peaked at around £24bn and is now sub-£3bn,” Bhatia said. The company’s share price has also fallen by over 70% in five years.

Bhatia noted that a “transformation is underway”, with the likes of former BT chief executive officer Philip Jansen sitting in a leadership role.

Nonetheless, the UK market outlook looks uncertain, both Bhatia and Matthews agreed.

Such an uncertain landscape also makes their continued efforts to prioritise risk management important, added Matthews.

“What we do know is that uncertainty is high, change is rapid and narratives are becoming more extreme and more binary – that creates inefficiencies and it also increases risk if you don’t manage the portfolio carefully,” he said.

“We believe this fund is now running with a lower level of risk than at any other point in its history. That combination – inefficiency plus discipline – is exactly where active investors can add value.”

We’ve all seen this debate play out before. Amazon was seen as a threat to Walmart, Salesforce would replace Oracle, and PayPal would overtake Visa. In each case, the challengers grew into meaningful businesses, yet the incumbents adapted and survived.

Today, artificial intelligence (AI) is often portrayed as a force capable of replacing a wide swathe of knowledge-based jobs and companies.

Sceptics, however, point to record high valuations – including $750bn for OpenAI  – alongside an estimated $650bn in hyperscaler capital expenditure in 2026. They also cite persistent shortcomings, such as model hallucinations, as fuel for speculation that we may be approaching bubble territory.

The more plausible outcome may lie between these extremes. In our view, this ‘middle ground’ looks like a steadier roll-out of AI as a commercially useful technology where winners are defined by execution, profit margin and demand – rather than market speculation.

As AI adoption broadens, the pace of change is likely to accelerate as costs fall. History shows that some markets have consolidated around companies able to shift technical advantage into sustainable returns. The US auto industry provides a compelling illustration, shrinking from 88 manufacturers in 1921 to just 44 by 1927.

The contradiction at the heart of the boom

There is little doubt that we are living through transformative times. Earlier this year, a man without a medical background leveraged AI tools to develop a cancer vaccine for his dog, illustrating how these technologies are already enabling us to do more with less.

Yet the prevailing AI boom rests on a contradiction. It assumes hyperscalers will generate sustained growth by selling infrastructure and tools to large established companies, while also assuming that those same customers will face pressures on revenue, pricing power and headcount as AI-enabled efficiencies take hold.

We believe that over time both assumptions cannot hold true. If AI erodes profitability in sectors such as banking, the capacity of those companies to spend more on AI services will likely weaken.

You don’t need a Ferrari to deliver a pizza

Historical precedent suggests that technological adoption rarely converges on a single dominant platform. In markets such as cloud computing, clients have typically adopted a mix of providers.

A similar pattern could emerge with AI. Major companies are likely to deploy a range of off-the-shelf private models, open-source alternatives and customised programmes built on proprietary data, depending on the task at hand.

Just as a Ferrari is unnecessary for local deliveries, a ‘good enough’ AI model will often prove sufficient for many tasks. This optionality opens the door for a range of providers to embed AI into existing products and workflows, rather than ceding the field to a single dominant platform.

The prevailing narrative around consolidation may therefore be overstated. In practice, users tend to favour flexibility – switching between different tools for specific tasks and adopting or abandoning them as their needs evolve.

A similar dynamic is evident in market share. Rather than quickly coalescing around a handful of winners, the industry remains fragmented with scope for multiple players to scale up and capture share over time.

Adoption is likely to be constrained by inertia, as integrating new systems and processes is typically slow and costly. Enterprise resource planning software offers a useful precedent, where a long tail of smaller providers has ensured that even the largest incumbents – Oracle and SAP – account for only about 10% market share each.

Practical barriers to the boom

The boom argument also assumes that the regulatory response will be limited. Yet in economies such as the US, where growth is driven by consumer spending, large-scale disruption carries social and political consequences. If AI weakens employment or household incomes, regulatory reforms will likely follow.

Constraints extend beyond regulations. The energy demands of large-scale data centres, rising memory costs and a shortage of specialist talent all pose challenges.

Data privacy concerns, cashflow limitations of AI providers and the deployment of these tools across entire organisations could also slow adoption.

None of these roadblocks are insurmountable in isolation, but taken together, they could point to a more measured pace of adoption than the boom narrative suggests.

