Semiconductors have been the latest beneficiaries of the AI trade as TSMC in Taiwan and SK Hynix in Korea have rocketed higher in 2026.

For Stonehage Fleming Global Best Ideas Equity fund manager Carolyn Bell and her deputy Prandhana Naidu, this has been one of the biggest detractors to performance.

Indeed, the £1.3bn portfolio has been a bottom-quartile performer in the IA Global peer group over the past six months. Bell took charge in April 2026, although she has worked on the fund since 2024.

Performance of fund vs sector and benchmark YTD

Source: FE Analytics

“Could everybody start looking at something that doesn't make semiconductors, because that's all anyone's been looking at. Reassess what you're getting the opportunity to buy now,” she said.

“We're in a cycle. The semiconductor industry will certainly be bigger than it was, but we don't think the rate of growth in the semiconductor industry can continue into perpetuity. At some point, the infrastructure build-out will be past its peak.”

There has been a shortage of memory chips, which has allowed certain companies that Stonehage Fleming Global Best Ideas Equity does not invest in to outperform. But this won’t last forever, warned Bell.

Currently, these stocks have pricing power as there is not enough supply to meet the rapidly increasing demand, but investors need to be careful when investing in a near-to-medium-term shortage.

“We may be better off investing in businesses that will benefit over the long term from a much bigger semiconductor industry and that aren't moving so much on pricing, which is a bit unpredictable,” she said.

“That's why the equipment names are better long-term holdings for us. I think they're higher-quality names and actually more durable.”

That is not to say the fund does not own companies involved in the AI trade. Below, Bell and Naidu explain how ASML has been the fund’s top holding over the past year, why it doesn’t invest in energy or property and why the managers can’t believe Mastercard is so cheap.

What is your process?

CB: It's very much a quality-growth fund. We have four pillars that keep us on track. One of which is organic growth: we're looking for sustainable competitive advantage in every stock.

Then strong management, evidenced through historic capital allocation, efficiency (strong margins) and a strong balance sheet with lots of free cashflow generation.

Is there anything you don’t invest in?

CB: We don't target any sector allocation but we don't usually find opportunities in real estate because it's so driven by interest rates, and we don't usually find opportunities in energy, because it's so driven by the oil price, which isn't something any individual company can control.

We're trying to harness businesses that can, as much as possible, control their earnings growth. They are quite rare.

Why has Stonehage Fleming Global Best Ideas Equity struggled in recent years?

CB:  The issue has been the style rotation. We're not anomalous in our underperformance in the past couple of years versus our peers in quality-growth.

We don't stray into growth or value just because those areas are working; we're not momentum led. It's really important that investors have a diversified portfolio and that their quality-growth managers are genuinely quality-growth.

What have been your best and worst performers over the past year?

PN: Our best performer in absolute terms was ASML, the semiconductor equipment company, which was up 149% in the 12 months to the end of June. ASML’s performance really accelerated in the past six months as AI capex commitments from hyperscalers and memory companies underpinned the growing demand for AI chip production. Alphabet has been another very strong performer for us, up 99%.

Our worst performer has been Netflix (down 46% to end June). It has been weak on the failed Warner Bros Discovery bid, co-founder Reed Hastings stepping down from the board and questions on engagement levels impacting sentiment. Content slate, content costs and engagement levels are important metrics we are tracking closely.

Is there a company you believe is mispriced?

CB: I shout about Mastercard because it looks so cheap to me for the strength of the business and the earnings power it has. It actually sold off on the Iran war, because cross-border revenues matter to it, so travel matters.

It's just super cheap to me. It is genuinely cash-generative, has a right to win and is basically in a duopoly. It's been a superlative performer over the period since it came to market and right now it is in the portfolio on 23x forward earnings. You hardly ever get the opportunity to buy it at that level.

What do you do outside of fund management?

CB: My passion is the Renaissance. I've got my degree in English, and then a master's in early modern studies. I started a PhD in Shakespeare, which I abandoned to go into fund management – I still feel a bit guilty about that. Also, I've got two kids – I love them too, I probably should have started with them.

PN: I'm quite a foodie. I've got one child, a daughter, and she's into it too. She’s got a very exquisite palate. So we at least attempt, on the weekends, to do something culturally different. We combine that with travel.

Three quality-growth managers have just placed different bets on which companies will win, each coming up with differing answers to the question of whether momentum can be fought or must be joined. But a brutal fortnight for the momentum factor shows why none of them can yet claim to be right.

This week, Bank of America's latest Global Fund Manager Survey found 82% of investors see 'long global semiconductors' as the market's most crowded trade, the highest reading the survey has ever recorded for any single position, as momentum money piled into the same handful of AI-linked names.

It also revealed that 45% of professional investors see AI as being in a bubble, the highest reading yet for that fear. But 61% don't expect AI hyperscalers to cut capex this year and cash levels have fallen to 3.6%, the lowest in years.

So it looks like fund managers are both worried about the AI trade and fully invested in it at the same time. That same contradiction has also played out across three well-known global equity funds.

Within the past fortnight, Fundsmith's Terry Smith, Rathbones' James Thomson and Lindsell Train's James Bullock have each given their answer to the question on what to do when momentum is setting share prices.

Smith eased Fundsmith Equity's longstanding 'do nothing' rule and said he would take more account of momentum when making investment decisions. He raised turnover to a high of 51.8% in the first half of 2026 and bought into the AI ecosystem, including a fresh stake in TSMC, the world's largest contract chipmaker.

As well as information technology, Smith bought industrials, financials, healthcare, consumer discretionary and communication services companies.

Thomson kept his Rathbone Global Opportunities fund's AI winners, Nvidia, Arm and CrowdStrike among them, but built a defensive flank: HALO (hard assets, low obsolescence) stocks like Caterpillar, Sandvik and Howmet, plus staples such as L'Oréal. His bet is that market leadership broadens out rather than reverses.

Bullock went the opposite way, adding to Lindsell Train Global Equity's stake in Intuit, a stock Smith and Thomson had both just sold, and other beaten-down software and data companies. His argument is that the 'AI loser' sell-off is a momentum story feeding on itself, not a verdict on the businesses involved.

It's only fair to point out that all three of these funds have strong long-term track records but have struggled more recently and are in the IA Global sector's bottom decile over the past year.

Momentum investing has dominated markets in 2026, with the MSCI AC World Momentum index gaining more than 40% in sterling over the first half. The quality, value and growth indices were all up around 12-13%.

But since 1 July, the momentum index is down 12.5%. The global value index is broadly flat, while quality has fallen 1.3% and growth has slipped 3%.

Performance of investment styles in 2026

Source: FE Analytics. Total return in sterling between 1 Jan and 16 Jul 2026

Of course, the momentum index is a quantitative factor built from stocks with the strongest recent price gains, not a direct stand-in for AI stocks. But there is some overlap – eight of the index's largest constituents are in the information technology sector, including Micron Technology, SK Hynix and TSMC.

Two weeks is a very short period in investment and won't settle who's right. All three managers are running portfolios built for years, not days. But for investors there are some questions worth asking.

Smith's move is the clearest to categorise. After years of 'do nothing', he's essentially decided that if you can't beat momentum, you join it, buying TSMC, a name sitting right at the centre of the world's most crowded trade.

Fairview Investing's Ben Yearsley asked, after 16 years running the fund one way, why the change now? If the answer is 'to catch the AI trade', has Smith arrived just as that trade starts to wobble?

Bullock sits at the other end. His addition to Intuit is a value argument: he's betting the stock's price and its underlying business will eventually reconnect, backed by unique datasets and switching costs he thinks the market is mispricing. It's a call that momentum has overshot and that overshoots correct, given enough patience.

Thomson isn't chasing the crowded AI/semiconductors trade; he's stepped out of it, into HALO names and defensives. But several of those names, particularly ones tied to data centre buildout and grid infrastructure, still sit close to the AI story he's supposedly diversifying away from.

So Thomson may be doing something genuinely different: stepping out of an overheated trade into a more attractive one. Or he may just be swapping one momentum bet for another. It's hard to tell which from where we stand now.

Momentum-driven markets rarely correct gently. The same flows that push prices up tend to reverse in the same way and the recent crack in the momentum trade should serve as a reminder that, ultimately, investments can never go up in a straight line forever.

Three managers have now shown their hand: Smith has bet that joining the crowd pays off from here, Bullock has bet that the crowd has already overreacted and Thomson has bet that leadership broadens without needing to call the top or bottom of anything.

The next few months, particularly how the momentum factor behaves from here, might start to show which wager is closest to right.

Gary Jackson is head of editorial at FE fundinfo. The views expressed above should not be taken as investment advice.

Multi-asset funds run by BNY Mellon, Fidelity and TrinityBridge are all returning to form after an off-decade, research from Trustnet suggests.

This year has been an interesting time to invest in multi-asset. The AI trade has moved on from US hyperscalers, known as the 'Magnificent Seven', to semiconductor stocks in the emerging markets (namely Taiwan and Korea).

Despite this, global developed market equities have performed quite well, up 11.2%, as other parts of the world (led largely by the likes of Europe, the UK and especially Japan) have gained ground.

Japanese equities have made the highest returns in sterling (37%), with emerging markets in second place, up 23.3%.

But the best asset to own in 2026 has been oil. The war between the US and Iran caused oil prices to spike when the Strait of Hormuz was closed, limiting the transport of the black stuff through the narrow waterway.

A barrel of Brent crude is up 46.9% year-to-date, although this was higher earlier in the year when the war was at its peak.

Bonds haven't made investors much money so far this year. While yields are high, the war has kept inflation high, which has limited the prospect of interest rate cuts around the world.

It could be argued fixed income is the best defensive asset class, as gold (often a good option at times of crisis) has fallen 6%. Prices coming into the year looked high as the precious metal had been on a strong run.

Additionally, the prospect of higher rates for longer increases the opportunity cost of the yellow metal, as it does not provide investors with a yield.

All of this still does not touch upon other areas that multi-asset funds can invest in, from property to infrastructure and private equity, which has gone completely off the boil in 2026.

The range of different returns and outcomes in the first half of the year has allowed some unfamiliar names to climb towards the top of the rankings.

Source: FE Analytics

For example, TrinityBridge Balanced Portfolio has made 12% so far this year, the 10th-best return in the IA Mixed Investment 40-85% Shares sector. This follows a decade-long run of disappointment, in which the fund has made a bottom-quartile return of 78.1%.

The £1bn fund has been managed by Giles Parkinson since 2021 with Henry Frewer and Richard Stroud joining him in 2022.

Despite its weaker long-term returns, the fund is part of a range that is rated by analysts at RSMR, who said a key draw was the "interaction between the various parts of the business", such as committees, research team, asset class specialists and fund managers.

"In saying that, each manager is responsible for all decisions made within their funds, so how they interpret the tactical asset allocation vote and weight the individual securities from the core universe in their portfolios is key to performance," the analysts noted.

Using direct investments rather than third-party funds is also a differentiator from the majority of other fund ranges, they added.

It was one of five funds from the IA Mixed Investment 40-85% Shares sector to make the above list alongside 8AM Balanced, EPIC Multi Asset Growth, McInroy & Wood Income and Discovery Balanced.

8AM Focussed was the only fund from the IA Flexible Investment sector struggling over 10 years but turning things around in 2026. Meanwhile, 8AM Cautious was the third offering in the table above from the firm.

All three are managed by Tom McGrath, although Andy Merricks is co-manager of the Focussed fund. Between them, the funds have a combined £12.5m in assets under management.

The only other fund group with multiple entrants is Fidelity, with Becky Qin's Fidelity Multi Asset Income and Fidelity Multi Asset Balanced Income funds both on the list. They reside in the IA Mixed Investment 20-60% Shares sector.

The former aims for a long-term income target of between 4% and 6%, while the latter is slightly lower (3-5%), but also charges half the cost.

The funds are rated by analysts at RSMR, who said they "combine flexible asset allocation with investment selection, splitting the potential investments into four underlying categories". These are: core yield, growing yield, alternative yield and flexible assets.

