China is an essential trade partner for the world, which has come to rely on its low-cost, decent-quality goods – and the US is no exception, according to Sammy Suzuki, FE fundinfo Alpha Manager of the AB Emerging Markets Multi-Asset Portfolio and the SVS Alliance Bernstein Low Volatility Global Equity funds. “The entire US economy cannot sustain itself without products from China,” he said.

Donald Trump’s tariff climbdown this week suggests he may have come to a similar conclusion. The US president had already exempted electronic imports from tariffs, sparing China from an extreme scenario in which people could no longer buy smartphones.

“In the modern era, if consumers can't access their smartphones, there would be riots. I don't know if that would have been politically wise – which is probably why Donald Trump had backed down on the electronics portion of the tariffs,” said Suzuki.

(In a similar vein, Iain Stealey, global fixed income chief investment officer at JPMorgan Asset Management, told Trustnet that if Trump had stuck to his guns and maintained extortionate tariffs on China, the resulting economic slowdown could have pushed the US into a recession.)

China’s economy is more resilient to disruptions in trade flows than investors may think, Suzuki continued. The current trade wars are only the latest chapter in a long story. Trump has been tightening the noose on China since he introduced tariffs during his first term but, despite his best efforts, China’s share of global exports has actually increased by 150 basis points during the past five years, he said.

China has maintained its dominant position in global trade by shifting its focus away from the US, towards countries such as Mexico and Vietnam, whose share of global exports increased by 20 basis points during the past five years. China’s continued dominance over global trade has encouraged Suzuki to keep faith. He has been identifying opportunities in the country for over a year, even as markets have moved in the opposite direction.

This has paid off since 2024, when the AB Emerging Markets Multi Asset Portfolio jumped ahead of the benchmark and of its peer group, as the chart below shows.

Performance of fund against index and sector over 3yrs

Source: FE Analytics

“A year ago people were saying that nothing good is happening in China and we should be overweight India just like everybody else, but that's not how we have been positioned,” he said.

The manager is convinced that country selection doesn’t drive returns as much as stock selection does, so he is focusing more on the 600 stocks that are available to buy in China.

“Is it possible that every single one of them are bad investments, or is it possible that because most people don't like China, there are 10 or 20 companies that are good investments that are being overlooked?”

In particular, he has identified three buckets: exporters, domestic growers and high-dividend yielders.

Companies in the third bucket are often value stocks and can be state-owned enterprises trading at a discount. “These are good, steady businesses with a 6% or 7% dividend yield, which the government is trying to restructure to improve the corporate governance and encouraging to pay out dividends a little bit more,” Suzuki explained.

“That can have a huge impact on the valuation, once they demonstrate that they're doing some of these things. So that's an opportunity.”

China and its companies have shown resilience, and even the most feared scenario among shareholders – a potential invasion of Taiwan – doesn’t overly concern Suzuki. “An invasion isn’t likely,” he said, adding that China’s dominance in global trade might even withstand such a crisis. “Even if China goes down that path, would we really stop all imports from the country? I’m not so sure,” he concluded.

The healthcare sector has a strong track record for successfully solving some of humanity’s most urgent challenges via medical innovation, a trend traditionally led by breakthroughs coming mainly from the scientific community. However, in recent years we have begun to witness healthcare solutions originating from organisations where technology is increasingly used to enhance scientific research processes – with advanced robotics, diagnostics and artificial intelligence (AI) equipment now occupying prominent roles in the modern medical research lab.

This increase in momentum could not have come at a more opportune time, with demographic challenges now creating pressure points throughout the global healthcare supply chain centred around ageing populations, a rise in lifestyle-linked ‘diseases of modernity’ and soaring costs.

Cost in particular is responsible for driving the creation of underserved patient populations, otherwise known as ‘medical deserts’. These deserts have historically arisen within rural communities; however, they are becoming increasingly prevalent within developed countries across regions which would otherwise be considered urbanised. For example, in the US almost 80% of counties are judged to lack adequate access to essential health services, whilst in France almost 50% of the population has either delayed accessing healthcare or foregone treatment entirely.

One notable example of a medical sector dramatically transformed by the confluence of technology and scientific research is cell and gene therapy, which has seen rapid growth, with over 1,200 therapies now in clinical trials globally. This is a significant leap from just five years ago when there were fewer than five therapies approved by the US Food and Drug Administration (FDA). Today, there are 38 approved therapies and the market has diversified its focus from rare diseases and oncology to include genetic disorders and autoimmune conditions, among others. This progress is largely driven by the enhanced precision of gene editing tools as technology has evolved.

Despite these encouraging advancements, one of the surprisingly persistent challenges facing the medical industry is the ability to scale production as a drug reaches commercialisation stage. The high costs associated with manufacturing coupled with the complexities of scaling the production of a new treatment often halts the progress of these lifesaving therapies and makes it difficult to find investors willing to commit the necessary funding to develop new treatments in the first place. This creates a space where active private equity investment by sector specialists can make a real difference.