The middle ground

Looking beyond boom-or-doom scenarios, our AI approach maintains a bottom-up focus on companies that meet our quality-growth criteria. By contrast, semiconductor companies are more cyclical, with an uncertain outlook for supply and demand.

Sceptics tend to think of companies as standing still while technology evolves. In our experience, the best companies tend to adapt by integrating innovations, passing productivity gains back to their clients and in effect disrupting themselves.

Their advantages lie in scale, data, established customer relationships, regulatory approvals and financial resources, all of which support durable, mutually beneficial solutions.

For established businesses with diversified revenue streams – in e-commerce and online advertising – AI exposure comes with a natural cushion visibility over future spend and the flexibility to absorb or redirect investment as the technology matures. These are not companies waiting to be disrupted. They are the ones doing the disrupting.

The middle ground may lack the drama of boom or bust narratives. However, if history is any guide, it is where the most resilient businesses – and the most sustainable returns – are ultimately found.

Justin Streeter is a US equities analyst and portfolio manager at Comgest. The views expressed above should not be taken as investment advice.

The investment characteristics of America's largest technology companies have fundamentally changed, according to Felix Wintle, manager of the Tyndall North American fund, who worries about the impact of their spending on their investment case.

Wintle is making a call for 2026 that the so-called Magnificent Seven – Apple, Microsoft, Google, Amazon, Meta, Nvidia and Tesla – will no longer dominate market returns as they have in recent years.

"They are great companies," he said. "But they've gone from being cash flow machines with high margins to spending heavily and becoming cash flow negative."

Meta is spending all of its free cash flow this year on capital expenditure and the stock is underperforming as a result. Oracle, which is spending heavily to compete in data centres, is down about 30% over the year to the beginning of April 2026.

"Across the group, they're spending all this money and no one is seeing a return. The Mag seven as a theme isn't as strong as it was in previous years," he said. "It's not that we won't own them, but right now we think there are better opportunities.”

Tyndall North American is around 20% underweight the Magnificent Seven compared to the S&P 500 index. The positioning comes with risk, particularly after the fund underperformed in 2023 because of a similar bearishness, as the mega-cap tech names recovered strongly.

"At the end of 2022, after a big bear market in tech where the Mag Seven fell a lot, I felt they were kind of over," Wintle said. "But in 2023 they recovered at the expense of everything else in the market and that was a mistake on my part, to count them out too quickly. So it's not that I'll never own them. But right now I think there are better places to be."

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

The shift away from the Magnificent Seven comes at a time when Wintle believes the US economy is in a strong position.

"When you look at what's going on in corporate America and in the US economy itself, it's actually a really bullish picture," he said. "We're going through a very strong, almost golden moment in the US economy of low inflation and high growth."

He expects nominal GDP growth to be north of 5%, a huge number compared with Europe and the UK, which are broadly flat. "Versus developed market peers, the US is a significantly better investment destination based on economic growth," Wintle said.

So while the biggest names in the American index are doing all the spending, the beneficiaries are smaller names that aren't heavily represented in passive indices, according to Wintle. "That's where we want to invest," he said.

His choice today is to back the beneficiaries of someone else's capex spending – one example being memory storage manufacturer SanDisk.

"There's a real bottleneck in memory and storage because of all the data being produced by data centres," Wintle said. "That data has to be stored and there isn't enough capacity."

DRAM and NAND are the two main types of memory and supply is constrained. Companies like SanDisk, SK Hynix and Samsung are among the only manufacturers and they have doubled prices multiple times.

Wintle also recently bought Intel, which is benefiting from strong demand for CPUs as well as GPUs.

"For agentic AI to take off, you need both," he said. "This is a new cycle. Intel has been a dormant company, but suddenly there's demand for CPUs again."

The company reported a much larger gross margin than expected because it was able to sell inventory at full price. Since the position was initiated on 22 April, the stock has grown to a top position in the fund.

"It's not a big part of the S&P anymore, so it's a good opportunity to be different and add alpha," Wintle said.

Price of stock over the past 6 months

Source: Google Finance

Outside tech, the US consumer offers "selective opportunities". The fund recently bought back Starbucks after the company went through a difficult period with poor service and a confusing menu.

"They've got a new management team now," he said. "It takes time to turn things around, but they reported strong numbers, 7% comp growth, which is really strong. We look for those inflection points as companies start to recover."