Allocations vary depending on the fund's risk profile and the team's views on the asset classes, but they are managed by the same team, using the same investment process, asset allocations and asset selection.

"The core of each portfolio is invested in funds, but they also have stocks in their equity and bond components making them hybrid portfolios rather than purely fund of funds," RSMR analysts said, adding that it is a "high-quality managed solution for income investors across different risk profiles".

After years of playing second fiddle to the US, regions like Japan, Asia Pacific and emerging markets roared back into favour in 2025, as investors sought to diversify their portfolios. Momentum has so far continued into 2026, particularly in markets benefiting from the AI build-out.

But not all funds have equally benefited from the new wave of interest. In fact there were numerous funds that saw outflows – perhaps as people trimmed their winners.

To find out which funds have attracted or lost the most money, we used FE Analytics data across IA Global Emerging Markets, IA Asia Pacific Excluding Japan and IA Japan to highlight those that recorded more than £200m in inflows or more than £200m in outflows over the first six months of the year.

IA Global Emerging Markets

The two funds that have attracted over £200m in inflows over the first half of the year have possibly drawn people in thanks to their exposure to South Korea and Taiwan – two high-flying regions that house companies integral to the AI value chain.

Source: FE Analytics

In particular, Ninety One Emerging Markets Equity was the standout beneficiary of inflows, with the strategy attracting just shy of £660m in net new money and a further £155m from performance. As such, assets under management (AUM) surged from £26m to £841m by the end of June 2026. Much of this increase occurred within a very sudden timeframe, which usually suggests a large investment by an institutional investor or a merging of share classes.

The fund, co-managed by Archie Hart and Varun Laijawalla, carries an FE fundinfo five-Crown Rating and sits on the more expensive end, with an ongoing charges figure (OCF) of 1.18%.

The 87-stock portfolio has leaned into the AI-driven resurgence in Asian technology, with South Korea’s Samsung and SK Hynix accounting for 10.4% and 9.8% of the portfolio respectively. Taiwan’s TSMC is a 9.6% portfolio position.

RSMR analysts said this is a well-established investment philosophy, noting that “its emphasis on behavioural inefficiencies and improving fundamentals is logical in markets like emerging economies”.

Invesco Emerging Markets ex China (UK) also attracted meaningful inflows, pulling in £292m and gaining £173m from performance, bringing total assets to £759m.

Co-managed by FE fundinfo Alpha Manager Charles Bond and James McDermottroe, the fund invests at least 80% of assets in emerging markets outside of China and maintains a 55-stock portfolio.

Like Ninety One Emerging Markets Equity, its top 10 holdings include Samsung and TSMC.

Part of the Invesco strategy’s appeal is also price, as it is one of the cheapest actively managed funds in the sector, with an OCF of 0.75%.

In addition, it proved resilient during downturns, logging top-decile downside capture ratios against the MSCI Emerging Markets index.

Performance of the fund vs sector over 5yrs

Source: FE Analytics

In contrast, Royal London Emerging Markets Equity Tilt had the largest withdrawals in the sector, with investors removing £450m. Despite this, strong performance added £1.8bn, lifting total AUM to £8.5bn.

Co-managed JoJo Chen and Michael Sprot, the fund aims to match the MSCI Emerging Markets ex China A GBP Net 10/40 index over rolling three-year periods while maintaining a carbon footprint at least 10% below the benchmark, although the financial objective takes priority.

Other funds that recorded outflows included JPM Emerging Markets Income and Scottish Widows Emerging Markets, which lost £363.9m and £323.7m respectively.

IA Asia Pacific Excluding Japan

Turning to the IA Asia Pacific Excluding Japan sector, only one strategy attracting more than £200m in net new money.

Source: FE Analytics

Baillie Gifford Pacific was the clear winner, pulling in £506m from investors and gaining £1.4bn from performance. Assets rose from £2.8bn at the start of the year to £4.6bn by the end of June.

The strategy is positioned as a long-term growth strategy with a strong preference for companies capable of compounding earnings. Managed by Roderick Snell and Ben Durrant, it is both index- and sector-agnostic.

However, technology remains a dominant theme, with half of the fund’s assets invested in the sector. Alongside the familiar AI-linked holdings, the fund also has a 2.2% position in CATL, the Chinese battery manufacturer specialising in lithium-ion systems for electric vehicles and energy storage.

Earlier this year, Darius McDermott, managing director at Chelsea Financial Services, said he would pick Baillie Gifford Pacific in the event of a sell-off in Asia, noting that it tends to benefit significantly once markets recover and investors refocus on structural performance.

Performance of the fund vs sector over 5yrs

Source: FE Analytics

In contrast, Stewart Investors Asia Pacific Leaders recorded the largest outflows in the sector by a wide margin, losing £1.2bn over the six-month period. Although performance added back £720m, total assets still fell by around £700m.

Managed by Alpha Manager Martain Lau and supported by George Pickard and Rizi Mohanty, the fund invests in large- and mid-cap companies across the region and applies a sustainability-focused philosophy.

Invesco Asian (UK), which is co-managed by Bond (also in charge of the Invesco Emerging Markets ex China mentioned above), William Lam and Marc Ye, logged withdrawals amounting to £542m, although performance added back £416m.

The fund is benchmark-unconstrained and includes Australia within its remit, focusing on companies the managers believe are trading at a discount to fair value while expected to generate 10% or more in annual shareholder returns while awaiting a re-rating.

RSMR analysts said: “Strong momentum in a small number of names would see the fund lag but this would present opportunities to invest in names which meet the investment criteria of the fund.

“The managers are disciplined in adhering to the process and actively seek out contrarian positions.”

Despite short-term outflows and underperformance, Invesco Asian (UK) has a strong long-term track record, gaining 246.6% over the decade to June 2026.

Performance of the fund vs sector over 5yrs

Source: FE Analytics

IA Japan

Finally, the IA Japan sector logged limited movement at the top end of fund flows, with no strategy attracting more than £200m, while two funds lost above £200m: iShares Japan Equity Index (UK) and L&G Japan Index Trust.

Source: FE Analytics

iShares Japan Equity Index (UK), which is managed by Dharma Laloobhau, logged £657.5m in outflows. The fund tracks the FTSE Japan index, investing in equity securities of leading Japanese companies.

Meanwhile, L&G Japan Index Trust had £208m of outflows. Managed by Konstantins Golonovs and supported by Hailey Choi, the fund also tracks the FTSE Japan index on a net total return basis before fees and expenses.

The near-term macroeconomic outlook is still positive for the dollar but the medium-term picture is less positive if foreign appetite for US assets fades or a deflationary growth shock brings Fed easing back onto the agenda.

US economic activity has held up better than other major economies but inflation is proving sticky and the market has had to price a more hawkish Fed path.

That relative-yield shift has already helped the dollar break higher from its earlier trading range and is broadly consistent with our baseline assumption of dollar strength into the end of 2026.

Relative US yields have been doing the heavy lifting for the dollar

Source: LSEG Datastream, Schroders Economics Group, 6 July 2026.

The other side of the trade for other global currencies remains fragile, however.

While the eurozone economy has been more resilient to the Iran shock and the ECB has been quick to raise interest rates, the euro still looks too firm relative to fundamentals.

With eurozone inflation coming in below expectations, if markets started to price that ECB tightening was not likely, there would be room for euro/dollar to move towards 1.10 in the months ahead.

Sterling is also vulnerable as weak growth, political uncertainty and the pricing-out of UK hikes are consistent with the pound heading towards the mid-1.20s against the dollar.

The yen continues to test Japanese authorities’ appetite for intervention, while the renminbi's recent appreciation may fade later in the year since widening rate differentials against the US will become harder to ignore if export growth continues to roll over.

Base case

All of this chimes with our May Q2 baseline forecast, where the dollar was assumed to rise through 2026 before giving back some ground in 2027.

 Our end of 2026 assumptions published back was GBP/USD at 1.21, EUR/USD at 1.07, USD/RMB at 7.09 and USD/JPY at 167.8.

Our end of 2027 working assumption is for the dollar to give back some of those gains – to 1.27, 1.12, 7.03 and 162.5 respectively – as fading inflation pressures give a tough-talking Fed breathing space and a pivot to a more forward-looking policy agenda would bring rate cuts back onto the agenda in 2027.

For now, chair Kevin Warsh’s hawkish rhetoric implies a clear risk that US rates end up being raised, keeping the dollar firmer for longer.

Medium-term risks

But looking further ahead, the medium-term dollar story is more balanced.

The key support for the dollar is still the relative US yield advantage, but the funding of the US current account deficit has become more dependent on short-term equity and investment-fund inflows. That leaves the dollar more sensitive to shifts in risk appetite.

If US markets keep performing, those flows can continue to support the currency. But if equity sentiment turns, the same channel can amplify FX volatility.

A larger role for short-term equity and fund inflows leaves the dollar more sensitive to risk appetite.

Source: Macrobond, Schroders Economics Group, 24 June 2026.

More generally, if the party in US markets draws to a close there are good reasons to think the dollar will be left nursing a hangover.

A weaker dollar

A weaker dollar has far-reaching implications for all global investors. These range from immediate portfolio effects to longer-term impacts on asset performance as economies, industries and individual businesses adjust to a lower-value dollar.

After all, the consequence of the boom in the US is that is has accumulated large, twin current account and budget deficits and an overvalued real exchange rate.

The implications of a weaker US dollar are neither straightforward or uniform.

If the next trend depreciation of the dollar eventually kicks in, it may pose stagflationary risks for the US, but it could also deliver a deflationary impulse to the rest of the world through cheaper commodity imports and manufactured goods. It could also support common-currency returns to investors from other markets – notably in the emerging world.

However, the outlook is complex, with second-order effects and policy responses potentially creating both winners and losers.

But as we recently argued, one beneficiary could be the yen. It is one of the clearest cases where the medium-term view is starting to differ from the near-term trend.

Near term, fiscal concerns, capital outflows and dollar strength have kept USD/JPY under upward pressure.

But as Japanese real rates turn less negative and the Bank of Japan normalises policy, the incentive to fund carry trades in yen should fade. The medium-term case for a stronger yen is therefore building, though the adjustment is likely to be slow.

David Rees is head of global economics at Schroders. The views expressed above should not be taken as investment advice.

James Bullock has been adding to business software company Intuit despite it being the Lindsell Train Global Equity fund's worst performer in June, arguing the market's punishment of 'AI loser' stocks has run well ahead of the actual risk to their businesses.

Bullock's fund lost 1.5% in June, against a 0.8% gain for the MSCI World index, leaving it 10.8% behind the benchmark over the second quarter. He attributed the shortfall to the fund's exposure to companies that markets have labelled 'AI losers', a group that includes software and information services businesses like Intuit.

Outside of Alphabet, Lindsell Train Global Equity holds almost nothing in the semiconductor, memory and energy names widely seen as AI's beneficiaries.

Performance of Lindsell Train Global Equity vs sector and index over 2026 so far

Source: FE Analytics. Total return in sterling between 1 Jan and 15 Jul 2026

The AI rollout and its potential impact have dominated stock markets in recent years, with investors weighing up if companies are likely to be winners of the AI buildout and adoption or losers that find their business models disrupted.

Companies like Intuit, RELX and London Stock Exchange Group have been put in the AI loser camp by some on the view that their customers will replace their proprietary data and tools with AI. However, Bullock argued that these companies' unique datasets and intellectual property means they are "likely to avoid the sort of black swan tail risks that AI arguably heralds", even if the market currently disagrees.

"But whilst the risk is not, and never has been, zero, Mr Market's newfound ability to conceptualise it (however unlikely) is becoming a self-fulfilling prophecy. If you take the view (I suspect commonly held and arguably supported by the continued success of the 'momentum trade') that share prices contain insight, then falling prices can quickly spiral into a vicious cycle; whereby a weak share chart implies a broken business model, more downward pressure and so on," he said.

"The difficulty of disproving a negative thesis (how do you refute an assertion made without evidence?) and the much-discussed rise of passive (massive, price-insensitive flows that polarise and build momentum) perpetuates both the narrative and trend."

