With Elon Musk’s intergalactic venture SpaceX set to start trading publicly from 12 June, everyone will be able to join the space race – from enthusiasts with the dream of going to Mars and building AI infrastructure in space, who are actively seeking exposure; to more grounded owners of index trackers such as the Nasdaq and the FTSE Russell, who will see SpaceX enter their portfolio via the passive route.

(S&P has refused to fast-track the stock into the S&P 500, meaning S&P index funds won't be forced buyers on day one.)

For the initial public offer (IPO), SpaceX is seeking just short of $1.8trn valuation, which would make it one of the world's most valuable companies. Yet it is still losing money, having recorded a $4.9bn loss in 2025 on $18.7bn in revenue.

Whether you are team Musk or team Muskn’t, this is almost certainly having an impact on your investments – perhaps inadvertently if you, like me, own an investment trust whose position in SpaceX has climbed the portfolio to a top holding.

As investors swing between greed and fear, so did I. My first instinct was to add to the position and ride the IPO momentum. But I'm naturally more fearful than greedy and quickly hesitated. What if I timed it wrong? What if the price surged on listing and then came back to earth? Have we forgotten when Musk threw himself into Donald Trump's Department of Government Efficiency (DOGE) and the consequences that had for Tesla? European sales fell and the stock dropped sharply. SpaceX has the same person behind it, with even more concentrated control, and is valued at a significantly higher price.

But there is also another side to the story: SpaceX isn’t actually going public – not fully – because of something called dual-class shares, whereby public share classes carry significantly fewer voting rights.

Public investors will receive one vote per share, while Musk – who will simultaneously serve as CEO, CTO and chair, and retain control of the election of directors – will have 10 votes per share, meaning he will control around 85% of voting power while holding approximately 41% of the stock.

Around 44% of US tech IPOs now use some version of this structure, which is designed to remove possible tensions between the vision of the founder and investors trying to hold them accountable.

The concentration of power in a single visionary figure – one whose judgment cannot be formally challenged and whose continuity is built into the legal structure – has a long history outside markets as well.

I feel uneasy around the rhetoric that strong men get things done, move fast and achieve what committees cannot, because when things go wrong, there is no mechanism to correct course. But that’s the direction markets are going.

SpaceX is simultaneously a launch provider, a global satellite internet business and an AI infrastructure play. Three capital-intensive businesses, each unproven at the scale being priced in, and a fourth narrative arriving via the Golden Dome defence contract.

Which of these are you paying $1.8trn for? Backing all of them requires an enormous number of things to go right, run by one person who cannot be removed.

As for me, I haven’t bought my investment trust specifically to get access to SpaceX, so I decided – perhaps cowardly – not to add or sell. My investment case in the trust is long-term and goes beyond this IPO.

I would like to know how you are preparing for this historic event. Email me at matteo.anelli@fefundinfo.com to keep the conversation going and check back on Trustnet for our upcoming SpaceX coverage.

Matteo Anelli is deputy editor at Trustnet. The views expressed above should not be taken as investment advice.

The Lowland trust has a long list of stocks: 118. That is a lot for an active fund, as many choose to take a high-conviction approach to investing, picking relatively few stocks and hoping their choices will perform better than the average.

“This isn’t conviction management,” said James Henderson, manager of the trust. “I don’t know how one can be truly convinced by things. There are too many variables and too much difficulty out there.

“But you can think, on the balance of probabilities, that something’s cheap and worthwhile – and then try to make it count within the portfolio.”

That is how he runs Lowland, taking bigger positions in companies where he sees more upside but including a long list of stocks that should mitigate the fact that the managers will be wrong “some of the time”.

The portfolio is benchmark-aware but is not driven by the index, he explained, with Henderson and co-manager Laura Foll willing to avoid large index stocks such as British American Tobacco and AstraZeneca where they feel there are better options elsewhere.

“Not owning the concentrated list of big-cap stocks allows us to have a much greater variety of things,” he said, which includes investing in a large range of mid- and small-caps.

While his top 10 largest holdings are all large-cap names, a good chunk of the portfolio is invested lower down the market capitalisation, as these stocks have more room to grow.

Henderson said: “A small company of £250m is more likely to become a £2.5bn company than a £2.5bn company is likely to become a £25bn company.”

The area has been challenging for Lowland in recent years, with mid- and small-caps underperforming their large-cap peers. However, the trust has been a top-quartile performer in the IT UK Equity Income sector during this time, despite the poor performance at an index level.

Performance of trust vs sector and indices over 3yrs

Source: FE Analytics

While mid- and small-caps have underperformed at an index level, there have been several companies bid for in the past year. In the Lowland portfolio, he highlighted chain maker Renold and credit products and insurance services provider IPF as lucrative examples.

Smaller companies remain out of favour, with investor meetings “still quite lonely” for Henderson, who said there are “not many people turning up for them”.

“At the moment, the brokers have to work quite hard to get much interest going,” he said, but noted that this is why he remains positive – arguing it is usually a bad sign for the market when there is too much interest, as this often signals the top.

“We’re 12 or 13% geared at the moment. And we’re getting cash in from these takeovers. It’s not taking us long to find good value homes for that cash, so it’s an interesting time,” he said.

Below, Henderson explains the parallels between investing and gardening, why the UK has an investing problem and how politics rarely has an impact on markets, despite a lot of discussion about it.

What is your process?

We have an emphasis on income and growth. I’ve always believed that the way to grow the income is to grow the capital first, so we never chip away at the capital and pay it out as income. And then we aim to get sustainable income growth coming through too.

We’re more value and contrarian-driven than some funds. One way we look at it is turnover to the market cap, adjusted for debt. That gives a feel for the size of the business. Then we ask: ‘Will it get a better margin on that turnover by the actions management is taking, by us helping them, or some other means?’

There are different risk metrics in different sectors. For the general capital goods companies, turnover is a good one. For property companies, for instance, the obvious one is discounts. But it’s not just one number.

Does the UK have an investing problem?

There is definitely a problem getting money into productive investment. For me, the biggest issue was UK pension funds leaving the market. [New] initiatives to try and get people back are interesting but they won’t get very far. They’re not going to be a big help.

I think what brings investors back to the UK is performance – another period like we’ve had over the past couple of months or so. We are seeing real interest. It’s at the margin, but we are seeing interest.

Do you worry about politics?

If I could have all the time of my life back that I’ve spent discussing politics, I’d be able to do something [useful] with it. We debate politics a lot but it rarely has much effect on the market at the end of the day.

I don’t think there’s any correlation between a change of party and stock market returns. Actually, there’s very little correlation between GDP growth and market returns as well. After all, you’re not buying the UK economy, you’re buying individual companies with individual management teams that do their own thing and find their own way with the problems they face.

Good management teams and reasonable valuations are much more important than worrying too much about politics. That’s why we don’t spend a lot of time debating politics.

What have been your best and worst stock picks in recent years?

Over the past two years the greatest contributors have probably been the banks, with Standard Chartered up around 175%, Barclays 116% and HSBC 100%.

Another big driver of performance has been from companies being bought at substantial premiums. In two years, we’ve lost seven companies to acquisition. IPF was taken over at a considerable uplift to the undisturbed price last year, for example.

Conversely, Marshalls is one of our biggest losers – down 55% in two years. It’s a well-run company that’s been dragged down by economic woes, but we think it will come good eventually.

What do you do outside fund management?

I have an interest in gardening. I joke about it being like this job – needing variety in the garden and not wanting everything out at once. You need things coming into flower at different times.

Investors often gravitate towards funds that do exactly what they say on the tin – a clear style, a defined region, a set benchmark or a neat sector silo. There is comfort in knowing exactly what you are buying.

But there is also something to be said for managers who aren’t boxed in. In a global market that has become dominated by a handful of mega-caps, the ability to roam freely across geographies, sectors, market caps and themes can be a genuine advantage.

As such, Trustnet asked fund selectors to highlight the ‘go anywhere’ funds and investment trusts they believe offer true flexibility and high-conviction stock picking.

Rob Morgan, chief analyst at Charles Stanley, identified the £1.1bn BlackRock Global Unconstrained Equity as a “punchy global option”.

The fund has been co-managed by Alister Hibbert – who Morgan said is “best known for his success in unconstrained European equity funds” – and FE fundinfo Alpha Manager Michael Constantis since its launch in 2020.

“The managers search for the ‘growth compounders’ of the coming decade and beyond, among mostly larger global companies, with no regard for any benchmark,” he said.

The portfolio has a notably higher price-to-book ratio of 9.29x and price-to-earnings (P/E) ratio of 34.56x. The ongoing charges figure (OCF) is currently 0.90%.