The fund also owns Warby Parker, which is developing AI glasses with Google. "It could be one of the first big consumer AI products that people really take to," Wintle said. "For a company like Warby Parker, it could be transformational."

Tyndall North American also has around 10% in energy, well above the index weighting, reflecting the manager's view that a new cycle is developing.

"There's damage to infrastructure and supply chains, and a need for new sources of energy," he said. "That creates opportunities in repair and new build. Most generalist funds wouldn't have that, but that's how we differentiate, by investing where we see the best opportunities even if it's out of line with the benchmark."

In the last 12 months, the positioning has benefited the fund, which is up 25.2% in the timeframe, against the 22.4% average return of the IA North America sector.

Wintle isn’t alone in his decision to broaden out within the US. Earlier today, Trustnet revealed which non-Magnificent Seven are the most owned in the IA North America sector.

That said, there are some of the Magnificent Seven that Wintle likes, as he said there is "a real dispersion of returns between these companies, so it's right to assess them individually rather than as one group".

The fund owns Nvidia and Google parent Alphabet among its top 10 positions – and these are also in the top three of the most-owned Magnificent Seven companies across the IA North America sector, as Trustnet revealed this week.

"The key driver for Alphabet is cloud growth. Google Cloud is growing 63% and taking share. You also have YouTube, the G Suite and other businesses, plus AI through Gemini. It's a diversified business with strong growth drivers,” he concluded.

UK investors returned to equity funds in April 2026 for the first time in almost a year, Calastone’s latest Fund Flow Index shows, but the rebound was narrow.

Investors added a net £1.1bn to equity funds in April 2026, ending a record 10-month selling streak, but the recovery masked a sharply divided picture in which the Middle East conflict and its asymmetric effect on global markets determined where money flowed.

The return to equities was the first since May 2025 and made last April the best month for inflows since April 2025. Between June 2025 and March 2026, UK investors had pulled money from equity funds every single month, a run without precedent in Calastone’s data.

Source: Calastone Fund Flow Index – Apr 2026

However, investors were selective last month: US equity funds took in £1.1bn and global equity funds, which are predominantly US-exposed, attracted £1.3bn. Every other regional category recorded net outflows.

Asia Pacific was the hardest hit, with investors withdrawing £383m. Emerging markets saw outflows of £355m and European equity funds lost £104m.

UK-focused equity funds also saw net selling of £342m, although Calastone noted this was the best result for UK-focused funds since December 2024, when flows were distorted by the aftermath of UK budget speculation.

Edward Glyn, head of global markets at Calastone, said the regional pattern reflected the uneven economic consequences of the ongoing Middle East conflict.

“The war in the Middle East has strangled energy and feedstock flows to large parts of the world – leaving US supplies largely intact, even if prices are higher,” he said.

“The expected economic fallout means that Asia and Europe - the worst affected regions - saw stock markets either flat or down during April. The gloomy outlook drove outflows from funds invested in most parts of the world.”

The US stock market surged by almost 10% in April after softer economic data brought forward investor expectations for Federal Reserve interest rate cuts. That shift lifted rate-sensitive large-cap technology companies disproportionately, though Glyn cautioned that the broader earnings picture remained uneven across sectors.

Glyn added that the rally’s foundations were narrower than the headline gain suggested: “The rally still looks narrow, with a small group of large-cap names doing most of the work, but it was strong enough to pull flows back into US and global equity funds, where US exposure typically dominates.”

The concentration in US equities was matched by a concentration in index funds. Investors added £2.6bn to passive funds during April while selling £1.5bn of active funds.

The resulting £4.2bn gap in favour of passive was the third largest in Calastone’s records.

Glyn said: “For momentum investors, simply buying index funds makes sense, which helps explain the particular skew to index funds in April.”

The return to equities appeared partly funded by withdrawals from safe-haven money-market funds.

Investors had added £3.8bn to money market funds across the 10 months of equity outflows between June 2025 and March 2026. But in April, they pulled £671m from this fund category, a withdrawal that coincided with flows to equities turning positive for the first time in almost a year.

Fixed income flows also stabilised. Outflows from bond funds were negligible at £27m in April, a significant improvement on March’s larger shake-out, as higher yields began attracting new buyers.