Intuit is the clearest example in his portfolio. Its shares fell 21% in US dollar terms in June alone, leaving them down nearly two-thirds from last year's highs.

That repricing has pushed Intuit's free cashflow yield from around 2.5% in 2025 to more than 10% now. Management still guides to earnings-per-share growth of 16-18% next year, yet the shares trade on a forward multiple of just 11 times non-GAAP earnings.

Despite this, investors continue to avoid the stock, which Bullock suggested is a behavioural problem: "The fear of being wrong (always possible I'm afraid) has a much sharper sting if consensus already told you so. It's said that it's better to fail conventionally than succeed unconventionally. Perhaps, but to fail unconventionally is surely the most painful of all and many investors will avoid this at all costs.

"Even if, at the current price and risk, the balance of probabilities skews heavily in your favour, the reputational damage of 'getting it wrong' is simply too distasteful – no matter how unlikely, or how attractive, the rewards for being right."

Lindsell Train Global Equity has held Intuit since its launch in 2011, alongside RELX and London Stock Exchange Group. All three have delivered strong long-run returns (total annualised sterling returns of 14%, 14.1%, and 18.6% respectively) despite recent falls in perceived value.

"In our view, these are exceptional companies in strong industries and, given our heritage and experience investing here over the decades, we feel in a good position to walk where others fear to tread, to take advantage of historically attractive valuations," the manager said.

Intuit's own management appears to share that confidence, with the company spending around $1bn a quarter on share buybacks, a rate that now equates to a buyback yield of close to 7%, at a valuation Bullock considers detached from its growth guidance.

Bullock's position is not shared by every quality-growth manager. Fundsmith Equity sold out of Intuit entirely in the first half of 2026, replacing it with accounting software rival Sage. Rathbone Global Opportunities also exited Intuit this year, as part of a wider move away from consumer-facing software and information services names on concerns about AI-driven competition.

For Bullock, buying into weakness means accepting a trade-off between price and probability, while tolerating the discomfort of looking wrong until the market agrees otherwise. He has extended this approach beyond Intuit, adding to RELX, LSEG and FICO in 2026 and starting two new positions he has not yet named, both roughly halved in share price from last year's highs.

"It's important to emphasise that we won't change our portfolios without strong cause, and even here we are talking about low-single-digit turnover. However, as with the additions of Alphabet and Games Workshop in April 2025, the extreme volatility evident so far across 2026 has created opportunities we'd be remiss to ignore," he finished.

Evidence of value for money and alignment with Consumer Duty is the factor advisers weigh most heavily when choosing a model portfolio service (MPS), a survey by Nedgroup Investments has found. 

Consumer Duty, the Financial Conduct Authority rule requiring firms to evidence that products deliver fair value and not just decent performance, was cited by 42% of advisers as the most important facet when selecting an MPS provider, ahead of consistency of outcomes relative to a stated risk level on 34%.

Investment process, governance and team credibility tied with quality of reporting, service and adviser support on 32% each. Performance and track record and total cost to clients each scored 30%, while platform availability and ease of implementation ranked lowest at 24%, as shown in the table below.

Source: Nedgroup Investments

Apiramy Jeyarajah, chief commercial officer at Nedgroup Investments, linked the findings to advisers' regulatory workload. 

"The survey highlighted that advisers are increasingly regulation-conscious as this aspect of their role becomes more burdensome," she said. "Investment outsourcing to ease regulatory burden is not a new concept but the importance of credibility is now a key priority for advisers as Consumer Duty weighs heavily on their shoulders."

Advisers were separately asked which client needs, of up to three, an MPS most effectively addresses, with confidence in volatile markets highlighted as the key driver of MPS growth.

This was chosen by more than half of the interviewees (52%), ahead of diversification (38%) and cost transparency and value for money (32%). Fewer advisers cited easing regulatory burden (28%), ongoing professional management (24%), simplicity and clarity (16%) or reliable risk targeting (14%).

Source: Nedgroup Investments

Given today's heightened volatility, Jeyarajah was "not surprised to see that confidence was a key reason behind the use of MPS among advisers".

"Advisers are looking for a safe pair of hands for their clients' investments. They want to see experienced fund managers who have been through a number of different market cycles as well as diversity of ages and experience in the teams, for balance," she concluded.

More than a third (36%) of DIY investors said their risk appetite has increased since Keir Starmer announced his resignation as prime minister, according to research from Charles Stanley Direct.

Starmer announced his resignation on 22 June 2026. Andy Burnham is set to take over as Labour leader after the number of nominations he received made it impossible for another candidate to challenge him. Once confirmed, he will become the UK's seventh prime minister in a decade.

Risk appetite refers to an investor's willingness to accept higher levels of volatility in pursuit of potentially greater returns, typically through more exposure to growth-oriented assets such as equities, rather than more defensive holdings like bonds.

Of the 36% who reported an increase in risk appetite, 10% said it had increased significantly and 26% said it had increased somewhat. The shift was most pronounced among Gen Z investors, of whom 52% reported an increase, followed by 50% of Millennials. The majority of respondents (55%) said the resignation had not affected their attitude towards risk at all, while 9% said their risk appetite had decreased.

Rob Morgan, chief investment analyst at Charles Stanley Direct, said the political scene in the UK had been unsettled over the past decade and that market and investor reactions to this leadership change had remained relatively measured.

"While some investors report a greater willingness to take risk, this should be viewed primarily as a reflection of broader sentiment rather than a clear shift in investment behaviour," he said.

"Political change can sometimes be perceived as creating new opportunities or a more favourable backdrop for economic growth, which may explain why some investors feel more confident about taking on additional investment risk."

Morgan added that most investors had remained unchanged in their approach, continuing to diversify their portfolios and focus on long-term objectives rather than making significant changes based on short-term political developments.

"While a new prime minister may bring changes in fiscal policy, marked changes to taxation or other policies affecting personal finances rarely happen overnight and usually come with a long lead-in time," he said. 

"Any shifts in portfolio decisions should be made rationally and there is likely plenty of time to assess any consequences, good or bad, that fall out of a change in political leadership. For those who are unsure, speaking to a financial adviser can help in making informed decisions that suit their personal circumstances."

The UK economy grew 0.1% in May, recovering from a 0.1% contraction in April, according to Office for National Statistics data released this morning.

Danni Hewson, head of financial analysis at AJ Bell, said the reading was “hardly cause for celebration and certainly nowhere near the momentum needed” for people to feel the economy is working for them.

The service sector was the only part of the economy to expand, offsetting falls in both production and construction. Over the three months to May, the economy grew 0.7%, although that was driven largely by a strong March.

Growth arrives as Labour prepares for a change of leadership. Hewson called the reading “a positive note” for incoming prime minister Andy Burnham to begin on, though speculation over his top team continues and households brace for what Hewson called “another long autumn of consumer caution” over potential tax rises.

Neil Birrell, chief investment officer at Premier Miton, said the growth figure “feels rather historic” given the lack of clarity over fiscal and social policy under a new administration, adding that businesses and individuals are unlikely to hire or spend “ahead of getting policy details”.

Rob Morgan, chief investment analyst at Charles Stanley Direct, struck a similarly cautious note. He pointed to a summer boosted by “football-fuelled” consumer spending but warned that a softening jobs market, a higher energy price cap and the approach of “what stands to be a seismic autumn Budget” could sap confidence as the year progresses.

Attention has already turned to who will run the Treasury. Reports that Shabana Mahmood is now front-runner for chancellor have calmed market nerves but Michael Browne, global investment strategist at Franklin Templeton, argued that Ed Miliband, tipped by some as a potential chancellor, deserves closer scrutiny.

Miliband's 2015 manifesto promised to cut the deficit every year and refuse a budget without Office for Budget Responsibility sign-off, a platform Browne called “remarkably restrained” by today's standards.

The fiscal picture Miliband would now inherit is tougher. Taxation reached a post-war high of 36.3% of GDP in April 2026, up from 32.5% in 2015, and debt interest now consumes a tenth of government income. But Browne noted the OBR projects borrowing falling to around 2% of GDP by 2029-30, similar to pre-pandemic levels.

“The cautious, fiscally grounded politician of 2015 may be precisely what this moment demands,” he said. “The question is whether the intervening decade has sharpened that instinct or eroded it.”

Consistency is rare in fund management but the funds that have managed it in the IA Global sector over the past three years share a common thread: a conviction in artificial intelligence.

In this Trustnet series, we have been identifying funds that posted top quartile returns consecutively from 2023-2025 and have done so again in the first half of 2026.

Within the IA Global sector, 10 funds have managed the feat, as shown in the table below.

Source: FE Analytics

Of these funds, the strongest performer in the first half of 2026 was Polar Capital Artificial Intelligence, which gained 59.8% over the six-month period.

At $4.1bn, it is a large specialist technology-focused fund. Co-managers Ben Rogoff, Nick Evans and Xuesong Zhao rely on fundamental analysis, supported by a 12-strong specialist team.

Given its focus on AI, 45.1% of the portfolio is allocated to information technology, followed by 23.3% in industrials and 7.1% in materials. The fund has an 80.7% active share and currently holds 68 stocks.

The top position goes to Nvidia at 4.4%, followed by Seagate Technology Holdings at 3.3% and Mitsui Kinzoku at 3%. Alphabet is the only other Magnificent Seven stock in the top 10 alongside Nvidia, with a 2.2% weighting.

Around two-thirds of Polar Capital Artificial Intelligence is invested in mega-cap stocks, with 24.1% in large-caps and just 4.6% in mid-caps.

In May, the managers reflected on the continued strength of technology stocks, driven by accelerating AI-related demand and renewed confidence in sustained capital expenditure.

“The tech-led move higher in broader markets this year has been predominantly driven by earnings as fundamentals continue to improve,” they said, noting that the first quarter reporting season saw a 27% year-on-year earnings growth.

Betting so heavily on AI can prove volatile, however. Indeed, in 2022 – the year before the AI surge really took off – Polar Capital Artificial Intelligence sat in the fourth quartile of the sector, losing 25.1% that year.

While Polar Capital Artificial Intelligence led the table for the first six months of 2026, the WS Blue Whale Growth fund delivered stronger returns in each of the three full years, gaining 30.7%, 28.2% and 28.4% in 2023, 2024 and 2025.

Managed by FE fundinfo Alpha Manager Stephen Yiu, the £2.7bn strategy aims to deliver capital growth over any five-year period through a concentrated, bottom-up stock picking approach.

Nvidia is also this strategy’s largest position, but at a significantly higher 9.9% weighting. The portfolio also includes SK Hynix at 5.5% and TSMC at 5%, reflecting Yiu’s conviction in semiconductor-driven growth.

Last month, Yiu defended investor ambitions to overinvest in AI, despite crowded trades and rising valuations.

RSMR analysts said the fund can be used as a core holding within a global allocation but the position should be sized based on an investor’s risk appetite.

Another fund that has demonstrated consistency is Capital Group New Economy (LUX). It gained at least 20% in each of the three full years and returned 23.6% in the first half of 2026; over the five years to June 2026, it returned 88.9%, underscoring its longer-term consistency.

Managed by a large team, including Matthew Cherian, Richmond Wolf and Tomoko Fortune, the $2bn strategy invests in companies benefiting from innovation, new technologies and evolving global economic trends. It also aims to maintain a carbon footprint at least 30% lower than its index and applies ESG-based negative screening.

The portfolio holds 148 stocks, with technology names again dominating the top 10 – including Micron, Alphabet, TSMC and Microsoft.

Other actively managed funds in the table include Heptagon WCM Global Equity and Allspring (Lux) Worldwide Climate Transition Global Equity.

IA Global Equity Income

Moving into the IA Global Equity Income sector, its more disciplined approach to income generation has driven equivalent consistency, with three funds posting top quartile returns across the three consecutive years and in the first half of 2026.

Source: FE Analytics

Jupiter Merian Global Equity Income logged the strongest return of the funds in the table in 2023 with a 17.4% gain but posted the weakest return for the first half of 2026 at 13.9%.