“This is a pure stock picking fund [with 22 portfolio holdings and] an uncompromising, unconstrained approach in the hands of accomplished managers,” Morgan said.

It has posted a first-quartile return in the IA Global sector thus far in 2026 and was highlighted by Trustnet as a strong performer in the wake of the initial sell-off following the outbreak of conflict in the Middle East and subsequent rally.

The fund is also in the first quartile for its five-year return to the end of May 2026, gaining 79.5%.

Performance of the fund vs sector over 5yrs

Source: FE Analytics

Morgan also suggested the $1.5bn Atlas Global Infrastructure fund, which is co-managed by a team of five: David Bentley, David McGregor, Peter Hyde, Rod Chisholm and Matthew Lorback.

“Markets often misprice infrastructure assets, which creates opportunities for skilled active management with deep experience and understanding of the sector,” Morgan said.

The fund – which is slightly more expensive than the BlackRock strategy with an OCF of 1.08% – aims to provide investors with exposure to a concentrated selection of high-quality infrastructure equities across developed countries.

“In contrast to many funds in the sector, which are quite widely spread, the managers undertake extensive due diligence to narrow the field down to only around 20 stocks,” he noted, adding that “this produces a genuine ‘best ideas’ portfolio with no regard for the benchmark”.

The fund has posted a first-quartile return in the IA Infrastructure sector over one, three and five years, gaining 75.9% over the half-decade.

Performance of the fund vs sector over 5yrs

Source: FE Analytics

In contrast, Hassan Raza, portfolio manager at CG Asset Management, turned to investment trusts, first suggesting the £1bn AVI Global Trust, managed by Joe Bauernfreund.

“It is an unconstrained portfolio of companies that is not afraid to rotate geographic exposure to pursue opportunities – over the years, we have seen the trust move with agility across the world based on its fundamental bottom-up research,” Raza said.

The trust currently has the biggest geographic exposure to Europe excluding the UK at 28%, followed by Korea (18%) and Japan (17%). Raza noted that the trust has added around 15% to Korean equities over the past eight months to capitalise on the amendments to shareholder rights, which should make corporate activism in the region easier.

AVI Global Trust was trading at an 8.7% discount to net asset value (NAV) as of 2 June 2026. Its net asset value (NAV) increased by 6.1% in April 2026, while the portfolio’s weighted average discount stood at 42%.

“AVI Global Trust’s NAV has delivered 11.5% per annum net of fees since 1985,” Raza said.

“As they [the managers] deepen their bench with Nicola Takada Wood bolstering the Japan sleeve, we think they offer a global ‘go anywhere’ equity product that diversifies investors away from richly priced US-centric portfolios, at a relatively low cost for genuine active management.”

Performance of the trust vs sector over 5yrs

Source: FE Analytics

Raza also highlighted BH Macro – a $1.9bn feeder fund into the Brevan Howard Master hedge fund.

“The fund takes a global macro approach where portfolio managers can trade across geographies and asset classes,” Raza explained, noting it has delivered strong returns during challenging market swings, including Covid (when it gained around 42%) and the 2015 China bubble (where it gained 9%).

“It can play a diversifying role for a broad portfolio that can tolerate a less transparent approach and some volatility,” he said.

Raza added that these periods of strong performance typically coincide with material discount narrowing, with the board “taking a more vigorous approach to buybacks”.

“At wide enough discounts, we think BH Macro is a cheap way to access global macro exposure compared to eyewatering fees in fund-of-fund structures.”

The trust’s discount to NAV currently sits around just shy of 6%.

Performance of the trust vs sector over 5yrs

Source: FE Analytics

Also looking at investment trusts, Ben Yearsley, director at Fairview Investing, pointed to Baillie Gifford’s Scottish Mortgage Investment Trust – a £13bn vehicle that invests in a combination of global private and public companies deemed innovators among their peers.

“Many may disagree with my choice here, as it does tend to invest only in high-growth companies,” Yearsley said.

“However, the managers are simply looking for any company that can at least double in value over the next five years – quoted or unquoted and regardless of sector. It’s ultimately unconstrained and will go anywhere.”

This includes investing in pioneering private businesses like Anthropic and SpaceX.

FE fundinfo Alpha Manager Tom Slater and deputy manager Lawrence Burns typically hold investments for long periods with limited turnover.

It has posted a first quartile return in the IT Global sector over one, three and 10 years to the end of May 2026, gaining 513.2% over the decade.

Performance of the trust vs sector over 10yrs

Source: FE Analytics

All markets and businesses have cycles, but when companies are going through drawdown phases it can be painful for investors and difficult to know what to do.

Kartik Kumar, part of the investment team on the Aurora UK Alpha trust, said investors tend to make mistakes when positions fall into the red, but these can be avoided.

To start with, it is important to know what a typical business cycle looks like. Kumar split it into six main sections. The first is the asset growing and a company’s price tracking higher as a result.

Next comes the start of the drawdown, usually when bad news hits. Here, the price falls far faster than the underlying value of the asset before reaching a floor, before then stabilising as investors appreciate that the news is not going to get worse – it does not necessarily have to be getting better either at this time.

Then there’s the turn, often triggered by marginally positive news that produces a disproportionate re-rating, followed by consolidation. In the last stage, the cycle begins again with price and value rising together.

This phenomenon comes from Richard Thaler's work in the early 1980s, which found that "prices fluctuate more wildly than value," Kumar said. More precisely, share prices move about 13x more than the discounted future cashflows that underpin them.

Each part of the cycle above is distinctly different and can last an unspecified amount of time. Kartik used Netflix as an example. The streaming service enjoyed rapid growth in 2021 and before tumbling just six months later. It then rebounded again quickly and enjoyed strong performance until the start of 2026.

Share price return (%) of Netflix over 5yrs

Source: Google Finance

At the opposite end of the spectrum, Phoenix holds Barratt among other housebuilders, which have long been falling and have yet to reach the floor, something that is taking “a lot longer than we would have anticipated”, said Kumar.

These episodes can mean companies get stuck at the bottom – or continue to fall – long after they perhaps should have. One reason for this is that people are “effectively wired like a smoke detector”, said Kumar. He compared investors selling at the first sign of trouble to a smoke detector bleating out when toast is burning. It is safer to take action just in case, although may not always be necessary.

Second is ‘anchoring’, where investors base their expectations on what has just happened rather than what is likely to happen next.

Kumar explained it is like driving by looking in a wing mirror: “What's in your wing mirror is a valid reflection of reality. It's just pointing in the wrong direction if you're trying to see what's coming.”

The third is career incentive: “Being wrong with the crowd is acceptable. Being wrong without the crowd is usually career-ending," he said.

Here he used the example of European banks at the start of the decade, which were viewed as capital-intensive, low-returning and uninvestable businesses.

Things have turned around in recent years and they have been one of the best-performing asset classes on the planet.

““But if you sat there in 2020 saying 'I think 13 trillion dollars of debt at a negative yield is irrational, and I think one day banks will earn a return from the spread on their deposits' – you wouldn't have had a job by 2022,” said Kumar.

All of these are real issues for the Aurora UK Alpha trust. The fund is down 10.7% year to date and 5.6% over one year and is therefore going through its own form of drawdown.

Performance of fund against index and sector over 1yr

Source: FE Analytics

This is compounded by the trusts’ underlying holdings, such as Barratt, which have been weighed relative to the benchmark.

Yet he is content with his portfolio’s positioning, noting that he and the team are anchoring their approach to intrinsic value rather than short-term price changes, which is making it easier to hold stocks currently falling.

He used the example of Frasers, where £20,000 worth of shares currently buys around £48,000 of assets and wealth. This frame of mind has helped the team to retain conviction in Barratt despite multiple price drops. Having bought at £3, at around £2.40 he has given up 60p so far, but is “looking forward to that nine-pound gain” he expects from the company’s intrinsic value. “I can't predict when it will happen, but I know it will,” he said.

For his own portfolio, he estimated that the net asset value stands at around 243p versus an intrinsic value of 760p.

“The upside to intrinsic value on price is 220%, which is truly an extraordinary level in our history. There's a very significant margin of safety,” he concluded.

Every investor seems to know and accept that AI is changing the world. But what many seem to be overlooking is the speed of change in AI itself.

The release of ChatGPT towards the end of 2022 felt like a watershed moment, blurring the lines between science fact and fiction. Every day since then has seemingly brought news of yet another industry, company or business model at risk of disruption from AI.