The Magnificent Seven stocks have dominated markets in recent years but there are some concerns over whether they can continue their run or if now is the time to diversify.

With this in mind, Trustnet looked at the stocks not in the exclusive Magnificent Seven club that are most owned by IA North America funds.

Yesterday we looked at the number of IA North America funds with a top 10 position in the Magnificent Seven names. All these stocks are in the top 10 of the S&P 500, which inflated their numbers as more than 40% of the sector is made up of exchange-traded funds (ETFs).

The same is true of the top name on the below list – Broadcom, which is a bigger weighting in the index than both Meta and Tesla. It appears in the top 10 of 135 IA North America funds, or 47.7% of the peer group.

Like its other tech brethren, the company enjoyed strong recent results in the latest earnings season, which it kicked off in early March.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said at the time: “Broadcom’s first-quarter results were strong, driven by rising demand for AI chips, while the outlook and management’s commentary helped ease concerns around the demand trajectory.

“Orders are expected to build through the year and the added colour on ramping deals for 2027 should act as a catalyst for earnings expectations to move higher.”

More recently, Carolyn Bell is lead portfolio manager of the Stonehage Fleming Global Best Ideas Equity fund, wrote on Trustnet that the tech giant ticks all of the quality boxes.

“Broadcom has delivered strong shareholder returns over a number of years. We believe its diversified growth profile, backed by strong fundamentals and ability to capture accelerating structural AI tailwinds, remains compelling for long-term investors in quality companies,” she said.

Source: Trustnet

Outside of the big tech names, Warren Buffett’s Berkshire Hathaway is the 10th largest stock in the index, but it is not the most popular option among the rest. This implies that it is not as fancied by active managers, as it will populate passive funds by force.

The next most-bought is JP Morgan, which is backed by 69 funds, with very few passives including the US banking group in their top 10.

It is the largest holding in the SSGA State Street SPDR S&P U.S. Financials Select Sector UCITS ETF and iShares S&P 500 Financials Sector UCITS ETF, at 11.4% and 11.3% respectively, but active fund Royal London US Equity Trust is third with a 5.4% holding.

Pharmaceutical company Eli Lilly is next. Danni Hewson, AJ Bell head of financial analysis, noted that the firm was the “standout performer” among the healthcare names in the latest earnings updates, with demand for its products such as its its weight-loss drug compensating pricing pressures.

“The market for weight-loss jabs is growing and set to grow further and, coupled with demand for diabetes drug Mounjaro, the company saw sales beat estimates by more than $1bn over the quarter,” she said.

Eli Lilly takes up 14.1% of the State Street SPDR S&P U.S. Health Care Select Sector UCITS ETF, but the remainder of its biggest backers are active funds.

Lazard US Equity Concentrated, New Capital US Growth, Capital Group AMCAP Fund and Artemis US Select all have more than 4% in the healthcare stock.

It sits alongside payments provider Visa, with both being top 10 holdings in 45 funds, or 15.9% of the peer group. Like Eli Lilly, the funds with the largest weightings are specialist financial trackers, while the active fund with the biggest stake in the firm is WS Lindsell Train North American Equity with 6.6%.

In fifth place is Berkshire Hathaway, with 36 funds including the stock in their top 10 holdings, while rival payment provider to Visa – Mastercard – is in sixth, appearing in 33 top-10 lists.

Mastercard is one of only two stocks on the list where its largest backers are not specialist ETFs. The fund with the largest weighting to the financials giant is SVS AllianceBernstein Concentrated US Equity with a 9.5% position.

Oil major Exxon Mobil is next up, sitting in the top 10 of 31 funds. It hits a lot of different boxes among specialist ETFs, sitting in the top 10 of energy and income trackers, as well as active funds.

Consumer brand Johnson & Johnson is the only other stock where more than 10% of the peer group have a top 10 position, while Cisco and Walmart are the final stocks to appear in the top 10s of 20 or more portfolios.

Passive funds in the US, European and Japanese equity sectors have proved most consistent at staying out of the bottom quartile, Trustnet research has found, with few active funds being able to match them.

In this series, Trustnet ran the quartile rankings of every fund in the Investment Association universe for each quarter of the past decade then looked for those that avoided the fourth quartile in every one of them.

The table below shows the IA North America and IA North American Smaller Companies funds that spent four or fewer quarters at the bottom of their sector.