The small $51.9m strategy is co-managed by Amadeo Alentorn, Yuangao Liu, Matus Mrazik, Sean Storey, James Murray and Tarun Inani. The fund targets a total return greater than the MSCI ACWI index over rolling three-year periods through a systematic process that evaluates companies across several characteristics, including valuation, balance sheet quality, growth prospects, capital efficiency, analyst sentiment and market trends.

Looking at the fund’s longer track record, it was also highlighted for consistency over 10 years, beating the MSCI World index in six of the past 10 years, and as a global equity income fund delivering top-quartile returns over one, three, five and 10 years.

The other two global equity income funds included in the table are Thornburg Equity Income Builder and Allspring (Lux) Worldwide Global Equity Enhanced Income.

“When there's uncertainty, we shouldn't be looking for certain outcomes,” according to Tom Matthews, co-manager of the JOHCM UK Dynamic fund, who has warned that investors are too focused on binary scenarios rather than embracing the grey area.

It is not necessarily their fault, however. He noted there are two key parts of the brain that are used for decision-making that lead to very different reactions.

The prefrontal cortex (or ‘wizard brain’) is the large part of the brain at the front that handles deep reasoning and probabilistic thinking. This is where most people make a lot of their decisions from.

However, during times of stress, the driving force for our actions changes to the amygdala, which he referred to as the ‘lizard brain’.

The amygdala is often used most when there is an overlap of crises, which “generate a strain on human comprehension that exceeds our ability to anticipate future developments”, said Matthews, referencing work done by the Cascade Institute.

“Put another way, it's cognitive overload,” he said.

This is a result of evolution. When attacked by a wild beast, for example, it was in our best interests to move away from the prefrontal cortex and instead use the amygdala, which moves much quicker but tends to view the world in binary black-and-white outcomes. Another name for it is 'fight or flight'.

“That's great for hunting, but terrible for markets and terrible for investors,” said Matthews.

Instead, investors should take a lesson from Annie Duke, the World Series of Poker champion and cognitive behavioural scientist. She is also the author of Thinking in Bets, a book the JOHCM UK Dynamic fund manager said is extremely popular “in investing circles”.

“She has a quote in her book: ‘Black-and-white thinking, uncoloured by the reality of uncertainty, is a driver both of motivated reasoning and self-serving bias’,” he said.

These binary outcomes are everywhere, he noted. For example, in recent years markets have been obsessed with central banks and whether they would achieve a hard or soft landing when it came to taming inflation.

More recently, it has been whether a company is an AI winner or loser – a fixation that led to this year’s ‘SaaSpocalypse’. In healthcare there is a similar movement between the winners of the GLP-1 weight loss and diabetes drug craze and those companies not involved in this particular market.

“The market is obsessed with these black-and-white outcomes. Why? Because the market keeps trying to sell you certainty,” said Matthews.

These are far from the only binary outcomes being backed by the market. He used the example of hedging.

“I went to our Bank of America broker and asked him for his baskets. They had a menu of European baskets. Just on the custom baskets he uses for hedging, he had 43 available,” the JOHCM manager said.

By contrast, Matthews only holds 38 stocks in his entire JOHCM UK Dynamic portfolio. “So that gives you an idea of the sheer volume of trades buffeting the market right now,” he said.

However, during times of uncertainty, investors should not be looking for certain outcomes but instead should consider the world in probabilities,

He said: “We need to be introducing uncertainty into our analysis. What is the likelihood of that outcome? What are the alternative truths? What else could happen that isn't in that binary spectrum? And what does the valuation imply?

“As investors, we shouldn't be buying narratives. We should be buying outcomes, the probabilities. So be very wary of these pervasive narratives, because they are genuinely distorting reality.”

He argued this is clearest in the UK. For more than a decade, investors have largely ignored the domestic market in favour of the US, where returns have far outpaced UK equities.

As a result, the UK market has been overlooked and stocks are now on “multi-decade discounts” to their overseas peers. Overall, the UK market sits at a 25% discount to the US based on sector-adjusted price-to-earnings ratios.

“UK equities are the Costco of global equities right now. Costco's business model is all about offering globally recognised brands at a discount, in bulk. Sound familiar? That's exactly what we've got in the UK right now,” said Matthews.

This, however, overlooks the fact that UK equities have compounded at a 10.8% rate over the past five years, only just behind the 13.2% from the MSCI AC World. Without technology (an area the UK historically has lagged in), that figure plummets to 9.7%.

It is an example of a behavioural bias and black-and-white thinking in action. However, he is not disappointed. In fact, Matthews said he likes behavioural biases.

“Behavioural biases mean market inefficiencies and that's what we're starting to see in the markets at the moment, which is why we're very excited,” he concluded.

In the world of investing, capital appreciation – the increase in the market value of an asset - tends to capture the headlines, for example Nvidia becoming the world’s largest company or Apple announcing a record fiscal quarter after the launch of the iPhone 17.

The drama of soaring share prices or the rapid growth of a technology giant makes for compelling reading but it often obscures the engine that drives the minority of long-term wealth creation: dividend reinvestment.

When looking across a standard investment horizon, there is a mathematical tipping point where the composition of total return shifts. We call this the 10-year effect. And at this point, investors often have a choice to make.

The choice to take cash or reinvest the dividend

During the first few years of an investment lifecycle, the impact of choosing to reinvest dividends rather than taking them as cash can feel almost negligible. It is a linear progression, a modest accumulation of fractional shares that sits in the shadow of broader market movements. 

However, as an investor approaches the decade mark, the geometry of compounding begins to assert itself. The income generated by the accumulated shares begins to create a snowball effect that structurally transforms the risk and return profile of a portfolio.

Over a ten-year period, this process can effectively double the share count of a high-yielding vehicle, significantly lowering the average cost basis and insulating the investor against capital volatility. This compounding engine becomes particularly potent in the current macroeconomic climate. With traditional fixed-income markets grappling with duration risk and equity markets exposed to shifting growth forecasts, the value of a reliable, high-yielding income stream is amplified.

The philosophy of a vehicle like CVC Income & Growth, which focuses on senior secured floating-rate corporate credit, is aligned with this long-term compounding dynamic. Because floating-rate assets adjust their coupons upward alongside base rates, they generate a consistently high level of distributable income without the capital erosion that plagues fixed-rate bonds when yields rise.

This means that during periods of market stress, the fund is effectively throwing off more fuel for the compounding engine, precisely when underlying asset prices may be suppressed, allowing automatic reinvestment to capture mispriced value at a discount. Beyond the maths, this reinvestment principle also introduces a critical behavioural discipline.

Reinvesting distributions removes the temptation to time the market, replacing emotional decision-making with the process of pound-cost averaging. In a market with rapid swings in inflation expectations and central bank policy, consistency becomes an alpha generator. By automatically recycling distributions back into the market, investors transform volatility from an operational risk into a structural tailwind, using short-term price pullbacks to accelerate their long-term share accumulation.

Small steps for long-term gains

The journey toward a transformed ten-year horizon is built on immediate, incremental actions. The decisions made during these regular quarterly windows may seem small in isolation, but they represent the foundational building blocks of long-term wealth, proving that the most reliable path to financial resilience is not predicting the future but methodically reinvesting in the present.

The illustration below models the geometric reality of reinvesting dividends over a 10-year period, based on a standard £10,000 initial investment, a high-yielding 7% dividend distribution and a conservative 2% baseline capital growth rate.

Source: CVC Credit Partners

Pieter Staelens is lead fund manager of CVC Income & Growth. The views expressed above should not be taken as investment advice.

Five sterling bond funds have managed to deliver first-quartile returns for three consecutive years and continued to outperform in the first half of this year.

In a continuation of a Trustnet series, we identified funds across the IA Sterling Strategic Bond, IA Sterling Corporate Bond and IA Sterling High Yield sectors that have posted a top-quartile return in 2023, 2024 and 2025, while maintaining their first-quartile status up to the end of June 2026.

As seen in the table below, no funds from the high yield sector met these criteria.

Source: FE Analytics

Among the qualifying strategies, the standout performer is the Man Dynamic Income fund, which posted the strongest return of those in the table in each of the three years and again in the first six months of this year.

Managed by FE fundinfo Alpha Manager Jonathan Golan since launch in 2022, the $8.9bn strategy has grown rapidly and carries a five-Crown FE fundinfo rating. Its objective is to provide income and capital growth over the medium- to long-term, employing a bottom-up approach to bond selection. As of 30 June 2026, the fund has a running yield of 6.7%.

The maturity profile is concentrated in the three-to-five-year range, which accounts for 43.5% of the portfolio, while around three-quarters of holdings are rated ‘BBB’, ‘BB’ or ‘B’.  

Golan was crowned Alpha Manager of the Year in 2025 by FE fundinfo, while Titan Square Mile analysts described Golan as a young and talented fixed income manager, awarding the fund an ‘A’ rating and including it in the firm’s Academy of Funds.

“A key differentiator for this fund, and we would argue its edge, lies in its bottom-up focus on smaller issuers and the team’s ability to extract alpha from undervalued credits which are overlooked by larger scale investors,” they said, while warning that smaller issuers can be more susceptible to defaults.

Performance of the fund vs sector over 5yrs

Source: FE Analytics

Golan also manages the Man Sterling Corporate Bond Fund which also sits in the table above. With £1.6bn in assets, the long-only corporate bond fund focuses on sterling-denominated bonds with a flexible mandate across industries and geographies.

The approach mirrors Golan’s philosophy in Man Dynamic Income, according to RSMR analysts, who said: “The focus on identifying undervalued bonds through detailed fundamental analysis provides a clear and repeatable framework for generating returns.”

From Man Group to Royal London, the latter also has two strategies which have posted first-quartile returns in their corresponding sector over three consecutive years and for the first half of 2026.

Royal London Sterling Credit is the strongest performer of the two Royal London strategies in the table, having logged higher returns in two of the three full years and again in the first half of the year. Both are in the IA Sterling Corporate Bond sector.

Managed by Alpha Manager Paola Binns and supported by Alpha Manager Eric Holt, the £2.5bn strategy aims to outperform the Markit iBoxx Sterling Non-Gilts Total Return All Maturities GBP index over rolling five-year periods through capital growth and income, by creating a diversified portfolio that benefits from market anomalies.

More than half of the portfolio (55%) is invested in ‘BBB’-rated bonds, and around half of the holdings mature within five years.

The Royal London credit team’s approach is ultimately benchmark agnostic, with the managers’ philosophy focused on the likelihood of defaults rather than recovery rates.

RSMR analysts said: “In falling yield environments, the fund should perform more strongly than in a rising yield environment.”

Indeed, last year, the fund was highlighted for posting a yield above cash while delivering best-in-class performance over five years.

The other Royal London strategy in the table, Royal London Corporate Bond, is managed by Alpha Managers Shalin Shah and Matthew Franklin. At £1.6bn, it shares the same long-term objective as the other.

Performance of the funds vs sector over 5yrs

Source: FE Analytics

The final fund in the table is the Titan Hybrid Capital Bond strategy, the second IA Sterling Strategic Bond fund to meet the criteria and the smallest in the table at £418m.

Managed by Peter Doherty since 2016, the fund carries a five-crown rating and aims to generate 5% per annum in income, net of expenses, from a hybrid capital portfolio with medium volatility.

The strategy invests in hybrid capital instruments, which sit between debt and equity in the capital structure and can offer attractive yields.

It is worth noting that, prior to its three consecutive years in the first quartile, the fund posted a bottom-quartile loss of 16.7% in 2022.

Rathbone Global Opportunities manager James Thomson expects stock market gains to spread beyond artificial intelligence and memory chip stocks in the second half of 2026, so has adjusted the £3.2bn portfolio's holdings ahead of that shift.

Key AI holdings such as Arm Holdings, CrowdStrike, Amphenol and Alphabet were among the fund's strongest performers in the second quarter of 2026. FE fundinfo Alpha Manager Thomson attributed their continued momentum to persistent macroeconomic pressures, but he thinks those pressures may now be turning.