The irony is that the list now includes the AI companies themselves. ChatGPT’s revenues have recently fallen behind those of rival Anthropic, with data suggesting Anthropic’s subscriber growth is coming at the expense of ChatGPT, meaning many customers are just switching.

This raises an important question: if AI is changing the world as we know it, and AI itself is changing even quicker, why are investors’ portfolios the same?

Valuations up, cashflows down

At the end of January 2023, the top five constituents of the MSCI World, at 12.5% of the index, were Apple, Microsoft, Amazon, Alphabet and Nvidia.

Fast-forward to today and the top five constituents of the MSCI World are Nvidia, Apple, Microsoft, Amazon and Alphabet – but at an even more concentrated weighting of 19.0%.

You could argue I’m being disingenuous here as, beyond Nvidia, only a tiny fraction of these companies’ revenues are directly generated by AI. However, while AI is not responsible for how these companies make their money, it now overwhelmingly accounts for how they spend it.

Microsoft, Alphabet and Amazon – plus Facebook owner Meta, which sits just outside the top five – plan to spend close to $725bn on AI infrastructure in 2026, a figure we expect to hit $1trn by 2030. This is up from just $150bn in 2023.

As a result, not only do these companies’ free cashflow yields sit below where they were in that year, they also sit below where they were a decade ago.

If such capital expenditure starts to generate healthy returns, or if a clear winner emerges among the so-called hyperscalers, this may turn out to be a shrewd use of investors’ capital. Until that time, we are happy to take an underweight position in this sub-sector of the market.

We are not bearish on AI

This does not mean we are bearish on AI. Although we have pivoted away from the companies collectively set to make a trillion-dollar investment in the technology, we have pivoted towards the loose body of industries and businesses set to benefit from it.

A key tenet of our investment process involves seeking out stocks where the potential upside outweighs the potential downside by a factor of two to one.

Among the beneficiaries of AI spending, this has frequently led us towards companies where demand for their product or service is outstripping supply. That $725bn is an enormous amount of money to attempt to push through the economy in a single year and, unsurprisingly, it has led to bottleneck after bottleneck.

A couple of years ago we would have probably named semiconductor designers (such as Nvidia) and manufacturers (such as Broadcom) as the only real beneficiaries of this trend. These companies have high incremental margins (meaning any increase in revenue results in an exponential increase in profitability) so their cashflows spiked just as those of the hyperscalers were beginning to collapse.

But, since then, we’ve learnt that AI data centres need to be wired up in a fundamentally different way, leading to a surge in demand for Coherent’s components. Storage has gone from a sickly industry that only made hard drives for desktop PCs to suddenly becoming a limiting factor in AI content generation and cloud growth. Hence, Seagate’s results continue to surprise to the upside.

And it’s not just tech. At a more mundane level, labour provider Comfort Systems is seeing a net retirement of electricians, welders, plumbers and pipe fitters, meaning there are more tradesmen leaving the industry than are coming in. If you're Meta or Alphabet, you’re desperately trying to pay these guys as much as you can to carry on working.

This supply/demand imbalance has allowed many companies in the AI value chain to generate super-normal profits. We see nothing to suggest this trade will come under threat any time soon – especially if the hyperscalers’ spending commitments remain in place.

Opportunities amid AI disruption

Of course, every investment has its price and with these bottleneck beneficiaries having already re-rated, there may come a time when another sector or theme offers a better trade-off between risk and reward.

Counterintuitively, this may eventually lead us to the sectors currently deemed most at risk of AI disruption. Fears of obsolescence have pushed down valuations in areas such as software and consultancy, even though earnings growth has in many cases outpaced that of the market.

Should these fears turn out to be misplaced, investors will reappraise these as fast-growing companies generating healthy levels of free cashflow and a re-rating will likely follow. 

We are currently a long way from knowing which companies in these sectors will prove immune to the threat of AI. But we will continue to monitor them for clues that suggest their business models are more robust than previously thought.

The point is, things change. And so should your portfolio.

Cormac Weldon is head of US Equities at Artemis. The views expressed above should not be taken as investment advice.

Asset manager Aberdeen, IT provider Computacenter and investment bank Investec will all enter the FTSE 100 index of UK large-caps on 19 June, FTSE Russell has confirmed.

Going the other way, housebuilder Berkeley Group, packaging firm Mondi and online property portal Rightmove will all fall to the FTSE 250, where there are nine changes overall.

Fund managers agreed that the number of changes was higher than usual. Tim Service, manager of the Jupiter UK Mid Cap fund, said this is likely due to some big swings in share prices over the past three months caused by "big macro crosscurrents in markets".

These include rising energy costs, the shift in the inflation/interest rate outlook, UK political turbulence, AI capex spending and potential AI disruption, he said.

Anthony Lynch, who co-manages the Mercantile and Claverhouse trusts as well as the JPM UK Equity Plus fund, said: "Index reshuffles tend to become more dramatic when markets are volatile. And that's exactly what we've seen in recent months, particularly following the escalation of tensions in the Middle East."

Indeed, the UK market has experienced volatility of around 14% so far this year, according to James Goodman, co-manager of the Schroder Prime UK Equity fund, "reflecting greater dispersion and disruption across sectors in the UK market".

There are some big themes investors can take away from the latest rebalance, the managers all agreed. Goodman noted that there has been a divergence between internationally exposed companies and more domestically sensitive areas of the UK economy.

"Higher interest rates and the slow pace of planning reform continue to weigh on housebuilding activity and broader repair, maintenance and improvement spending," he said.

Meanwhile, the "noticeable trend" of successful AIM-listed businesses moving into the main market indices is another theme worthy of note.

Lynch added that stocks exposed to currently 'hot' structural growth themes seem to have been promoted at the expense of housebuilders.

"Demand for AI infrastructure, data centres, digital connectivity and the commercialisation of space continues to attract investor capital, reflecting confidence in long-term structural growth opportunities despite a more uncertain economic backdrop," he said.

Below, fund managers highlight their key takeaways from the latest reshuffle.

Source: FTSE Russell

Housebuilders

Starting with housebuilders and other property-related stocks, these companies have been battered in recent months and have dropped down the indices.

Thomas Moore, manager of the Aberdeen Equity Income Trust, said it was the "most striking theme on the demotions list", noting that the backdrop for the sector could "hardly be more challenging".

"Government plans to drive up housebuilding volumes have so far failed, despite some easing in planning restrictions, as gilt yields hit new highs due to rising inflation, record public sector borrowing and political uncertainty," he said.

Names in the list above include Berkeley, Rightmove, Ibstock and Marshalls, which Lynch said have fallen out of favour as investors price in stickier inflation, weaker consumer confidence and the prospect of interest rates staying higher for longer.

Service noted that he has a short position in Ibstock, the brick manufacturer. Despite being a "well-managed" company with a "decent market position", it is an energy-intensive process to produce bricks.

Meanwhile, on the demand side, "its customers are mostly volume housebuilders, who are under enormous pressure from higher mortgage rates, rising build costs and lacklustre demand", he noted.

"Volumes are down and may drift down further, potentially exacerbating balance sheet concerns."

Technology and AI

Another key theme is the rise of technology, highlighted by the inclusion in the FTSE 100 of IT provider Computacenter. The firm specialises in helping customers source, transform, and manage their technology infrastructure by reselling both hardware and software. This includes data centre infrastructure, which has been in the headlines in recent months.

Goodman said the stock "stands out positively as one of a relatively small number of UK-listed technology businesses that has successfully expanded into the US market".

Service also highlighted the stock, noting it is one of the top positions in his Jupiter UK Mid Cap and the Jupiter UK Specialist Equity funds.

"The business is a classic mid-cap long-term compounder, with a stellar record since it listed 25 years ago. It is one of the world's leading resellers of IT to large corporations, with especially strong positions in the UK, Germany and North America," he said.

"It is well positioned for the AI capex boom, both directly selling to some of the US hyperscalers, and also the secondary demand that's coming from companies in non-tech sectors looking to upgrade their existing technology stacks to prepare for AI integration."

Investment trusts

Another benefiting from the rise in technology is Seraphim Space Investment Trust, which is to enter the FTSE 250 later this month. Kevin Glover, investment director on the diversified assets team at Aberdeen, said it reflects the stock's "extraordinary run" this year, in which the company has tripled its market capitalisation.

"[This] speaks both to underlying portfolio progress and a significant awakening in investor sentiment towards the space theme, driven in part by high profile events like the SpaceX IPO and Artemis II," he said.

This hasn't all been due to the share price, however, with Glover noting that the trust's £137m share raise was the largest in the investment trust sector for several years.