Source: Finxl. All funds have a minimum track record of 10 years. Total return in sterling between 1 Apr 2016 and 31 Mar 2026

Some 15 funds have a perfect track record of dodging the fourth quartile over the past 10 years. All of these reside in the IA North America sector and invest passively.

Those tracking the S&P 500 have made the highest returns over the past decade, reflecting the fact that US mega-cap stocks – especially in the tech space – have consistently led the global market.

Active funds, on the other hand, have historically found it difficult to outperform in the US, owing to it being the most heavily analysed market in the world and leaving little exploitable mispricing for active managers to capitalise on. In addition, the strong concentration of the past decade has held back active managers who failed to match the benchmark weightings to the winning stocks.

We have to go down 18 places to find a fund that is not a pure index tracker: PIMCO GIS StocksPLUS, which has only been in the bottom quartile in one quarter. This fund tracks the S&P 500 but uses an actively managed portfolio of short-duration bonds to generate alpha.

Royal London US Equity Tilt, HSBC US Multi-Factor Equity and abrdn American Equity Enhanced Index are examples of funds that largely mirror the market but make small active bets away from it in the pursuit of higher returns or, in the case of Royal London’s Tilt range, an improved ESG profile.

On HSBC US Multi-Factor Equity, analysts at Square Mile Investment Consulting and Research said: “Broadly speaking we would expect this fund to outperform the S&P 500 index during periods of market growth as well as when markets are being driven by fundamentals. While it may well underperform during market inflection points, a natural weakness for more quantitatively driven strategies, overall we believe that investors will be well served over a full market cycle.”

GS Multi-Manager US Equity Portfolio and JPM America Equity are the only active funds to appear in the above table, thanks to just three and four quarters in the bottom quartile respectively.

The Goldman Sachs portfolio is split between multiple investment managers who are unaffiliated with Goldman Sachs Asset Management, although the exact managers are not readily available on the fund’s factsheet or webpage.

JPM America Equity is built around a concentrated portfolio of the managers’ best ideas across the growth and value styles, which is intended “to provide investors with access to complementary investment styles and potentially smoother long-term returns”.

Source: Finxl. All funds have a minimum track record of 10 years. Total return in sterling between 1 Apr 2016 and 31 Mar 2026

European equities are often seen as being a much richer hunting ground for active managers, as the market is less covered by analysts than the US and tends to have more attractive starting valuations.

However, FE fundinfo data shows that passive funds have the best track record in avoiding their peer group’s fourth quartile in this part of the market as well. As the table above shows, the vast majority of funds making the shortlist in this research track an index.

Of the 34 funds that have only been in the bottom quartile for four or fewer periods, just two – abrdn European Equity Enhanced Index and Royal London Europe ex UK Equity Tilt – do not take a pure passive approach.

But as we saw with the US sectors, even these funds are not fully active as they largely mirror the benchmark but will take underweight and overweight stock positions in order to maximise returns or their ESG profile.

Source: Finxl. All funds have a minimum track record of 10 years. Total return in sterling between 1 Apr 2016 and 31 Mar 2026

In the IA Japan sector, the same trend can be seen with only nine funds making the cut and all of these being pure index trackers. The exception is Royal London Japan Equity Tilt, which is in the same range as two funds already mentioned in this article.

Emerging markets have returned to relevance after years in the doldrums as a weakening dollar, a rotation away from expensive US equities and strong performance across Asian markets have combined to give the asset class renewed momentum in 2026.

For investors looking to gain exposure, the choice of structure matters as much as the choice of manager. The three largest active funds in the IA Global Emerging Markets sector – Robeco Emerging Stars Equities (€4.4bn), Polar Emerging Market Stars ($4.4bn) and Royal London Emerging Markets Equity Tilt (£7.1bn) – span a wide range of approaches and costs, from Robeco's high-conviction, high-fee active strategy to Royal London's near-passive tilt fund.

On the trust side, the three largest vehicles are Templeton Emerging Markets Investment Trust (£2.7bn), JPMorgan Emerging Markets Growth & Income (£1.5bn) and Fidelity Emerging Markets (£549m).

Below, we asked fund pickers which they prefer and why.