"We're anticipating market performance broadening beyond the AI and memory chips basket, potentially triggered by a fall in oil prices and easing in the hawkish tilt by central banks – especially if inflation moves lower," he said.

Performance of Rathbone Global Opportunities vs sector and index in 2026 YTD

Source: FE Analytics. Total return in sterling between 1 Jan and 14 Jul 2026

He added that the Iran conflict continues to be priced in and out of investor assumptions, creating volatility around this broader trend.

Thomson pointed to several macroeconomic indicators that rose in the second quarter and could reverse course: oil prices, inflation, inflation expectations, bond yields and central banks' rate projections. He thinks his portfolio might benefit if these indicators start to fall.

"Our zero exposure to oil and gas, due to its unpredictable growth qualities and price-taking characteristics, was a headwind during the war of H1 but it could become a tailwind in this scenario," he said.

As the chart above shows, Rathbone Global Opportunities has underperformed both its average IA Global peer and the MSCI World index since the start of 2026. Its 2.3% loss over this period puts it in 543rd place out of 576 funds in the peer group.

Thomson pointed out that the fund is not retreating from the AI theme, distinguishing between stocks exposed to capacity shortages, which he considers less durable, and companies he sees as structural beneficiaries of AI infrastructure build-out.

"We are not AI naysayers – in fact, we have many AI beneficiaries from GPUs to CPUs, hyperscalers, networking, data centre real estate, grid modernisation and power infrastructure construction and equipment," he said.

Nvidia, Arm and CrowdStrike, a recent addition, now sit among the fund's 10 largest holdings and provide exposure across different parts of the AI supply chain.

But in looking outside of this theme, Rathbone Global Opportunities has “bought more new stocks so far this year than at any similar point in the past”. Alongside these purchases, Thomson has sold consumer-facing software holdings including Intuit, along with information services and private equity positions, on concerns that AI-driven competition could erode their growth rates.

Much of the new buying has gone towards stocks in the 'HALO' theme (hard assets, low obsolescence). He introduced it in response to what he sees as elevated obsolescence risk – or the risk that a process, product or technology will become obsolete – across industries.

New additions include electrical infrastructure contractor Quanta, aerospace contractor Howmet, mining equipment supplier Sandvik and construction equipment maker Caterpillar, joining motion control technologies firm Parker Hannifin and fibre-optic products maker Amphenol, both existing holdings. Thomson made two further unnamed HALO additions.

The manager links this theme to a broader expectation that resource independence and protectionism will shape markets over the coming years, as major economies compete for the critical minerals needed for technology and electrification infrastructure. Despite that view, Thomson avoids direct exposure to commodity producers.

"We remain wary of investing in pure commodity stocks as they are often at the mercy of a single commodity price and have high project risk. We have taken a less risky picks n' shovels approach," he said.

Thomson has also used recent volatility in software stocks to add to positions he considers mispriced. CrowdStrike fell during a broader sell-off in software shares, which he attributes to fears about AI-driven disruption, but he expects the business to benefit from rising demand for cybersecurity as AI adoption spreads.

Separately, energy drinks maker Monster Beverage and cosmetics business L'Oréal have been added to the fund to bolster its defensive holdings, aiming for growth less tied to technology sector swings.

Thomson said this repositioning is a trade-off between short-term and long-term returns. He expects that giving up exposure to the fastest-growing but potentially unsustainable stocks will support performance once market gains broaden out.

"Forgoing returns in stocks with supernormal (but fleeting) profit growth may be painful in the short term, but it will protect us in the longer term," he said. "Our balanced and diversified approach to portfolio construction will drive outperformance as the market broadens beyond this single theme. Meanwhile, we are using the bifurcation as a rare opportunity to buy watchlist stocks."

Tatton Global Managed Equity has made the best return in the most aggressive model portfolio sector over the past 10 years, Trustnet research shows, with strategies from Saltus, Quilter, Brooks Macdonald and atomos also ranking highly.

In this research, we've grouped FE fundinfo's six MPS sectors into two broader categories – defensive and growth – to identify the best performers of the past decade. The growth group covers the UK MPS 45%-65% Growth, UK MPS 65%-85% Growth and UK MPS 85%-100% Growth sectors.

The UK MPS 85%-100% Growth sector contains aggressive or equity-focused portfolios, with little to no defensive allocation. In the 65%-85% Growth sector, equities dominate, with a smaller allocation to bonds or alternatives for diversification, while the balanced portfolios in the 45%-65% Growth sector are roughly evenly split between growth and defensive assets, sometimes tilted towards growth.

Source: FinXL. Total return in sterling between 1 Jul 2016 and 30 Jun 2026.

Starting with the UK MPS 85%-100% Growth sector, the best performer of the past 10 years was Tatton Global Managed Equity with a total return of 221.5%. This compares with an average return of 151.7% from the peer group.

Tatton Global Managed Equity sits within Tatton's Managed Portfolios range. It has around 98% in stocks with the small remainder in cash. This is Tatton's highest risk category, suited to a minimum eight-year time horizon.

The range takes a mainly active approach with Tatton's investment team selecting funds run by managers whose strategies fit its view of the global economy. The team reviews and adjusts these choices through a six-stage process, covering fund research, setting the strategic and tactical asset mix, building the portfolio and ongoing monitoring.

It currently has around two-thirds of its assets in US equities. Here, the passive HSBC American Index is its largest holding, surrounded by active funds Jupiter Merian North American Equity, BNY Mellon US Equity Income, SVS AllianceBernstein Concentrated US Equity and Artemis US Select.

The firm also has the second- and third-placed model portfolios in the sector.

In third place is Tatton Global Tracker Equity with a total return of 218.2%. The Tracker range is managed in the same way as the firm's other portfolios but they use passive rather than actively managed funds, meaning they have much lower charges.

In second place is Tatton Global Core Equity with a 218.7% return. The Core range is a mix of passive and actively managed funds, which Tatton said "marries the advantages of both passive and active strategies during investment cycles and reduces overall cost".

Source: FinXL. Total return in sterling between 1 Jul 2016 and 30 Jun 2026.

Tatton also has the top model portfolio in the UK MPS 65%-85% Growth sector: Tatton Classic Tracker Aggressive, with a 158.6% return.

This portfolio takes Tatton's Classic approach, which has a higher weighting to UK stocks than the Global version. This means it has 42.8% in North American equities with 22.3% in UK stocks.

Its largest holdings are Vanguard US Equity Index, HSBC American Index and Vanguard FTSE Developed Europe ex-UK Equity Index, with iShares UK Equity Index and Invesco UK Enhanced Index also in the top 10.

In second place in the UK MPS 65%-85% Growth sector is Saltus Model Portfolio Global Market – Growth, with a 157.6% return over 10 years.

Saltus runs the portfolio to a fixed asset allocation of 80% equities and 20% fixed income, sitting in the firm's Risk Band 4 (Growth). It invests directly in a range of externally managed funds rather than running money in-house.

The approach is built around factor investing. Saltus aims to avoid bias towards any single asset class, country or style, and instead identifies factors, such as value, that it believes drive returns, then tilts exposure towards them using low-cost index funds. The firm also spreads holdings widely to reduce reliance on any one factor, while keeping costs low.

Global developed market equities make up the bulk of the portfolio through holdings like Vanguard FTSE Developed World ex-UK Equity Index, UBS FTSE RAFI Developed 1000 Index, L&G International Index Trust and abrdn World Equity Enhanced Index.

Quilter's WealthSelect Blend Managed Portfolio 8 is next with a 154.9% return. The portfolio aims for capital growth over five years or more through a diversified mix of UK and global investments, targeting a set range of volatility rather than a fixed asset split.

It holds mainly equities, with around 56% in developed markets outside the UK and 19% in UK equities, alongside smaller weightings in emerging markets and alternatives such as absolute return and dynamic bond funds.

Quilter runs the portfolio using a wide range of external fund managers, blending index-tracking building blocks with actively managed Quilter Investors funds run by names such as BlackRock, Jupiter and Janus Henderson. Its largest single holding is iShares North American Equity Index at 19.2%, followed by iShares UK Equity Index at 9.3%.

Source: FinXL. Total return in sterling between 1 Jul 2016 and 30 Jun 2026.

Schroder Active Portfolio 6 tops the UK MPS 45%-65% Growth sector with a 10-year return of 121.3%. It sits in the middle of Schroder's nine-strong Active Portfolio range and targets risk level 6, aiming to keep volatility between 65% and 80% of that of global stock markets over a rolling five-year period.

The portfolio takes an active approach, investing worldwide across equities, bonds, currencies and alternative assets such as absolute return strategies. Around 60% sits in equities, with a further 23% in alternatives and the remainder split between bonds and cash, giving it a fairly even balance between growth and defensive holdings.

Rather than holding underlying funds directly, it invests through a layer of Schroder's own regional and asset-class model portfolios, such as Schroder MPS North America Equity and Schroder Alternative Portfolio. These sub-portfolios then hold funds run by external managers including Artemis, JPMorgan and T. Rowe Price.

Brooks Macdonald Platform MPS Medium Risk (Passive), in second place with a 119.7% return, is built from index-tracking funds to keep costs down. The portfolio aims to deliver a mix of income and capital growth, with equity exposure typically running between 55% and 75%.

At medium risk, it currently holds around 63% in equities, with the largest slices in UK and international/thematic funds, at 22% each, alongside North American, European and Asian holdings. The remaining 37% sits mainly in fixed interest, split between UK and international bonds, plus a smaller allocation to alternatives and cash.

Rather than rebalancing to a fixed timetable, Brooks Macdonald's multi-asset team reviews and adjusts the portfolio at its own discretion, based on its read of market conditions.

The UK MPS 45%-65% Growth sector's third-best model portfolio over 10 years is atomos index balanced, up 115.4%. Atomos aims to increase return potential over the long term rather than prioritise capital protection; investors are expected to hold for at least five years and to accept short-term swings in value in exchange for better long-term returns.

The portfolio is built from index-tracking funds, with its largest weighting in North American shares at around 35%, followed by smaller allocations across the UK, Europe, Japan, Asia Pacific and emerging markets. The remainder sits in government and corporate bonds, high yield debt and a modest allocation to property, infrastructure and other alternatives.

The European bank trade has bolstered investors’ returns over the past 12 to 18 months – the question is whether this is set to continue.

As shown in the graph below, European banks have far outstripped the overall MSCI Europe benchmark since the start of 2025, gaining 114.3% against just 36.1%.

In 2025, European banks’ 84.4% return was far ahead of the 26.1% from the wider index, while they’ve made another 16.5% in 2026 so far, versus 7.9% from the MSCI Europe,

Performance of MSCI Europe/Banks vs MSCI Europe since 1 Jan 2025

Source: FE Analytics

Robert Schramm-Fuchs, portfolio manager on the European equities team at Janus Henderson, describes himself as “very bullish” on European banks.

To explain why, he first pointed out that Europe is in a supportive yield curve environment. “Even though the Iran war has reduced some of the steepness in the yield curve, it is still positively shaped,” Schramm-Fuchs said.

Next, is the absolute level of interest rates.

“We just had an ECB [European Central Bank] hike – even though the hawks want more hikes, the base case is one and done,” he said.

“This leaves us at an absolute interest rate level which is in the Goldilocks window for banks: too low, the business model doesn’t work; too high, you have to worry about economic stress.”

Schramm-Fuchs said the ‘Goldilocks’ window sits around 2-4% for short-term interest rates. The current interest rate set by the ECB is 2.4%.

European banks are also seeing supportive revenue trends, he noted, with loan volumes growing modestly and fee income rising as more savers shift money out of deposits and into investment products – a trend that policies like Germany’s pension reform are accelerating.

Meanwhile, the cost of bad loans remains very low because European borrowers have materially paid down debt since the 2008 financial crisis, leaving banks with a higher quality loan book, he said.

Benjie Creelan Sandford, associate manager of Algebris Financial Income and Algebris Financial Equity, is also bullish on European banks, noting they have been “a huge relative and absolute overweight position over the past few years”.

He noted that the sector presented an “extremely attractive value opportunity” coming out the other side of Covid, as Europe moved into a higher inflation environment.