He said the rationale for investing was "less about short-term excitement and more about the market starting to take space tech seriously", although he noted that the speed of the rerating matters. With shares now trading at a "meaningful premium", current momentum will only be sustained by "disciplined capital deployment" and the "continued delivery from the underlying companies".

Cordiant Digital Infrastructure is also on its way into the FTSE 250 after its move to the main market, benefiting from the interest in digital infrastructure brought about by the rise of AI and the need for more data centres.

“The company has evolved over the past few years and has been steadily delivering on its ‘buy, build, grow’ strategy – building out a diversified portfolio of assets, supporting organic growth and adding bolt-ons where appropriate,” said Glover.

“That’s now translating into a more established track record, with consistent NAV [net asset value] progression and solid operational performance across the portfolio.”

Capital Gearing Trust is proposing a 10-for-1 share split while cutting its annual dividend by 35%.

The board has recommended a final dividend of 66p per share for the year ended 31 March 2026, down from 102p the previous year. At the same time, it is asking shareholders to approve a subdivision of the trust's ordinary shares, which would reduce the price from around £50 to approximately £5. Dealings in the new shares are expected to begin on 23 July 2026, subject to approval at the annual general meeting.

The share split is designed to lower the barrier to entry for smaller investors, monthly savers and dividend reinvestment programmes – groups the board says have been disadvantaged by a share price that has risen sharply since the trust's launch.

As for the dividend cut, the board pays out broadly what the trust earns in dividends and interest, and income fell in the year to March 2026. Of the 66p total, 43p is designated as an interest distribution and 23p as a dividend – a structure the trust uses to take advantage of UK interest streaming rules, which reduce its corporation tax liability when income comes from interest-bearing assets.

The trust delivered a net asset value (NAV) return of 5.8% over the year, against Consumer Price Index (CPI) inflation of 3.3% – a real return of 2.5 percentage points. The share price returned 6.4%. Over 10 years, the NAV total return stands at 68.6%, against CPI of 40.7% over the same period.

Performance of fund against index and sector over 1yr

Source: FE Analytics

The 12-month period ending in March opened with US tariff announcements and closed with the outbreak of war between the US, Israel and Iran. In the sell-off that followed the tariff shock, the MSCI World Index fell 18% from peak to trough; Capital Gearing's NAV fell 2%. When the Iran conflict began, global equities fell 7%; the trust’s NAV again fell around 2%.

The trust's resilience in both episodes reflects its large allocation to inflation-linked bonds, which stood at 46% of the portfolio at the year end, split between US Treasury Inflation-Protected Securities (25%) and inflation-linked gilts (21%). The managers sold all of the trust's gold in February at $5,105 per ounce, ahead of a 17% fall in the gold price following the start of the Middle East conflict.

Equities contributed 2.3 percentage points to the gross return, the largest single component. Among the trust's investment trust holdings, Blackrock Energy & Resource Income Trust returned 73%, Fidelity Emerging Markets 61% and Monks 32%. Finsbury Growth & Income Trust fell 16% and Mobius Investment Trust fell 12%. North Atlantic Smaller Companies, the largest equity holding, returned -4%; the board says it is engaging with the company on corporate governance.

The share split, if approved, will not affect the value of existing holdings. A shareholder with one share at 4,985p would hold ten shares at a theoretical 498.5p each immediately after the subdivision.

Ongoing charges rose marginally, from 0.56% to 0.59%, as buybacks shrank the asset base. The trust repurchased 2,272,529 shares during the year at a total cost of £111.2m – fewer than the 4,067,965 bought back the previous year for £194.5m. The average discount over the year was 2%, and the shares ended March at a 2.3% discount to NAV.

Investors piled into bond and multi-asset funds in May, which both enjoyed their strongest month in almost three years, according to data from Calastone.

Fixed-income portfolios took in £877m in net new money last month, the biggest monthly intake since June 2024 and the sixth-best month on record, as yields surged.

More defensively minded investors seemed to take the opportunity to switch out of money market funds as their defensive asset of choice. Around £669m was puled out of these cash-like funds last month.

Edward Glyn, head of global markets at Calastone said: “Bond markets bottomed out in the middle of the month as yields touched highs last seen before the global financial crisis.

“This offered an enticing opportunity to switch out of safe-haven money-market funds whose returns mirror central bank policy rates and to lock into those multi-year high yields for the longer term.”

Multi-asset funds meanwhile raked in £2.7bn of net inflows, the second-best month on record behind the record £3.3bn of inflows last month, which Calastone attributed to a rise in demand for diversification.

Among equity funds, there was a rare inflow into UK portfolios, which enjoyed net inflows for the first time since November 2024 after more than a year and a half of consistent selling.

They bucked a trend, however, with investors mainly choosing to remove money from equity funds last month. The biggest loser was the emerging markets, with a net £390m removed.

These were followed closely by Asia-specialist (£232m withdrawn) and European funds (£213m). Global portfolios were flat on the month while US equity funds were the biggest winners, taking in £238m in net new money.

“Equity flows reflect that same caution – modestly reducing risk by withdrawing capital and then being picky on where to place it. Investors continued to favour the US, while pulling back from emerging markets, Europe, and Asia,” said Glyn.

“The inflow to UK equity funds is encouraging and may indicate sentiment towards domestic assets is becoming less negative, but it was narrowly focused, therefore it’s too soon to call it a broader trend. Overall, May looked less like a return to risk and more like a carefully managed re-entry into markets.”

Outflows from UK property funds also slowed markedly in May to £15m, the lowest monthly level since June 2024, thanks in large part to a reduction in sell orders, rather than an uptick in new purchases.

Investors who bought an index-linked gilt fund five years ago hoping they would serve as an inflation hedge have been left disappointed. Over this time the average fund in the IA UK Index-Linked Gilt sector is down 36%, with the best performer losing 30.9%.

It could have been worse if investors bought at exactly the wrong time. If they did so at the end of 2021, by the end of 2025 they would have almost halved their money.

Yet some fixed-income specialists still back them as a viable instrument – provided that investors understand duration and buy the right part of the market.

Index-linked gilts (“linkers”) are UK government bonds where the income rises in line with inflation. Unlike conventional gilts, which pay a fixed coupon, linkers adjust both the coupon and the face value in line with the Retail Prices Index (RPI) (replaced by the Consumer Prices Index (CPI) from 2030, due to recent reforms).

That inflation-protection is a huge attraction in eras when prices rise, but the asset class is much more complicated than assuming these bonds will do well when inflation increases.

Take the iShares GBP Index Linked Gilts ETF – a widely held exchange-traded fund among retail investors – which has a duration of around 14 years. This means it is highly sensitive to changes in long-term real interest rates.

When real rates rose sharply in 2022 and 2023, the ETF fell by roughly half. Today, it has partially recovered but remains down about 35% in total-return terms, as the below chart shows.

Performance of fund against index and sector over 5yrs

Source: FE Analytics

Investors who therefore assumed they were buying protection against rising prices ended up, inadvertently, with a large bet on real rates falling.

As Trustnet reported earlier this year, gilts have been losing investors money for a number of years now, particularly these index-linked bonds. But has a reset in valuations now made them worth revisiting?

The case for

Real yields on index-linked gilts – the return investors receive above inflation – turned positive in 2022 for the first time in years.

Emma Moriarty, portfolio manager at CG Asset Management, says she remains firmly committed to linkers as a core portfolio holding. The Capital Gearing trust, which she works on, has its entire fixed-income allocation in index-linked bonds, with around 45% of the total portfolio in linkers, split roughly 20% in UK index-linked gilts and 25% in US treasury inflation-protected securities (TIPS), which are the American equivalent.

“If you look at our core index-linked markets – the US and UK – index-linked bonds have outperformed nominal government bonds since the turn of the century. The reason for this is that markets systematically underestimate realised inflation,” she said.

The 10-year index-linked gilt currently yields 1.62% in real terms, which Moriarty says looks attractive against the economy's long-run trend rate of growth.

Juliet Schooling Latter, research director at Chelsea Financial Services, agreed that the entry point is better now than it has been in years and so did Richard Carter, head of fixed interest research at Quilter Cheviot, who stressed that linkers offer “some protection against spikes in inflation”.

The case against

The rehabilitation of linkers as an asset class comes with important caveats, the biggest of which is duration.

Carter pointed out that the all-maturity index has a duration roughly double that of investment-grade corporate bonds.

“If bond markets keep selling off, be that due to UK domestic political problems or otherwise, then linkers could suffer further,” he said.

Moriarty agreed. While the 10-year gilt yields 1.62% in real terms, CG Asset Management has positioned its own portfolios shorter than the index due to concerns about the long end of the UK gilt curve.