The fund picks

Among the three, Robeco Emerging Stars Equities – a Luxemburg-based fund managed by Jaap Van Der Hart and Karnail Sangha – has been the standout performer over most time periods: up 67.5% over one year, 86.3% over three years and 66.8% over five years, which comfortably exceed the Polar Capital fund's equivalent returns of 42.5%, 55.6% and 20.4%.

Its alpha of 13.28 and Sharpe ratio of 2.88 over the past year suggest its active risk has been rewarded, although investors do have to pay more for this as the fund has an ongoing charges figure (OCF) of 1.24%.

Sheridan Admans, chief investment strategist at Infundly, chose it for its concentrated 35-to-50 stock approach, combining top-down country allocation with bottom-up stock selection.

"It is genuinely active and comfortable taking big bets on companies it believes have healthy, solid business models and attractive growth prospects at reasonable valuations," he said.

Darius McDermott, managing director at FundCalibre, also went for the Robeco fund, highlighting its ability to access opportunities through discounted holding companies.

"By investing in names such as SK Square instead of SK Hynix, or Naspers rather than Tencent, the managers gain exposure to high-quality growth assets at a meaningful discount," he said. "As these discounts narrow over time, this can provide an additional source of returns beyond underlying earnings growth."

Royal London Emerging Markets Equity Tilt is a different kind of product: a near-passive vehicle charging 0.10% which works by adding active tilts to a benchmark allocation.

The trust picks

On the trust side, opinion was more divided. Admans chose the Templeton Emerging Markets trust, citing its scale, experienced team and the potential return from discount narrowing.

At roughly 8%, the discount offers a second performance lever for investors who are patient enough to wait for sentiment to improve. It is managed by Chetan Sehgal and Andrew Ness and has achieved a maximum FE fundinfo Crown rating of five.

"Investors are paying for the managers to take views on where the structural winners in emerging markets are likely to be," Admans said.

On the other hand, McDermott went for JPMorgan Emerging Markets Growth & Income, as it "leans more clearly into the structural growth story underpinning emerging markets, with greater exposure to areas such as India and domestically driven economies", while also offering an income component, which he saw as a growing source of return in the asset class.

Templeton's more valuation-aware approach "has delivered strong long-term results, but can lag when growth-led markets are in favour", he said.

Finally, Fairview Investing director Ben Yearsley liked Fidelity Emerging Markets for its 130/30 long-short structure.

"[Managers] Nick Price and Chris Tennant have shown they are adept at both finding good companies and poor companies," he said.

Its one-year return of 96.4% is the highest of any vehicle in this comparison by a wide margin.

Funds or trusts?

As investment trusts do not face redemption pressure, managers can hold illiquid positions, use gearing and take a long-term view without being forced to sell at the wrong point in the cycle.

However, they are priced just like shares and can trade below the value of their underlying assets, which can amplify losses when sentiment turns.

McDermott said that "in emerging markets, where volatility and liquidity constraints are part of the opportunity set, the closed-ended structure comes into its own".

Yearsley broadly agreed but noted the advantages aren’t as strong as in other asset classes.

"I'm not in the camp of unit trust over investment trust or vice versa," he said. "Emerging-market equity is one of those where I slightly favour trust over fund, although it's not as clear-cut as say frontier equities, where you're definitely better off in a trust."

In theory, a global equity fund should be an excellent tool for diversification across countries, sectors and currencies. With more than 40,000 stocks to choose from, active managers have plenty of opportunities to differ from their peers in the IA Global sector, which is home to over 550 funds.

Many of these funds will have a benchmark, but some managers will simply pay no attention and focus on the best opportunities. Over the past 15 years, this has resulted in a huge chunk of assets going into US equities.

Research from Morningstar from May 2025 showed the average fund in the IA Global sector had 61% of assets in the US (vs. 44% a decade earlier).

There is no doubt this has been a successful play. Driven by tech behemoths, the S&P 500 has returned almost 700% in the past 15 years, more than triple the returns of the likes of UK, European and emerging market equities.

The upshot is we now have 71.2% of the MSCI World in US equities (and a third in technology and communication services). Missing out on these exposures in recent years would have seen global funds struggle to compete with their peers in a proliferated market.

US no longer the only game in town

However, US equities have been underperforming their international peers since the start of 2025. The ‘end of US exceptionalism’ has been well touted, with capital shifting from US assets to emerging assets and Europe – opening the question of whether global funds should be following suit.