“We had a view as to what that would mean for interest rates, coinciding with fundamental factors that were turning around for European banks – a 180-degree pivot versus the period from post-GFC [great financial crisis] through to 2020.”

Valuation-wise, Creelan Sandford thinks European banks still have space to run.

“We still don't think the sector is expensive. We still think medium term, given the fundamentals, you can compound that value over time. It is still a very attractive investment proposition,” he said.

“But clearly European banks now trading at 10x P/E versus two or three years ago when they were trading at 6x P/E means the valuation is not quite as attractive as it was, which is why we have pared back the extremity of our positioning and taken up positioning elsewhere in the financial allocation.”

At its peak, European banks made up over 40% of Algebris Financial Income, he said, noting that these stocks continue to be the single largest position in the fund but they have now been cut to around 25%.

That is not to say that Creelan Sandford expects European banks to move from 10x to 15x going forward.

“The reality is you don’t need to believe that to think banks continue to create value,” Creelan Sandford said, noting that he focuses positioning on a bank’s steady compounding of value.

“When I look at the dividends I am getting paid, total distribution yields for the sector are still around 7-8%, so still incredible yield, while cash dividends are around 5-6% and then there is 2-3% on buybacks on top,” he said.

“If I look at the dividends I am getting paid plus the good value growth that banks are generating – given the strong profitability underpinnings – that is around 15% per annum total shareholder return. That’s not a bad place to be as a starting point.”

Schramm-Fuchs also expects European banks to continue to be a core driver of returns in his portfolios.

“We are still at a valuation discount in price-to-earnings (P/E) terms and still at a valuation discount to the history of European banks,” he said.

“That history has been very chequered: it was a history of extreme leverage pre-financial crisis and then a history of rising share count after the financial crisis because balance sheet health needed to be restored and leverage needed to be dramatically reduced.”

Regulatory ceiling

However, while conditions are good for European banks, Schramm-Fuchs noted that over-regulation threatens continued growth.

He said that the bloc has “the most rigid and intense banking regulation in the world” while simultaneously having one of the highest degrees of reliance on bank lending.

“This reliance on bank lending, combined with forced deleveraging, has meant that, macroeconomically, Europe is not doing as well as it could – but, at the micro level, for banks, it has meant we have been through all the exposures with a fine-tooth comb. There is no bad debt in the system – there cannot be.”

This is, however, hindering the sector’s growth potential, Schramm-Fuchs said. For example, he highlighted how many European banks are eager to integrate new software and AI-powered capabilities to become more efficient but are limited.

In particular, he is concerned that this “ongoing regulatory creep” is keeping European banks from achieving a level playing field with banks in other regions, such as the US, which promote deregulation and therefore have more ability to innovate and grow earnings.

“Despite their quality, you have to go down to the most challenged banks among the US regionals to find any trading at the same low earnings multiples as European banks. It doesn’t make any sense,” said Schramm-Fuchs.

Indeed, Schramm-Fuchs said an apples-to-apples comparisons suggests that, if assessing the core tier one ratios of European banks versus US banks and adjusting them to the same regulatory standards, “European banks would hold 100 to 150 basis points more capital than their US counterparts”.

He therefore concluded that there is “very clearly a ceiling to European banks due to regulation”.

“If your growth is limited, there is a ceiling to how much re-rating you can get,” he said.

Most fund managers will tell you they want to buy high-quality companies. After all, who wants a poorly run business with dismal prospects and a shrinking market share?  But quality comes at a price and, for periods, the comfort of quality can be overvalued.

Quality is easily recognisable and measurable, using metrics such as a high return on equity (RoE) or a high return on invested capital (ROIC). This has led to it becoming a prized factor for many investors. It is not the whole story though.

A high-quality company can be a poor investment if expectations are too high, while a temporarily unloved company can become a strong investment if expectations are too low.

We believe the fund manager’s job is not simply to identify quality, but to judge when the market is mispricing it and when a special situation exists that could create a timely buying opportunity.

When quality isn’t enough

Take Rightmove, for example. The property portal has the highest RoE and ROIC in the FTSE 350 index. From this, you might infer it is a fantastic company.

Yet despite displaying all the hallmarks of quality, Rightmove’s share price has plummeted since the summer of 2025, settling close to where it sat a decade ago. Not such a fantastic investment, then.

But we think it could be, which is why we added Rightmove to our portfolio in May.

Rightmove’s recent share price weakness has multiple sources. In November 2025, the company announced plans to accelerate its investment in artificial intelligence (AI), to transform its app and search capabilities.

It has also allocated more resources to research and development. These investments led to an uncharacteristic reduction in short-term margin guidance.

Then in February 2026, many software-as-a-service (SaaS) stocks de-rated sharply due to fears that AI would disrupt their business models. Even though Rightmove is different in many ways to these stock market peers, it was not immune to the selling pressure.

And like several other businesses caught up in the ‘SaaS-pocalypse’, Rightmove had the problem of a high starting valuation. In August 2025, its shares traded above 25x one-year forward earnings, which was around their 10-year average. Today, they trade on 13.3x, a steep discount to history.

Despite its recent troubles, Rightmove has not lost any of its competitive advantages. Sellers want to be listed on Rightmove because that is where buyers are looking. Buyers visit the site because it is where all the properties for sale are listed. This virtuous circle, or network effect, enables Rightmove to dominate online traffic for estate agent property listings.

These dynamics give Rightmove considerable pricing power, allowing it to increase listing fees for estate agents every year. This helps to explain Rightmove’s high price-to-earnings (P/E) multiple for most of the past decade and why we are confident in its ability to recover.

The market’s concern is that AI could change how people search for homes. That may be true at the margin. But in our view, AI does not remove the attraction of having the deepest pool of property listings, estate-agent relationships and buyer traffic. If anything, better search tools could make Rightmove’s platform more useful, not less.

Different industry, same problem

Another ‘quality darling’, RELX, has been on a similar journey. Its price-to-earnings (P/E) halved in less than nine months before we bought it at a valuation of 15x  in February 2026.

RELX provides data and information tools for insurance, scientific and legal professionals. The business-critical nature of its information has created high barriers to entry, allowing for consistent price growth, driven by new product development.

More recently, the threat of AI agents has brought RELX’s growth potential into question and challenged the terminal value of the business.

Yet RELX continues to deliver strong growth in revenue, profits and new sales. The business is improving its existing products and launching new ones at a faster pace.

We think future results will dispel fears over competition and new product launches, while AI integration should enhance revenue growth. We see considerable upside as a result and expect RELX’s shares to regain their previous P/E rating of more than 20x.

The life cycle of a special situation

In the long run, there is nothing wrong with buying quality companies. But you still have to be discerning. To build a more complete picture, we analyse other powerful factors such as growth, momentum and (especially) value.

Over time, valuations act like gravity on share prices. Higher valuations and lofty expectations tend to weigh them down eventually. And if the narrative changes, share prices can become vulnerable to a new perspective.

This is when the ‘special situations’ opportunities emerge. The life cycle of a special situation has three stages.

Rehabilitation comes first. This is the early stage of a turnaround, where an issue has been identified – often by a new management team – and a plan is made to fix it. This is the riskiest stage. We would initiate only a small position at this point.

Then the stock moves into the recovery phase, which is all about improving margins and taking out costs. We increase our position size when we see evidence the turnaround is working.

The final part of the life cycle is revitalisation, which involves reaping the benefits of all the hard work. By now, margins have improved and the share price has re-rated upwards as more investors recognise the company’s earnings potential.

We believe we are picking up Rightmove at the recovery stage. After a period of reinvestment, we expect margins to recover. If AI fears turn out to be unfounded, we will wait for a re-rating and then take profits, before recycling the capital into nascent opportunities.

Ultimately, our main argument against focusing on business quality alone is that it ignores an indisputable fact of investing – a good company only makes a good investment if you pay the right price for it.

Henry Flockhart is fund manager of Artemis UK Special Situations. The views expressed above should not be taken as investment advice.

Japanese, emerging market and Asia funds run by Aberdeen, Baillie Gifford and Invesco have all enjoyed strong returns so far in 2026, arresting poor long-term performance.

Six Japan funds, two Asia Pacific portfolios and three emerging market specialists made the list below, which highlights long-term laggards that have turned a corner in the past six months.

The best performing of the group below is the Allianz Little Dragons fund, managed by FE fundinfo Alpha Manager Yu Zhang. It invests in small and mid-sized companies across the Asia Pacific region and has flourished in the first half of 2026, up 54%.

Although it cannot own burgeoning names such as Taiwan's TSMC or Korea's SK Hynix, which have both rocketed during the AI boom, it has been overweight stocks in both countries, which have also benefited from the wave of money entering the countries.

China is the fund's largest country allocation (31.4%), closely followed by Taiwan (27%) and Korea (18.1%). Technology is the largest sector exposure, at just under half of the portfolio (48.8%).

Source: FE Analytics. All data to 30 June 2026.

In second place, PineBridge Asia ex Japan Equity has made 42.8% year-to-date. Managed by Caroline Loke, the fund is dominated by technology and includes some of the best-performing stocks in the latest wave of the AI trade.

Korean giants Samsung Electronics and SK Hynix are the largest two stocks, accounting for some 18.8% of the portfolio. TSMC is third at 8.9%. They are far and away the largest positions in the portfolio, with the fourth-largest company – Delta Electronics – a 3.4% position size.

Finally, looking more broadly, three emerging markets funds made the list. With the rise of Taiwan and Korea in recent months, Asia dominates the MSCI Emerging Markets index. The two countries make up more than half (51%) of the index, while China and India account for a further 30%.

Abrdn Emerging Markets Equity and abrdn SICAV I Emerging Markets Equity have been the best performers. With identical returns of 34.8% over the past six months, these sister funds are near identical to one another – however the former is an open-ended investment company (OEIC) while the other is a SICAV structure domiciled in Luxembourg.

Managed by the Aberdeen global emerging markets team, they look for high-quality companies that can be held for the long term. Top holdings include TSMC, Samsung and SK Hynix, with more than 30% of the funds in these three stocks at the end of May.

In the SICAV, the firm also states that the fund will use environmental, social and governance (ESG) screens to ensure that a minimum of 10% is invested in sustainable companies, although its top 10 remains the same as the OEIC.

They were joined by T. Rowe Price Emerging Markets Equity, which is just behind with a half-year return of 32.7%.

It is an Article 8 fund investing in companies with good environmental or social characteristics. Like everything else on this list, it is heavily invested in the 'big three' of Samsung, SK Hynix and TSMC, with the trio accounting for 29% of the portfolio.

Lastly, while looking at Asia Trustnet also considered Japanese funds. Here, six portfolios in the IA Japan sector are rebounding from a poor decade so far in 2026, with Invesco Japanese Smaller Companies (UK) the clear winner, up 35.3%.

This is the third-best performance in the sector during the period and reflects a trend of smaller companies catching up with their large-cap rivals so far this year. abrdn SICAV I Japanese Smaller Companies Sustainable Equity and Baillie Gifford Japanese Smaller Companies also made the list above.

Baillie Gifford’s fund has been particularly poor, returning just 39% over the past decade. Former manager Praveen Kumar was replaced by Brian Lum and Jared Anderson last year, with the duo also taking over the Shin Nippon trust.

The Japanese smaller companies funds used to have their own sector within the Investment Association, but this was closed in 2023 with the funds relocating to the IA Japan peer group.

They were joined on the list above by abrdn SICAV I Japanese Sustainable Equity, AXA Framlington Japan and abrdn Japanese Equity.

This is part of an ongoing series. Previously we have looked at the UK.

Global stock market concentration has spread well beyond the handful of US mega-caps that dominated headlines in recent years, with Schroders' latest research showing the same pattern now appears in emerging markets as well.

Investors have spent recent years treating the Magnificent Seven as the main source of concentration risk but that framing now seems outdated, given how much weight sits in a handful of countries and companies across other regions too.

The clearest evidence sits in emerging markets, Schroders' Equity Lens for July 2026 shows, where two countries and three chipmakers have come to dominate the benchmark.