Two factors are weighing on longer-dated gilts: continued supply pressure from debt-funded government spending and reduced demand from defined benefit (DB) pension schemes.

The latter were the largest structural buyers of long-duration linkers but have significantly wound down their activity following the liability-driven investment crisis of 2022, when the Truss government's mini-Budget triggered a gilt sell-off so severe that leveraged pension fund strategies faced margin calls overnight, prompting a Bank of England intervention and a subsequent industry-wide reduction in long-duration gilt exposure.

There is also the RPI-to-CPI switch to contend with. From 2030, the inflation index underpinning linkers will shift from RPI to CPI. Since RPI has historically run 0.5% to 0.8% above CPI, the inflation compensation going forward will be lower than in the past.

Carter noted the change is "well understood by market participants" and Moriarty said her modelling suggests the curve around 2030 reflects rational pricing. But for new buyers it reduces the expected compensation from holding longer-dated instruments.

Schooling Latter flagged a further complication in the middle of the curve.

“The 20-year area is arguably the most attractively valued part of the curve,” she said, “but this is a consideration for investors prepared to take on significant duration risk, rather than those simply seeking an inflation hedge.”

What investors should actually do

If retail investors want genuine inflation protection from linkers, shorter-dated instruments would be a more appropriate route.

Carter recommended one-to-10-year index-linked gilts for investors primarily seeking protection against inflation spikes rather than a long-duration rates view.

Moriarty made the same distinction, noting that the problem with broad ETFs like the iShares fund above is that investors buying them were making a long-duration bet they may not have understood, which is precisely why CG Asset Management launched the CG UK Index-Linked Bond fund with a duration of around five years.

Schooling Latter also pointed to the iShares Up to 10 Year Index-Linked Gilt fund as a more conservative option for retail investors, while noting that the iShares vehicle remains appropriate for those willing to take on duration risk at what is now a more favourable starting point.

For those wanting managed active exposure rather than a simple ETF, Schooling Latter highlighted the Capital Gearing trust.

Performance of fund against sector over 5yrs

Source: FE Analytics

Animal testing is a controversial topic and could be a line in the sand for some investors. This was evidenced by Hargreaves Lansdown’s sustainable investor survey at the end of 2025, which revealed half of its customers are uncomfortable investing in companies conducting animal testing.

However, there is a big distinction between animal testing for medical and non-medical purposes, said Dominic Rowles, lead ESG analyst at Hargreaves Lansdown. The former has led to the production of breakthroughs such as antibiotics, the polio vaccine and the Covid-19 vaccines.

Where investors could have more of a moral issue is when animals are being subjected to tests that are more frivolous, such as the beauty and cosmetics industry.

It is illegal to market or sell cosmetics in the European Union where the final product of any of its ingredients were tested on animals for cosmetic purposes. The UK kept similar rules after Brexit, although testing can occur in limited specialist circumstances.

But not everywhere has the same stringent laws, noted Rowles. In the US, for example, there is no such ban on cosmetic animal testing, although some states have outlawed it.

Meanwhile, in some countries such as China, certain products such as hair dyes or sunscreens can require animal testing before being sold.

This variation across the world means investors who wish to take a stand against animal testing must be selective. Below, Rowles outlines two UK funds that specifically invest with this in mind.

Aegon Ethical Equity

The first is Audrey Ryan’s Aegon Ethical Equity fund, which uses a strict exclusions-based approach and will not invest in companies involved in activities deemed unethical, such as tobacco and alcohol producers, munitions manufacturers and banks with significant exposure to third-world debt.

“Crucially, the fund also avoids companies that provide animal testing services, or that sell animal-tested cosmetics or pharmaceuticals,” said Rowles.

“[Ryan] aims to identify and understand the key environmental, social and governance (ESG) risks of each company, industry and sector she invests in. She believes companies that lead the way in governance and sustainability can outperform over the long run.”

This has not been the case in recent years, with Aegon Ethical Equity a bottom-quartile performer over one, three, five and 10 years.

Performance of fund vs sector and benchmark since start of data

Source: FE Analytics

The fund is just behind the FTSE All Share since July 1999 – the earliest available data on FE Analytics – although it was a long way ahead until recently, when oil and commodity stocks rallied following the outbreak of the US/Israel-Iran war.

As well as animal testing, the fund also applies several other animal-related exclusions, including companies involved in intensive farming, businesses that operate abattoirs or slaughterhouses and stocks that produce or sell meat, poultry, fish, dairy or slaughterhouse by-products.

Janus Henderson UK Responsible Income

For a fund with an income focus, Rowles highlighted Janus Henderson UK Responsible Income, which has been managed by Andrew Jones since January 2012.

Since he took charge, the fund has made 261%, the ninth-best return of 51 funds in the IA UK Equity Income sector during this time.

Performance of fund vs sector and benchmark since manager start

Source: FE Analytics

“His investment process starts with a screen that excludes companies involved in areas some investors consider unethical. He also excludes companies that aren’t compliant with the UN Global Compact [United Nations principles on human rights, labour, the environment and anti-corruption],” said Rowles.

The fund also does not invest in vitamin, cosmetics, soap or toiletries makers, unless their products and ingredients are not animal tested, but will invest in companies that use animal testing for medical purposes providing they can demonstrate best practice.

To do this, the manager has a set of guiding principles, called the ‘Three Rs’, Rowles noted: refine experiments to ensure suffering is minimised; reduce the number of animals used to a minimum; and replace animals with alternative techniques where possible.

A single person now needs a pension pot of £691,000 to achieve a comfortable lifestyle in retirement, while a couple requires £389,000 each, according to wealth manager and financial adviser Quilter.

This has been calculated against the latest Retirement Living Standards (RLS) report published by Pensions UK, which outlines the additional private pension income needed for minimum, moderate and comfortable lifestyles in retirement, based on real-world spending patterns. Its calculations assume receipt of the full state pension and no rent or mortgage costs.

According to the RLS thresholds, a minimum lifestyle now costs £13,900 a year for a single person and £22,500 for a couple. A moderate lifestyle requires £32,700 or £45,400, while a comfortable lifestyle has risen to £45,400 and £62,700 a year respectively.

With the full state pension now sitting at around £12,500 a year, this comes close to supporting costs at the minimum threshold for single people or couples of its own.

To determine the size of the pension pot required to generate an income level with each of these thresholds, Quilter based its calculations on a 6.1% escalating annuity rate for a 66-year-old – also assuming no housing costs in retirement.

For a single person, Quilter’s calculations yielded the following.

Source: Quilter

Quilter’s estimations for joint pot sizes are also shown in the table below.

Source: Quilter

Pensions UK expects 82% of the working population to reach the minimum standard of living in retirement, compared to 23% reaching a moderate standard and just 9% achieving a comfortable lifestyle.

Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “The latest update to the RLS underlines a clear reality for many people: today’s saving levels will not be enough for the retirement they expect.”

She warned that without action “too many risk facing a cliff-edge drop in income when they stop work”.

These thresholds do not match up with what pension savers expect, with the comfortable threshold for retirement practically double what people believe they need. According to interactive investor’s 2025 ‘Great British Retirement Survey’, pension savers said they believe they need to save an average of £350,000 for a comfortable retirement.

It is also important to note that the Quilter figures assume people are mortgage-free at the point of retirement – a reality that will become less common for future generations who are taking out larger mortgages with longer terms.

Jon Greer, head of retirement policy at Quilter, said: “Factoring in housing costs could push the required income higher still, making early planning and regular reviews even more important.”

Intensifying financial challenges also need to be accounted for when considering how the RLS applies to younger generations, in particular, with Gary Smith, retirement specialist at Evelyn Partners, warning that younger and middle-aged savers will need to further adjust their pension pot projections for inflation.

“If someone currently needs a post-tax income of £45,400 for a ‘comfortable’ lifestyle, they will need a lot more in 20 years’ time – if inflation averages 2.5% over the next two decades, that is roughly £74,800 by 2046,” Smith said.

There are also questions around the long-term sustainability of the state pension in its current form, he added.

“What is clear is that workers must think seriously about how much they are saving right now,” Smith said.

Recent research by AJ Bell shows the challenge for pension savers aiming for Quilter’s moderate lifestyle pension pot of £413,000 for a single person and £416,000 for a couple.

It said that a 30-year-old earning £37,000 today could build a pension pot of over £437,000 by age 67 by contributing 8% of their salary – assuming their employer also adds 3%.

However, this also assumes the individual already has £19,000 in pension savings, achieves a 5% annual investment growth before charges of 0.6% and receives a 3% pay rise each year.