JOHCM Global Opportunities fund co-manager Ben Leyland holds around 44% in US equities in his portfolio. He said there are two fundamental changes investors have to consider. The first is the rising capital intensity of the US tech darlings – as they continue to spend more money on AI infrastructure – meaning profit/cashflow numbers are likely to be more limited.

The second is that there are now a host of other opportunities available to investors. Examples include Germany’s fiscal stimulus (something we have not seen for two decades), which should benefit wider Europe, and Japan moving into an inflationary environment, making it a more attractive investment climate. He also said places like Spain and Ireland have de-levered, having been the big crisis economies of 2011-12.

T. Rowe Price Global Focused Growth Equity portfolio specialist Daniel Hurley said his team brought down its allocation to US equities in early 2025 (currently 55%), citing the frenzy for US assets following Trump’s victory (a valuation call to lower exposure).

He said the team also felt there would be a growing valuation dispersion from the AI trade, citing the fact that only two of the Magnificent Seven outperformed in 2025.

“We think a lot of the hyper-scalers (internet companies and cloud service providers) are going to spend on capex and we want to be underweight those and overweight where the money is going to be spent, such as data centre companies and the infrastructure names – these are both in the US and overseas,” he said.

FOMO and the tyranny of the benchmark

Hurley said there are challenges to simply ignoring a big part of the market and underweighting those names to a significant degree. He said: “Your tracking error could really blow out and clients can get nervous if it goes from 8-15% and investors may simply say that is too big – there is a balance to this.”

Fidelity Global Special Situations manager Christine Baalham said momentum and benchmark sensitivity will inevitably drive flows into US AI-related names.

They have also seen how powerful narratives can shape outcomes for investors – the ‘AI loser’ narrative, for example, has weighed heavily on software and adjacent sectors, while the US mega-caps have not repeated the outsized performance seen in 2024.

She said the focus remains on fundamentals rather than narrative-driven positioning, adding that they retain exposure to select US leaders where they see durable competitive advantages and pathways to growth.

Leyland said history shows that owning sectors due to concerns over missing out can be challenging. He said: “Tech has outperformed since 2015 in different guises. Names like Microsoft and the social media businesses have been ever present in that, and it has gone on so long that they now represent a big part of the index. Some simply believe you cannot afford to not have Erling Haaland in your fantasy team.”

Leyland said US earnings have been the main driver of growth for the region above others, but this has been distorted by the Magnificent Seven – adding that the other 493 companies in the S&P 500 have no better earnings growth than other parts of the world.

However, he believes those companies have benefitted from a rising-tide-lifts-all-boat scenario in the US – meaning you are now paying a big premium for those other names.

The US still has its attractions

Perhaps the most obvious factor beneath the bare numbers is that many US companies are global revenue generators. Capital Group’s New Perspective fund’s investment director John Lamb cited names such as GE Aerospace and Visa, with revenues of 55% and 60% outside the US, as examples of this.

Lamb said New Perspective currently has around 55% in US equities, adding that although there are cracks in the US exceptionalism story, the reality is if you want to find a lot of the leading AI/tech companies, you need to look to the US.

Nutshell Growth manager Mark Ellis said many global funds are always going to have 50-70% in the US, not only because of the global nature of many US firms but also because there is far greater freedom.

He said: “We can go through the Russell 3000 and there will be hundreds of companies that we find interesting – whereas in the FTSE there might be six and a few more in Europe. But the US is a different level of depth of quality.”

It's hard to say there is a simple correct answer on this. Some funds are willing to deviate significantly from global benchmarks, while others are more benchmark aware due to the risk around significantly underweighting the big return drivers in markets. It does not mean they are not good stock pickers.

The challenge for investors is making sure they have diversification in terms of not being overexposed to single themes – like technology – if exposure is replicated across a number of their holdings.

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

Brown Advisory has launched a new fund to give institutional, intermediary and retail investors outside the US access to its US small-cap fundamental value strategy.

The strategy invests in American smaller companies the team considers mispriced relative to their intrinsic value. It targets both classic value opportunities and situations where the team believes the market has not fully reflected a company’s long-term potential.

It has delivered annualised returns of 12.6% gross of fees and 11.5% net of fees since its 2008 inception to 31 March 2026. Over the same period, the Russell 2000 Value index returned 10.4%

David Schuster, who has managed Brown Advisory’s US small-cap fundamental value strategy since its 2008 launch, said: “The market price of a stock often does not reflect a company's true value – particularly in the small-cap universe. We focus on businesses with persistent free cash flow and management teams that allocate capital effectively.”