US weight in global benchmarks, since 1969

Source: LSEG Datastream, MSCI, Schroders. Data to 30 Jun 2026

The US share of both the developed-markets MSCI World index and the broader MSCI AC World index has climbed over the past decade, according to Schroders' long-run chart of US index weight. The rise has taken the US share of these benchmarks towards the upper end of its history stretching back to 1969.

This is not a new phenomenon but the scale of the current reading puts today's US weighting among the highest points in more than 50 years of data.

Five US mega-caps vs the next five biggest countries in MSCI AC World

Source: LSEG Datastream, Schroders. Data to 30 Jun 2026

Schroders compared the combined index weight of Nvidia, Apple, Alphabet, Microsoft and Amazon against the combined weight of Japan, Taiwan, the UK, Canada and Korea within the MSCI AC World.

The two totals sit close together: those five companies now carry roughly the same influence over the global index as five entire countries.

This comparison highlights the scale of concentration more directly than country-level weightings alone, as a small number of stock-specific factors now move as much of the global index as issues affecting five national markets combined.

Taiwan and Korea's tech leaders have driven them to overtake China

Source: LSEG Datastream, MSCI, Schroders. Data to 30 Jun 2026

Taiwan and Korea have overtaken China as the largest markets within the MSCI Emerging Markets index, driven by their leading semiconductor companies.

China previously held the largest single-country weight in the MSCI Emerging Markets index but the shift has been driven almost entirely by a handful of chip manufacturers rather than a broader rotation across emerging market sectors.

Taiwan Semiconductor Manufacturing Company accounts for 55% of Taiwan's weight in the index, while Samsung and SK Hynix account for 34% and 32% of Korea's weight, respectively, as at 30 June.

Top five and next five stock weights across major markets

Source: LSEG Datastream, MSCI, Schroders. Data to 30 Jun 2026

Schroders' market concentration chart shows the top five and next five stocks account for a meaningful share of the index in every major market it covers.

This reveals how concentration is not confined to the US or to any single style of index, but shows up in developed and emerging markets alike, once measured at the level of individual stocks rather than sectors or countries.

Share of stocks outperforming the index

Source: MSCI, Schroders. Data to 30 Jun 2026

Schroders tracked the percentage of emerging market stocks outperforming the benchmark over time, alongside the equivalent measure for the US and developed world.

The emerging market reading has fallen towards its lowest point in the series shown, even as the index itself has produced strong headline returns.

This breadth measure supports the concentration argument: a narrow group of stocks is generating most of the index return, while the majority of emerging market constituents lag behind it.

Five multi-asset funds are offering investors a middle ground between low-cost passive exposure and the potential for excess returns from skilled managers by combining low costs with high returns over the past decade, according to Trustnet research.

As part of an ongoing series, we screened Investment Association (IA) sectors for funds that sit in the cheapest decile of actively managed strategies while also ranking in the top decile of their sector for 10-year returns.

Across four multi-asset sectors, investors would have made a higher average return over the assessed decade by investing in the cheapest decile of actively managed funds as opposed to the most expensive.

The most notable difference is in the IA Mixed Investment 40-85% Shares sector, where the average 10-year return for the cheapest decile sat at 131.7%, while the average for the most expensive funds in the sector was 88.6%.

Five funds across the four mixed asset sectors combined cheap costs with top returns – notably, no funds from the IA Mixed Investment 0-35% Shares sector.

Source: FE Analytics

The cheapest active fund with a first decile 10-year return is Orbis Global Balanced, which is co-managed by FE fundinfo Alpha Manager Alec Cutler and Mark Dunley-Owen and has delivered a 221.3% return over 10 years.

It is a strategy that stands out not only for its performance profile but also for its unconventional fee structure, offering an ongoing charges figure (OCF) of 0%.

Unlike other funds, Orbis Global Balanced charges no annual management fee. Instead, the firm is paid only when the fund outperforms, through a performance fee structure that can also refund charges to investors during periods of underperformance.

The £2.4bn strategy also holds an FE fundinfo Crown Rating of five and has been in the top decile for returns over four of the 10 years.

The contrarian nature of Orbis Global Balanced, coupled with a focus on intrinsic value, means the fund is highly active, with bottom-up stock selection that can lead to significant dispersion from peers.

The fund is ‘Elite-rated’ by FundCalibre, whose analysts said the managers “have shown they have the ability to build a bottom-up portfolio of holdings that can perform across a variety of market conditions”.

The portfolio typically holds between 90-140 positions, with the managers accounting for both equity and currency hedging. Positions are held with a three-to-five-year time horizon.

Two other funds in the table are also from the IA Mixed Investment 40-85% Shares sector: BNY Mellon Multi-Asset Global Balanced and Vanguard LifeStrategy 80% Equity.

Performance of the funds vs sector over 10yrs

Source: FE Analytics

At the opposite end of the table, M&G Managed Growth has the highest OCF of the five funds but is still one of the cheapest in the IA Flexible Investment sector at 0.63%. It also posted the second-strongest return in the table, with a 194.1% gain over the decade.

The £1.2bn fund aims to provide a higher total return – capital growth plus income – than the average sector return over any five-year period.

Managed by Craig Simpson and supported by Tony Finding, the strategy is a fund of funds, with at least 70% of its assets invested in company shares, either directly or via other funds.

Its largest position is the M&G Global Sustain Paris Aligned Fund (10.6%), which targets a higher total return over any five-year period while supporting climate change mitigation by investing in companies contributing to the goals of the Paris Agreement. Other top holdings include M&G Lux Episode Macro Fund (9.3%) and M&G North American Value Fund (9.1%).

Performance of the fund of funds vs sector over 10yrs

Source: FE Analytics

Finally, the only portfolio from the IA Mixed Investment 20-60% Shares sector to meet the criteria is Waverton Multi-Asset Income.

Its 10-year return of 90.8% is notably lower than the other funds in the table, which is likely due to the sector’s lower equity exposure and more cautious positioning.

Managed by James Mee since 2014, the £506m fund aims to achieve three objectives: grow capital in line with or ahead of inflation, pay a consistent level of income and limit capital drawdown in markets.

The strategy has historically maintained a flexible allocation, with around 50% in equities, 20% in bonds and 25% in alternatives, with the remainder held in cash. Top holdings include Amazon, 3i Infrastructure and Shell.

Titan Square Mile analysts said the fund is a “robust option for investors seeking a fund which can deliver a steady natural income as well as capital growth”.

They added: “Whilst the fund has now morphed from its original fund of funds structure, which it followed since launch, to its current approach, which is directly invested, the objectives of the fund have remains consistent. The directly invested nature of the fund means it is competitively priced relative to other actively managed peers.” 

Performance of the fund vs sector over 10yrs

Source: FE Analytics

M&G Japan is the only actively managed fund in the IA Japan sector to combine low costs with top-decile returns over the past decade, Trustnet research can reveal.

This latest article is part of an ongoing series that identifies actively managed funds that sit in the cheapest decile among their active peers, while also ranking in the top decile for 10-year total returns across the entire sector.

In Japan, only one fund met the criteria: M&G Japan, which has an OCF of 0.47% and 10-year return of 243.8%.

The £5.4bn strategy is managed by Carl Vine, with FE fundinfo Alpha Manager Dave Perrett as deputy, and targets a combination of capital growth and income to deliver a return higher than the MSCI Japan index over any five-year period.

They typically hold up to 60 stocks, with the largest holdings in the portfolio including Mitsubishi, Sony and Toyota. Positions sizes are typically between a 1% and 5% active weight, with smaller-cap names at the bottom of this range due to liquidity.

It is invested across the market capitalisation spectrum but carries an overweight to small- and mid-caps across the region.

The fund is popular among investment platforms and fund selectors. For example, it features among AJ Bell’s Favourite funds, with the platform noting that a £10,000 investment into the fund in 2016 would have swelled to £25,398 by the end of June 2026.

Growth of £10,000 invested in M&G Japan since 2016

Source: AJ Bell

Paul Angell, head of investment research at AJ Bell, said: “Given the relatively core approach, the fund can theoretically perform in any market environments, however, the fund should typically work best when company fundamentals and idiosyncratic stock selection are being rewarded and underperform in narrow thematic rallies or during periods of growth leadership.”

The fund is also on FE fundinfo’s Approved List of funds, with Sophie Turner, a fund analyst at the firm, highlighting manager Carl Vine’s strong track record in investing in Japanese equities.

“A key part of the management team’s process that we like is that they aim to remain sector neutral and have derived their consistent performance through strong stock picking,” Turner said. “This is something they have shown time and time again.”

The fund is also ‘Elite-rated’ by FundCalibre, with the firm’s managing director – Darius McDermott – noting the management team “knows Japanese companies inside and out, focusing on a core universe of around 250 stocks they have followed for many years”.

McDermott also highlighted the team’s constant dialogue with management teams as another key characteristic he likes about the fund.

When breaking the fund’s performance down by calendar year, it becomes clear that its 10-year record has been bolstered by its more recent performance record. It surged from its bottom-decile return of 3.6% in 2020 to the top-decile with a 13.8% return the following year.

Angell said that this recent strong run has been backed by “strong stock selection across robotics, semiconductors and manufacturers which have all been positive for returns”.

M&G Japan is slightly overweight industrials vs the index at 25.8% vs 24.7% and it is also overweight informational technology vs the index at 19.2% vs 18.8%.

McDermott concluded that, with an OCF of 0.47%, the fund is “exceptional value for genuinely active, high-conviction management”.

But M&G Japan is not the cheapest actively managed fund in the sector. That top spot goes to Aviva Inv Japan Equity Growth, which boasts an OCF of 0.06%. It has gained 172.7% over the decade.

Source: FE Analytics

It also isn’t the top performer outright – its 10-year return ranks seventh strongest among actively managed funds in the sector.

Source: FE Analytics

More broadly, investors who opted for the cheapest active funds would have enjoyed a higher average 10-year total return than if they had backed the most expensive, according to the Trustnet research.

The cheapest decile of active funds posted a 192.9% average 10-year gain compared to 163.9% for the most expensive.

Investing in the UK is like running up a down-facing escalator, according to JOHCM UK Equity Income manager Clive Beagles, who said the structural headwinds of the past two decades have made it extremely difficult for domestic funds.

It is no secret that the UK market is a dwindling power on the global stage. Once a powerhouse, it has less total market capitalisation ($2.8trn) than both Nvidia ($3.6trn) and Apple ($2.9trn), with other US tech giants not far from overtaking the entire market either.

And it will take real and meaningful change to arrest this. “Just tinkering around with little fiddly things isn't going to make any difference,” said Beagles.

The UK was once far more important, he noted. When the JOHCM UK Equity Income fund manager started his career in 1989, it was 15% of the world index and the second-largest equity market in the world.

“Every international investor had to have an allocation to the UK because it was too important. It was a badge of honour to be listed in the UK,” he said.

But the decline has been steady and unrelenting. Its allocation dropped to around 10% by the turn of the century and today stands at around 3.5%, placing it in third place after the US and Japan.

Beagles put this down to there being more sellers than buyers. This has been turbocharged by domestic pension funds, which in 2000 held around 50% of their assets in UK stocks. Today this figure stands at a paltry 2.8%.

Source: JO Hambro Capital Management

“Pension fund allocations in the UK have broadly gone from 50% to almost nothing. Obviously, that's been a very large supply of equity that has been hard to offset and it has left us in this pretty amazing situation where the UK is the only major developed market that is underweight its own domestic equity market,” he said.

As the table above shows, US pension funds’ allocation to their home market is broadly in line with global benchmarks, although Beagles noted that it is hard for them to be overweight given its 65% allocation in the global indices.

The more direct comparison is to other countries of similar stature, such as Australia, where pension funds have nearly 40% in domestic equities versus a 1.5% weighting in the index.

“You can see how significantly different other countries are. They care about their domestic equity market and all the natural benefits that flow from that,” said Beagles.

“In the UK we've just let this happen almost by accident and no politicians or regulators have been prepared to stand in the way.”