For someone aged 40 with an existing pot of £39,500, they would need to contribute 11% of a £48,000 salary to get the same pot value.

For those aged 50, the task is even harder. AJ Bell assumed the saver would have an £80,000 existing pension pot, noting they would still need to contribute 18% of a £58,000 salary to reach Pension UK’s moderate living standard by state pension age.

Charlene Young, senior pensions and savings expert at AJ Bell, said: “These personal contribution figures rise to a whopping 16% (£493 per month), 22% (£880 per month) and 35% (£1,692 per month) of the respective salaries for our three age groups to get over £700,000 and into the pot range required for a comfortable living standard.

“Clearly the contribution from a worker could be lower if an employer paid in more than just 3%, but this also highlights that stark reality for self-employed people, who will not benefit from an employer top up.”

The AJ Bell research underscores how the current 8% auto-enrolment minimum is unlikely to be enough for future retirees – an issue that the re-established Pensions Commission is considering, with the body’s report expected next year.

Policy uncertainty is not helping matters, with pensions being dragged into inheritance tax from April 2027 and changes to salary sacrifice adding further complexity.

Craig Rickman, personal finance expert at interactive investor, said: “Moving the goalposts and chipping away at valuable tax incentives may disincentivise savers at a time when many need all the help, encouragement and support they can get.”

If I suggested we were investing in semiconductor companies, most people would immediately picture Nvidia. Quite understandably so. Over the past two years, the company has become almost synonymous with artificial intelligence, to the point where ‘AI exposure’ and ‘Nvidia’ are often treated by markets as near interchangeable concepts.

The reality, however, is that the semiconductor industry is vastly broader, more nuanced and, frankly, more interesting than that.

Whilst Nvidia has come to dominate headlines, the semiconductor ecosystem spans everything from hyperscale AI infrastructure and networking through to industrial automation, automotive systems, medical equipment and factory machinery.

Companies may all technically ‘make chips’, but the underlying economics, customer bases and long-term investment characteristics can look entirely different depending on which part of the market they operate in.

That’s part of the reason we’re comfortable holding exposure to businesses as different as Nvidia, Broadcom and Texas Instruments within portfolios at the same time.

Nvidia has, quite understandably, become the defining company of the current AI investment cycle. Its graphics processing units sit at the centre of many of today’s most advanced AI models and the company has become one of the clearest beneficiaries of the enormous capital expenditure currently flowing into data centres and computational infrastructure.

Broadcom occupies a slightly different but equally important role within that ecosystem, benefiting from both networking infrastructure and the growing demand for custom silicon as the largest technology companies increasingly seek to optimise their own AI capabilities.

These are businesses operating at the frontier of computational intensity and digital infrastructure. Their growth profiles have been exceptional, but so too has the level of market excitement surrounding them.

Texas Instruments, by contrast, represents a rather different side of the semiconductor world. The company specialises primarily in analogue and embedded semiconductors; the less glamorous but deeply essential components that help the physical economy continue functioning.

Its chips are used across industrial equipment, factory automation, automotive systems, power management, communications infrastructure and medical devices, often performing highly specific tasks over very long product lifecycles.

In many ways, Texas Instruments reflects the quieter reality of semiconductors. Whilst the market focus naturally gravitates toward artificial intelligence and cutting-edge computing power, much of the global economy still depends on relatively simple chips performing repetitive but mission-critical functions reliably and efficiently.

A factory production line, for example, has little interest in whether a semiconductor can generate poetry or create photorealistic images; it simply needs systems to continue operating safely and consistently.

One business is helping train large language models capable of answering existential philosophical questions at extraordinary speed. The other is making sure your car braking system, factory conveyor belt and air conditioning unit continue behaving themselves. Financially speaking, though, both can be extremely attractive businesses for very different reasons.

Although these companies all sit broadly within the semiconductor universe, they’re exposed to very different drivers. Nvidia and Broadcom are more closely linked to AI investment cycles, hyperscaler spending and the rapid expansion of computational demand.

Texas Instruments is more closely tied to industrial production, automotive content growth and the gradual digitisation of the physical economy. One benefits from explosive technological acceleration, the other from durability, breadth and long-cycle industrial demand.

We don’t necessarily view those exposures as competing with one another. If anything, they can be highly complementary within a long-term portfolio.

One of the persistent challenges during periods of technological excitement is that markets often compress nuance into a single narrative. Entirely different businesses can begin trading as shorthand for the same theme, despite having very different competitive positions, customer bases and risk profiles.

Investors saw similar behaviour during earlier phases of the internet buildout, cloud computing and electric vehicles. Artificial intelligence has merely accelerated the tendency.

In reality, technological revolutions rarely produce a single winner. They tend to create multiple layers of beneficiaries operating across different parts of the value chain, each with distinct characteristics.

For investors, that’s where portfolio construction becomes interesting. Long-term investing isn’t simply about identifying important themes, but about understanding where sustainable economics sit within those themes and how diversified sources of return can coexist alongside one another.

Eleanor Ingilby is head of high net worth at Atomos. The views expressed above should not be taken as investment advice.

Two dedicated ETFs have shown the greatest correlation to quality investing in recent years while a Fisher Investments strategy has done so with the highest total return, Trustnet research shows.

Quality investing focuses on companies with strong balance sheets, high returns on equity, stable earnings growth and low financial leverage. The idea is that businesses with these characteristics are more durable over time and tend to hold up better during periods of market stress than cheaper, more financially stretched companies.

The MSCI AC World Quality index returned 64.2% in sterling terms between May 2023 and April 2026, placing it between the growth index (69.7%) and the value index (47.8%) over the same period. Momentum investing led the investment factors with a 91.8% return. Quality and growth tracked momentum closely for much of this time, with their paths diverging only in the final months as momentum pulled well clear of both.

Performance of investment factors over 3yrs to end-Apr 2026

Source: FE Analytics. Total return in sterling between 1 May 2023 and 30 April 2026.

In this article, Trustnet ranked all funds in the IA Global sector by their three-year correlation to the MSCI AC World Quality index to identify those most closely aligned with the quality style.

The two funds with the highest correlation to the quality index are Xtrackers MSCI World Quality UCITS ETF and iShares Edge MSCI World Quality Factor UCITS ETF, both at 0.97.

Both are passive funds tracking the MSCI World Sector Neutral Quality index, which selects stocks based on three metrics: high return on equity, low leverage and low earnings variability. This methodology results in a portfolio concentrated in the US (a 73.4% weighting) and information technology (a 28.5% weighting).

This helps explain both the high quality correlation and the funds' second-quartile returns of 51% over the period, as US tech stocks have led the market over recent years on the back of the ongoing AI boom.

Source: Finxl. Correlation to MSCI ACWI Quality and total return in sterling between 1 May 2023 and 30 April 2026.

Of the funds in the above table, Fisher Investments' FI Institutional Global Equity Selection strategy has made the highest return. Managed by founder Ken Fisher and his team, the fund is currently underweight both the US and tech stocks.

Fisher Investments does not position itself as a quality manager, with its approach being primarily top-down and macro-driven. It analyses global economic conditions across countries, sectors and styles to determine what point it is in a market cycle and which areas of the market to favour.

However, in a 2024 paper, Fisher Investments set out in detail how quality fits into its process, using a proprietary quality Z-score built from return on equity, earnings variability and debt-to-equity ratio. This score ranks companies within the investable universe, with exposure adjusted according to the firm's view of the market cycle.

The firm also distinguishes its approach from standard index definitions of quality, which it criticises for relying solely on backward-looking data, and incorporates forward-looking analysis alongside historical metrics.

Performance of FI Institutional Global Equity Selection over 3yrs to end-Apr 2026

Source: FE Analytics. Total return in sterling between 1 May 2023 and 30 April 2026.

GMO Quality Investment is the most notable explicitly quality-oriented active fund in the table. Managed by Tom Hancock, Anthony Hene and Ty Cobb, it returned 53% over the three-year period, placing it in the second quartile of the IA Global sector.

Analysts at FE Investments said: "Since the team took over in 2015, selecting the right companies has been the main driver of returns, with sector choices also helping.

"Stock picking in technology and healthcare has been particularly strong since 2019, important given these are the fund's largest positions. A focus on steadier names has also helped the fund hold up better in downturns, including after the 2020 Covid sell-off and the tech pullback in August 2024."

The most common theme among the funds with the highest correlation to the quality index is broad market exposure: Vanguard FTSE All World, iShares MSCI ACWI, State Street SPDR MSCI All Country World, UBS MSCI ACWI Universal, L&G Global Equity and Vanguard Global Stock Index are all essentially cap-weighted global index trackers.