Charlie van Straubenzee, global head of institutional business development at Brown Advisory, cited “increased dispersion in company fundamentals and valuations” as a factor behind the timing of the launch.

The new UCITS fund will sit alongside the strategy’s existing US mutual fund and separately managed account vehicles.

The Magnificent Seven remain as dominant and as popular as ever, with the US tech giants’ aggregate stock market capitalisation combining to hit a new record high of $22.5trn yesterday.

AJ Bell investment director Russ Mould said Alphabet, Amazon, Apple, Meta, Microsoft and Tesla had encouraged investors with a strong earnings season – with only Nvidia remaining to report.

“Investors seem happy to abide by the adage ‘never mind the quality, feel the width’, judging by the generally positive share price reactions to the latest quarterly earnings from Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla, and the ongoing rise in Nvidia for good measure,” he said.

It was a positive month for the tech giants from an earnings perspective, with many producing top results. Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Growth was strong across the group, cloud demand accelerated and the message from management was clear: the buildout continues.

“The market was less united on what to make of the spending plans, with investors still trying to balance the scale of the AI opportunity against the cash required to chase it. But the bigger takeaway is that this cycle is nowhere near cooling.”

Alphabet was the “market darling”, he said, with Microsoft struggling to garner much reward from investors for its stellar figures, which included beating analyst forecasts for the fourth straight quarter.

Amazon was broadly on track while Meta “cannot catch a break”, said Britzman, with the stock marked down by investors for spending more in the AI race.

But which of the stocks are most heavily backed by funds? Below, Trustnet counted the number of funds in the IA North America sector with a top 10 position in each of the seven tech behemoths.

Microsoft is the most popular stock among US funds, according to data from FE Analytics, with some 174 IA North America funds including the company in their top 10.

It means some 61.5% of the 283-strong peer group include the S&P 500's third-largest company in their major holdings.

Source: Trustnet

The software provider is the most popular stock of the sector, with Google parent company coming in second, sitting in 169 of top-10 lists.

A stock split means Alphabet appears twice in the S&P 500, with two of its share classes appearing in the index's top 10. Its overall weighting between the two classes stands at close to 7% of the index – combining to make it the second-largest US company.

For this study, we did not split out each share class, instead focusing solely on the number of funds where ‘Alphabet’ appears in the top 10. If a fund includes both, it would only have been counted once.

Third came chipmaker Nvidia – the largest company in the S&P 500 – with 167 funds making the stock a top 10 position (59%). Amazon is next (151 or 53.4% of the sector), with Apple (142) also in more than half of the peer group.

The laggards are Meta (111 funds, or 39.2% of the sector) and Tesla (84, or 29.7%). Both have been leapfrogged by Broadcom, which has risen to the seventh-largest stock in the S&P 500, with Meta Platforms in eighth and Tesla in ninth.

All of the stocks above have benefited, however, from the large number of passive options in the IA North America sector. Some 116 (or around 40%) of the peer group invests passively, although not all track the S&P 500.

For example, the single largest position to any of the seven is the 34.2% position that Xtrackers MSCI USA Consumer Discretionary UCITS ETF has in Amazon. The online retailer also makes up around a third of both the State Street SPDR S&P U.S. Consumer Discretionary Select Sector UCITS ETF and iShares S&P 500 Consumer Discretionary Sector UCITS ETF.

Electric vehicle maker Tesla was another to benefit from its consumer discretionary slant, with the same three funds also taking big positions in the Elon Musk-led firm.

This was common throughout the suite. The top holders of Microsoft, Apple and Alphabet were all specialist US quality or technology trackers, as well as many general US exchange-traded funds. Nvidia also proved difficult to overweight: some 18 funds had a double-digit position to the stock, but only three were not ETFs.

But there were some exceptions. Alphabet was widely owned by active funds more than passive, although this may be due to its aggregate weighting – active funds put both share classes together, while passives are more likely to split them out into two.

Meta was the other where some active managers had taken big bets. FTGF ClearBridge US Large Cap Growth has the largest weighting of all at 7.1%, while all six funds with a position of more than 5% were active.