His solution is ‘mandation’ – forcing pension funds to invest in UK equities by taking away tax relief if they are not appropriately allocated. This, he said, would be a “sensible route” for the next iteration of the current government to go down, once a new prime minister and chancellor are in place.

“We’re not saying you can't have freedom in where you want to invest, but if you want to get your full tax relief, maybe you should be prepared to have a minimum allocation of some sort to the UK,” said Beagles.

“We're not asking for it to be 40 or 50%, but 10% would make the world of difference to valuations and then companies could get back to a more sensible valuation.”

This is far from the only thing that needs to change, however. A lifting of uncertainty, which has dominated the past decade since Brexit, would also lead to more confidence in the domestic market, said Beagles.

It should encourage retail investors – the other major part of the financial equation – to invest, rather than hoard their savings. The chart below shows the aggregate between savings held in cash deposits and loans. British people have £350bn in net cash, the most we have ever had.

Most of this has gone into cash ISAs, he argued, with between £40bn and £60bn being placed into the tax wrapper over the past three years.

“We're not short of cash or capital, it's just all in unproductive places. That money should be put to work more productively in the economy, rather than stuck in cash ISAs,” he said.

This is the mindset Americans have. The chart below shows UK residents save double the amount of cash as US citizens, who are more likely to invest. This has not always been the case, however.

Source: JO Hambro Capital Management

During Covid, savings went up as people could not spend their cash. Upon the world reopening, this plummeted as people splurged on things they were previously unable to, such as holidays, and the rate dropped below the long-run average.

In the past three years, the US has trended down to near all-time lows while in the UK the savings rate has drifted higher, back towards 10%.

Whether they invest or spend the cash, using this money will be beneficial for UK companies and markets.

“Two-thirds of UK GDP is made up of consumer spending. That's the thing that's going to change the dial – it's not going to be about becoming the next AI superpower or leading the next wave of decarbonisation, but about getting the consumer feeling a bit more confident and prepared to spend some of these excess savings,” said Beagles.

One way to encourage people to invest (or spend) is perhaps to reframe how we view the UK economy. Here, he said the media does not help here, as it “perpetuates a doom loop” that is not always accurate.

The JOHCM UK Equity Income manager acknowledged that economic growth had not been strong, but highlighted that it has grown by almost 15% over the past decade. While this is “not a great number”, it is faster than four of the other G7 countries and only behind the US and Canada.

“The ONS's [Office for National Statistics] initial estimates of GDP tend to start off with a very low number and subsequently get revised higher,” Beagles noted. Over 20 years this has averaged as a 0.39 percentage point increase each year.

“So if the initial estimate put GDP growth at 1%, the actual outcome is 1.4% — that's quite significant. The problem is people don't even read past the headline. They hear GDP this year was 1%, it was rubbish and they don't look at the subsequent revision.”

While India’s domestic economy has remained resilient in the face of global turmoil over the past year, the rupee has emerged as a sticking point for many foreign investors.

Supported by credit growth, domestic demand and broader structural tailwinds, the economy is estimated to have grown at 7.7% for the year ended in March – the latest reading. But currency weakness, foreign outflows and oil-price sensitivity have all weighed on sentiment.

Recent policy action marks a clear turning point, with the Indian authorities moving decisively to ease those pressures, support the rupee and restore confidence among overseas investors.

This shift could prove to be a defining moment for India’s long-term growth story.

The local currency problem

The key issue for some foreign investors hasn’t simply been Indian market performance in local currency terms, but the translation back into dollars.

A falling rupee can quickly erode otherwise attractive returns and a local bond yield or equity gain becomes less compelling if much of the return is lost through currency depreciation.

Over the past 12 months, the rupee has depreciated by 11%, with 5% of that decline coming in recent months as global geopolitical tensions have escalated.

Compounding this, the yield premium investors earn on Indian bonds over US treasures has narrowed to roughly 2.4%, while the five-year spread is around 2.7%, according to Jefferies.

In practical terms, foreign investors have had less compensation for taking currency risk, raising the hurdle for overseas capital.  However, Indian authorities have now introduced measures intended to address this, as set out below.

Removing the Indian debt drag

The first policy response has been to improve the appeal of Indian government bonds. Indian authorities have removed withholding tax and capital gains tax for foreign investors in certain bonds, directly improving the after-tax return available.

Removing that drag makes Indian debt more attractive and may signal that policymakers want to reopen the door to foreign capital while the rupee is under pressure.

The early response has been constructive. Foreign funds bought $4.4bn of government bonds in June vs. $1.6bn YTD to May. This suggests overseas investors are already reassessing allocations.

Foreign currency deposit window

The second measure is potentially more significant. The Reserve Bank of India has opened a foreign currency deposit window aimed at non-resident Indians, allowing overseas Indians to place foreign currency deposits with Indian banks while the RBI absorbs the currency hedging cost.

This creates a route for dollar inflows without asking the depositor or the bank to take the same foreign exchange risk.

There is precedent for this policy. India used a similar FCNR-B deposit window in 2013 during the taper tantrum when the rupee was under heavy pressure.

Jefferies estimates that the 2013 scheme mobilised $34bn in total foreign currency inflows, equivalent to around 12% of India’s foreign exchange reserves at the time. FCNR-B deposits rose from around $15bn before the scheme to around $40bn during the window.

Reuters has reported that Indian banks could raise $35bn–$40bn through the current scheme. Given the Indian economy diaspora and remittance base are all considerably larger than they were in 2013, the eventual inflow could provide a useful buffer for the currency and wider balance of payments.

The bigger picture

While India is attempting to ease the macro pressure, the domestic story remains very much intact. As a major energy importer, India remains sensitive to higher crude prices, which can increase the dollar import bill, pressurise the external balance and weigh on currency confidence.

Recent data, such as increased foreign debt flow in June and a ~20-basis-point fall in the 10-year yield, suggest the policy measures are having their intended effect.

For foreign investors, this helps separate the macro issue from the underlying investment case as the domestic economy remains supported by solid credit growth, resilient demand and structural reform.

And while global equity markets have become increasingly concentrated around AI-related exposure and emerging market indices are becoming increasingly tilted towards technology, India might offer a different, diversified source of growth – a large, domestic-demand-led emerging market with deep structural drivers, a wide corporate universe and a reform-minded policy backdrop.

If the rupee stabilises, this could encourage international investors to refocus on those fundamentals.

Putting the micro back in focus

The rupee has been a genuine challenge for foreign investors in India.

Recent policy action does not remove every external risk, but it does show a clear willingness and commitment to supporting the currency, restoring confidence and bringing capital back.

While the macro picture has been a problem, these decisive actions are aimed at lowering the hurdle for overseas capital and could help isolate India's robust domestic growth from external noise.

Andy Draycott is portfolio manager of the Chikara Indian Subcontinent fund. The views expressed above should not be taken as investment advice.

Terry Smith's decision to put less emphasis on the 'do nothing' leg of his investment mantra has drawn a mixed response from fund analysts, ranging from sympathy for his read of the market to scepticism about why the change has come only now.

Smith has long run his £12bn Fundsmith Equity fund with three rules: buy good companies, do not overpay and do nothing. But in his recent semi-annual letter to investors, the manager said while the first two legs stand, the third needs revising.

The fund opened 12 new positions in the first half of 2026, including GE Vernova, Mastercard, TSMC and Netflix, while exiting Unilever, Novo Nordisk, Nike and Zoetis, taking portfolio turnover to a high.

Smith's justification for the change rests on a market he sees as dominated by passive flows and AI-driven momentum rather than fundamentals. He singled out one technique he is stepping back from: buying quality companies after a setback, the approach that worked for Warren Buffett's investment in American Express during the salad oil scandal.

In today's market, he wrote, "all we are getting is cut fingers as their downward share price spiral is exacerbated by the index momentum enhancement effect".

Performance of Fundsmith Equity vs sector and index in H1 2026

Source: FE Analytics. Total return in sterling between 1 Jan and 30 Jun 2026

Fundsmith Equity fell 2.9% in the first half of 2026, against an 11.2% gain for the MSCI World index in sterling terms. Portfolio turnover reached 51.8%, a high for the fund.

Smith said: "We run open-ended funds, and you can and increasingly have been taking money out, we suspect mostly to join the exodus from active to passive, or possibly to invest in managers who profess that they understand quality better than we do.

"They may be right, or they may just be closet momentum investors, which will be fine until it isn't. However, there will be little point being proved right about the dangers of passive or momentum investment after our fund has closed."

Ben Yearsley, director at Fairview Investing, pushed back on that framing, saying "it feels a bit disingenuous" for Smith to suggest managers who have done well are just momentum chasers.

But Yearsley's larger question is one of timing. "Is he admitting after 16 years that he has been wrong? And if so, why has it taken until now to change course?" he said, noting that the quality style favoured by Smith and managers such as Nick Train has been out of favour for several years already.

Simon Evan-Cook, manager of the MGTS Downing Fox funds, was cited approvingly in Smith's letter for his own writing on the shortcomings of passive investing. He took a more sympathetic view of the Fundsmith Equity manager's move.

"There was an industry belief that low turnover = good, high turnover = bad, and that cast a long shadow," Evan-Cook wrote on LinkedIn. "But that was oversimplified, and now markets have changed too."

He agreed with the view that markets are genuinely different after quantitative easing and the Covid pandemic, with volatility returning "with a bang".

"Active investors aren't driving any more, so it makes sense to adapt to the craziness that now happens. Being on the wrong side of that hurts investors," he added.

Rob Morgan, chief analyst at Charles Stanley Direct, cautioned against attributing all of Fundsmith Equity's underperformance to the dynamics Smith described.

He pointed out that the fund sits in the fourth quartile of the IA Global sector over one, three and five years while the iShares Edge MSCI World Quality Factor UCITS ETF, charging a quarter of Fundsmith's fee, has beaten it comfortably over the same periods.

Performance of Fundsmith Equity vs sector and quality ETF over 5ys

Source: FE Analytics. Total return in sterling between 1 Jul 2021 and 30 Jun 2026

Even allowing for the ETF's heavier technology weighting, Morgan argued that this suggests Fundsmith's underperformance is not just about momentum and passive dominance alone.

On the change itself, he had some sympathy: "It makes sense to acknowledge the market characteristics and aim to take advantage of outsized moves rather than simply being a cork on the ocean of volatility. In that sense, modifying the 'do nothing' part of the approach is logical."

But he suggested the actual changes go well beyond that description. Pointing to Smith's retreat from buying quality companies after a setback and the new weight placed on price and fundamental momentum, Morgan asked: "Does the first part of the fund's mantra now become 'buy good companies that are not falling in value' and it's a case of if you can't beat the momentum investors join them?"

Yearsley raised a related concern about execution. "I don't have an issue with tweaking the style, however the question to be asked now is whether Terry and team can deliver in a faster-paced environment with more change at a portfolio level. Will they end up chasing performance?" he asked.

In his letter, Smith questioned the market's enthusiasm for the AI-driven narrative while adding names such as TSMC that sit inside that same ecosystem. Morgan noted that these businesses would be unlikely to escape unscathed if AI infrastructure spending disappointed.

Yearsley said it seems "a bit weird" to be adding holdings like TSMC after such a strong run. Morgan added that this raises the question of whether these are "a short-term trade rather than a long-term hold".

On where all this leaves investors, Morgan said: "The crucial question that must be asked: whether the manager has made a correct, pragmatic decision to adapt to a new world or whether he is mistakenly abandoning an important tenet of his process. Ultimately, this probably depends on where you stand on the market dynamics right now."

Yearsley said he has not been an investor in Fundsmith Equity and "probably wouldn't start now".

Evan-Cook concluded that Smith's portfolio changes are, at the moment, "Schrödinger's Trade: simultaneously both a good idea and a bad one".

"We will only know if it's a stroke of genius or a miscalculation once the markets have judged," he said.

"I hope it pays off. Fundsmith has made investors a lot of money over the years, and it's been a great advert for active fund management (and at a time when other star managers were screwing up). We need more success stories like this."