Their high quality correlation reflects the dominance of US technology mega-caps within market-cap-weighted indices. Companies such as Apple, Microsoft and Nvidia score strongly on quality metrics including return on equity, earnings stability and balance sheet strength, while their sheer size means they influence the style bias of any portfolio that holds the market in proportion.

A second major theme is ESG and ethical screening, which appears prominently in both the growth and quality correlation lists.

Vanguard ESG Global All Cap, Vanguard ESG Screened Developed World All Cap Equity Index, iShares MSCI World Screened, Xtrackers MSCI AC World Screened, Invesco MSCI World Universal Screened, LO Funds TargetNetZero Global Equity and JPM Carbon Transition Global Equity appear in the table, as does the Invesco's Dow Jones Islamic Global Developed Markets ETF.

The reason screened funds correlate with the quality index follows similar logic to their correlation with growth.

Standard ESG screens remove large portions of energy, materials, utilities and traditional financials. These tend to be lower-quality sectors on measures such as return on equity or earnings stability, so what remains is a portfolio tilted towards technology, healthcare and consumer staples, all of which score highly on quality metrics.

Shell, TotalEnergies and a little-known French LNG infrastructure business are among the stocks investment trust managers are backing as geopolitical disruption tightens energy markets and forces governments to rethink their approach to energy security.

Three months of disruption to oil and natural gas supplies in the Middle East have materially tightened energy markets, with liquefied natural gas (LNG) exports to Asia and oil products such as diesel and jet fuel among the most affected.

Mark Hume, co-manager of BlackRock Energy & Resources Income Trust, said: "Crucially, the Iran conflict has placed a focus on energy security and countries appear to be evaluating energy policy. Heightened geopolitical uncertainty is reinforcing the strategic importance of secure, resilient energy systems, supporting continued investment across upstream supply, infrastructure and reliability-focused energy assets.

"Capital discipline across the sector remains strong, balance sheets are robust, shareholder returns are attractive, and demand for oil, gas and electricity generation continues to grow. Taken together, we believe this represents one of the most compelling medium-term setups for the energy sector seen in over a decade."

The International Energy Agency recently raised its oil demand forecast and pushed out its expected date for peak demand, a development Thomas Moore, lead manager of Aberdeen Equity Income Trust, said is prompting a re-rating of companies across the sector.

Governments are also recalibrating taxes and incentives to encourage sufficient investment in production capacity, he added, creating a backdrop that favours those companies positioned to benefit from rising capital expenditure.

Sue Noffke, manager of Schroder Income Growth, noted that demand is being driven by urbanisation and electrification in developing economies and by AI infrastructure build-out in developed markets.

A further reason to hold energy stocks is portfolio diversification, said James Ashworth, manager of Brunner Investment Trust.

"Geopolitical shocks, including those seen in the past few years, often result in the price of oil rising while the wider stock market falls," he said, adding that the high cashflow yields available in the oil sector stand out at a time when much of the market offers relatively low dividend and cashflow returns.

Below, investment trust managers give some of their favourite energy stocks amid this backdrop.

Shell

Anthony Lynch, manager of JPMorgan Claverhouse Investment Trust, named Shell as his preferred holding within the energy sector. His focus is on companies that combine disciplined investment with consistent shareholder returns, and he said Shell fits that profile more clearly than its peers.

"We believe Shell remains particularly well positioned due to its disciplined approach to capital allocation, including improving operational efficiency, reducing costs and divesting underperforming assets," Lynch said.

"This has supported stronger shareholder returns through both a growing dividend, which increased by 9% year-on-year in the first quarter, and a countercyclical approach to share buybacks."

Lynch also highlighted Shell's position as a global leader in LNG production as a structural advantage. He described LNG as "an important transition fuel, given its lower carbon intensity relative to other hydrocarbons" and said this should support the durability of Shell's returns over the longer term as the energy system gradually shifts.

TotalEnergies

Rebecca Maclean, co-manager of Dunedin Income Growth Investment Trust, holds TotalEnergies as a play on the energy transition rather than exposure to traditional oil. Every company in the Dunedin portfolio is assessed on its sustainability credentials, with the manager looking for "evidence of real progress rather than just stated intentions".

"TotalEnergies is held as an energy transition company," Maclean said. "We believe its balanced approach across oil, gas, electricity and renewables, combined with disciplined capital allocation, should position it well for a changing energy landscape."

Gaztransport & Technigaz

Maclean also named Gaztransport & Technigaz, known as GTT, as a holding that offers a different route into the LNG theme. The French company's patented membrane technologies are installed in approximately three-quarters of the world's operating LNG carrier fleet, providing it with a dominant market position, high barriers to entry and long-dated order book visibility.

"Geopolitical events in the Strait of Hormuz have, if anything, reinforced the strategic importance of diversified LNG supply and the infrastructure that underpins it," Maclean said. "GTT operates a capital-light model, meaning it earns royalties on its technology rather than owning physical assets, which, combined with a net cash balance sheet, has historically supported attractive returns to shareholders."

Maclean also outlined three time horizons that investors should monitor when watching for risks in the oil and gas sector.

In the near term, the energy sector remains highly sensitive to geopolitical developments, particularly around the Strait of Hormuz, which can cause fast and unpredictable moves in energy prices.

Over the medium term, the pace at which inventories and stockpiles can be rebuilt once production normalises will matter, alongside any lasting impact on trade routes and infrastructure.

For the longer term, she identified capital allocation discipline – specifically if companies have developed a clear and disciplined strategy for delivering growth and returns while managing resilience and transition within the energy system – as the central risk to watch.

Entrepreneurs are generally “eccentric” and “don’t care what other people think of them”, according to Andrew Hollingworth, manager of the VT Holland Advisors Equity fund, which can rub some fund managers up the wrong way.

As a result, many of his peers shy away from investing in entrepreneur-backed companies, as they are run by “difficult people” who can be “volatile”.

He highlighted Michael O'Leary, chief executive of Irish budget airline Ryanair, as an example of someone who swears a lot – something that is uncommon in the professional corporate world.

“The chemistry between investors and entrepreneurs isn't good,” said Hollingworth.

There are several reasons for this. Firstly, getting access to these owner-managers can be a challenge. Hollingworth suggested that fewer than 5% of companies are run by their founders and the few entrepreneurs who are still in control of the companies they have built are typically much more difficult to get hold of than appointed CEOs.

“Those people don't do much investor relations,” he said.

Once in the room, there is a litany of differences between regular CEOs and entrepreneurs. One is that most chief executives tend to be more cautious with their investors as they have career longevity and (in some cases) remuneration packages to consider.

“Around 98% of investor meetings are not with an owner-manager. They're with the chief executive of a telecom company or a utility or an employment agency, who has an incentive share option scheme,” said Hollingworth.

“When you ask questions, they say: ‘That's a really interesting question, thank you so much for asking that.’ The subtext being: you own me, you're the owner and I'm the manager, and I'd really like to make sure you approve my share option scheme at the end of next year.”

This is very different with the likes of O’Leary or with Lord Wolfson at Next, Hollingworth said, who own large parts of their companies and so “don't care what you think of them”.

It can be particularly difficult in meetings if investors ask “questions that show they don't really understand the company”, as these individuals tend to have little time for poorly prepared investors.

“Woe betide if you sit in front of them and show them you haven't researched their company,” he said.

Entrepreneurs are not all that common. While the likes of Elon Musk (Tesla and SpaceX), Mark Zuckerberg (Meta) or Jack Dorsey (Square, formerly CEO of Twitter) are well-known, they represent a very small number of companies.

Most businesses are run by chief executives who have come up through the business or who have a foundation in the corporate world, with Hollingworth suggesting the number of companies in the market still run by these owner-managers standing at around 5%.

As a result, these companies are underrepresented in most portfolios.

“When it comes to an investment portfolio, someone might have two or three entrepreneurs in a portfolio of 80 stocks,” he said.

This is despite most people agreeing that businesses managed by entrepreneurs are more likely to outperform than if headed by run-of-the-mill chief executives.

“If I said to you, there are five people in your village that run companies – one is a good entrepreneur and the other four have just all been brought into the business from a local institution – you'd all assume that the entrepreneur would run the best business,” he said.

Hollingworth tries to take the opposite approach, with around 95% of the stocks in his portfolio run by entrepreneurs. “We go seeking that out,” he said.

“That's what we go looking for, because we know that there is gold with those companies.”

It is one of three key tenets to the VT Holland Advisors fund. The others are to find the companies with the best business models and buy at opportunistic prices.

“I'm a massive admirer of Warren Buffett and all the great investors that have gone before and I think what I've learned from all those people over a 25-year study is that there are only three or four ways to really compound at better rates,” he said.

Global equities have provided access to long-term economic growth, technological innovation and productivity gains whilst offering a natural hedge against inflation over time.

Over the past 20 years, global equities have returned 6.1% per annum on a nominal basis, significantly outperforming global bonds, US treasuries and cash. When adjusted for inflation, the relative advantage of equities becomes even more pronounced.

We believe the question for investors is not whether to allocate to global equities but how best to construct the exposure to meet individual objectives and risk tolerance.

Source: Allspring

Active versus passive: The perennial debate

Whilst there are strong views on both sides of this well-worn debate, the sensible conclusion for investors is an ‘and’ rather than an ‘or’. An efficient and effective global equity portfolio can be constructed by blending low-cost market exposure (beta) with skilled active management (alpha).

For example, blending an actively managed global equity strategy with a passive exchange-traded fund allows investors to seek added return without abandoning the benefits of low-cost market exposure.

Depending on their risk appetite, return objectives and fee budget, allocations can be scaled to help to meet the desired outcomes.

Over the past decade, passive investments have garnered hundreds of billions of dollars from investors seeking low-cost, broad market exposure. Considering the prolonged period of disappointing returns from active managers, driven by exceptionally loose monetary policy, abundant liquidity and periods when fundamentals appeared disconnected from market prices, it is unsurprising that passive investing has grown to its current scale.

However, these substantial flows into passive strategies have also resulted in historically high levels of concentration in the largest stocks within major indices. The risk is that, should flows reverse, selling pressure may also become concentrated, potentially exacerbating market drawdowns.

We see investors increasingly exploring alternative ways to build their core portfolio exposures. Whilst concentration remains a risk, markets have started to show signs of improving breadth and a renewed focus on company fundamentals.

This may indicate a more normal market environment in which active management can once again show its true value – delivering alpha.

Excess return, or alpha, is powerful over the long term and is especially valuable when overall market returns are expected to be lower. The following graph compares a portfolio of $100,000 invested in the MSCI All Country World Index (ACWI) over the past 20 years with three hypothetical investment strategies that generated 1%, 2% or 3% of excess returns annually.

This straightforward example provides a clear reminder of the powerful impact that even modest levels of alpha can have on long-term capital growth.

Source: Allspring

Systematically capturing alpha

Investors seeking to generate alpha choose among fundamentally driven and systematic investment approaches. Systematic investing harnesses large datasets – with advanced technology and investment innovation combined with experienced human oversight – aiming to build disciplined and repeatable portfolios.

A key advantage of systematic investing is the ability to assess every company within an investment universe against a variety of metrics on a daily basis, from traditional measures such as profitability, valuation and return on equity to other factors such as sentiment, revisions and momentum.

Companies can also be efficiently assessed through multiple lenses, by traditional categories such as geography and sector as well as the stage of their life cycle and overall business maturity.

Why is this important? Research shows long-term equity wealth creation has been driven by a relatively small number of stocks – many listed companies failed to outperform the market.

The chart below shows 68% of stocks in the S&P 500 Index underperformed the index return in 2025. Index performance can mask significant dispersion at the stock level, whereas systematic strategies can assess the entire market, aiming to identify long-term winners whilst avoiding persistent underperformers.

Whilst systematic investing is grounded in fundamental principles, incorporating a final stage of human validation helps address the challenge that no model can pick up every material data point all of the time.

For example, a purely systematic process may guide you towards a company whose CEO just resigned or to a company that’s experienced a stock-specific event that could materially impact future performance.

We believe this combination of scale, advanced technology and experienced judgement allows systematic investing to stand out as a robust approach to capturing sustainable alpha.

Source: Allspring

Sophie Scott is a systematic core equity specialist on the Allspring Global Equity Enhanced Income fund. The views expressed above should not be taken as investment advice.

Schroders accounts for three 'ultimate' UK equity income funds over the past five years, including the sector's top performer, a Trustnet study has shown.

To gain the 'ultimate' status, funds in the IA UK Equity Income sector needed to pass three criteria. First, they must have produced a top-quartile return over the past five years to the end of 2025.

Second, they must have paid an above-average income over this time. To determine this, we only looked at the average of all funds with a full five-year dividend history. This came to £2,699.65.

Lastly, the funds must have grown their income paid out each year from 2020 to 2025. We ran all of the above figures based on an initial £10,000 invested at the start of 2020.

The result is 11 funds that can claim to be among the 'ultimate' UK equity income portfolios. Three come from Schroders, with Schroder Income boasting the largest total return over the period after growing the initial £10,000 to £21,127.08.

Source: FE Analytics

Managed by Andrew Lyddon and Tom Grady, this £1.2bn fund employs the same strategy as the global value team headed by Simon Adler. The managers screen for cheap companies, only able to select stocks from the most discounted part of the market.

Analysts at FundCalibre have given the fund an 'Elite' rating, noting that its strict valuation focus is "unusual in an income fund, which allows Schroder Income to differentiate itself from others in the sector".

"The process, which has been in place for a substantial number of years, can lead to shorter periods of underperformance, but the core discipline of buying cheap stocks has generated good long-term outperformance and a good income," they said.

Formerly managed by Nick Kirrage and Kevin Murphy, with Lyddon and Grady taking charge last year, the fund was removed from some best-buy lists but remains highly regarded among others, such as FundCalibre.

It is also recommended by analysts at RSMR, who said the team is "well resourced" and has "significant collective experience investing in the value style". At times returns can differ widely from the benchmark, but for patient investors, the fund offers the potential to significantly outperform over longer periods. The fund would make a good choice for income-seeking investors where long-term total return is also an important consideration, RSMR said.

They agreed that there will be times when the fund is out of favour, noting that they would use the fund as a diversifier in a wider portfolio.

RSMR analysts also recommended the second-placed fund: UBS UK Equity Income. This £418m fund is managed by Chloe Hickey-Jones and Jessica Kaur, who run a value-orientated strategy.

"The fund can be used as a core holding and is a good candidate to be blended with either an index, growth or quality orientated fund," RSMR analysts said.

"Using the fund in conjunction with others should offer a good balance to a UK allocation, with value-orientated market regimes providing ideal conditions for this fund to perform strongly."

Several other funds on the list caught the attention of different experts. Analysts at AJ Bell are hot on the £2.3bn Man Income fund, headed by FE fundinfo Alpha Managers Henry Dixon and Jack Barrat.

They said: "This UK equity fund's disciplined valuation investment approach, which the lead fund manager [Dixon] has developed over many years, is a real benefit here.

"Additionally, his analytical mindset provides a level of pragmatism that allows the fund to navigate through a variety of market conditions."

However, they noted that by investing across the market capitalisation spectrum and being completely benchmark agnostic, the fund can be more volatile than some of its peers.

One spot ahead of it on the list, Jupiter UK Income is run by Adrian Gosden and Chris Morrison, who took over the fund from Ben Whitmore in 2024, moving over from GAM to do so.

The duo were also previous involved in the hugely popular Artemis Income fund for many years. While the £1.6bn  Jupiter UK Income fund suffered outflows after Whitmore's departure, its assets under management have risen steadily over the past year.

It remains on the recommended list of analysts at Titan Square Mile, who liked the managers' focus on "free cashflow generation, the sustainability of this and how this drives the ability of companies to pay sustainable and growing dividends through time".

The managers will take exposure further down the market capitalisation spectrum where they see opportunities, although at least 70% of the portfolio's assets will be invested in FTSE 100 listed names at all times.

"We view this as a solid option for investors seeking exposure to a relatively high conviction portfolio of income-generating stocks, and which is managed by a highly capable investment duo," Titan Square Mile said.

Lastly, at the foot of the table, FTF ClearBridge UK Equity Income is a favourite of analysts at Fidelity Personal Wealth, who have included it in the firm's Select 50.

Alpha Manager Ben Russon, alongside co-managers Will Bradwell and Joanne Rands, are based in Leeds and "seasoned UK managers" who have "strong experience finding companies that can pay sustainable and growing dividends".

"This fund can be helpful for clients seeking dividend income from companies primarily listed in the UK. Like any equity fund, it is higher risk and may be subject to fairly substantial but hopefully transitory drawdowns. Investors will need a long-term view of 10 years or more," Fidelity Personal Wealth said.

Previously in this series we have looked at the top-paying UK income funds over the past five years. We also looked at their IA Global Equity Income equivalents, and also determined the ultimate global equity income peers.