Healthcare companies in the meantime are positioning themselves to capitalize on this wave of investment interest by strengthening and diversifying their supply chains, as well as outsourcing to ensure scalability of production can actually be achieved – resulting in a compelling range of opportunities for investors.

At Patria Private Equity Trust, we invest in the 'picks and shovels' of the medical industry rather than taking on the significant, often binary, risk associated with individual drug development or single product investments. In the cell and gene therapy market, this has included contract development and manufacturing organizations (CDMOs) and manufacturers of inputs into gene therapies, such as plasmids and reagents.

One example is Clean Biologics, a contract manufacturer and testing business based in France, which provides services for biotherapeutic development that are compliant with the FDA’s good manufacturing practices (GMP) regulations. Clean Biologics benefits from the rising pipeline of biotherapies and, particularly for such biotherapies, the trend towards increased outsourcing by biopharma companies due to stringent regulatory requirements and a lack of in-house expertise and capacity. As the leading testing provider in the European market, Clean Biologics is well positioned to benefit from this structural tailwind.

Looking beyond cell and gene therapy, Patria Private Equity has made several investments in health tech, including DocPlanner, a rapidly expanding digital health ‘matchmaking’ platform which connects patients with healthcare providers. We have seen an increase in consumer demand for accessible and convenient healthcare services offering a streamlined process, something which DocPlanner delivers through its software as a service (SaaS) tool, which enables healthcare providers to optimise patient flow, reduce no-shows for appointments and digitize certain aspects of operations.

Focusing on the mid-market, technology advancement is moving particularly fast within smaller, agile healthcare businesses, which are less likely to be encumbered by legacy processes or dated technology stacks. This corner of the market is accelerating the pace of change across the wider healthcare market, leveraging emerging technologies to develop medical products and services faster and more cheaply than larger competitors.

Companies fitting this profile are the kind of investments likely to be found within Patria Private Equity’s portfolio because of the greater potential to unlock value. It is our view that the future winners in the healthcare market will be those businesses who understand clearly that success relates just as much to the practical aspects of running a business as it does to the scientific talent driving the discovery of a new cure. Companies which strike this difficult balance will stand a much greater chance of building long-term profitable businesses whilst simultaneously delivering life-saving treatment – two concepts which are no longer mutually exclusive.

Karin Hyland is a partner and deputy head of co-investments and Andrew McMillan is an investment director at Patria Private Equity Trust. The views expressed above should not be taken as investment advice.

Funds investing US equities, tech stocks and uranium miners are among those making the highest returns since markets started to recover from the Liberation Day sell-off, FE fundinfo data shows.

Markets were rocked on 2 April – so-called Liberation Day – when US president Donald Trump unveiled trade tariffs on much on the world and later embarked on a tit-for-tat series of hikes with China.

However, risk assets started recovering from 9 April, when the US announced a 90-day delay on most tariffs to allow time for trade deals to be negotiated. Last week, the UK was the first country to clinch a trade deal with the US, then markets rallied yesterday when the US and China agreed to slash tariffs.

Between 2 April and 9 April, the MSCI AC World fell 9.5% in sterling terms but it has rallied 12.8% since the tariff delay was announced (aided by a 3% jump yesterday after the US-China deal).

This means that global equities have gained 2.1% since Liberation Day, led by growth and tech stocks – the same areas that led the falls when the tariffs were first announced.

Performance of MSCI AC World and sub-indices since 2 Apr 2025

Source: FinXL

The impact on funds has been just as noteworthy. Between 2 April and 9 April, 90% of the funds in the Investment Association universe made a loss but this has since reversed and 88% have made a positive return since 9 April’s tariff delay.

This means that 75% of funds have made a positive return since Liberation Day – an outcome that many commentators at the time (including this journalist) would have thought very unlikely.

FE fundinfo data shows there are 20 peer groups where every fund is in positive territory since 9 April, including IA UK All Companies, IA UK Equity Income, IA UK Smaller Companies, IA Mixed Investment 40-85% Shares, IA Global Equity Income and IA China/Greater China.

IA Global just missed out with 99% of funds in the black while the stat for IA North America is 98%.

However, it’s worth remembering that many of these sectors had 100% of their members posting losses in the week after Liberation Day.

But which funds have made the biggest gains since the 90-day tariff delay reassured markets and sparked a jump in investor sentiment?

According to FE Analytics, the average fund in the IA Technology and Technology Innovations sector is up 15% since 9 April, followed by IA Financials and Financial Innovation (up 14.1%), IA UK Smaller Companies (up 13.9%) and IA European Smaller Companies (up 13.4%).

As the table below shows, many of the individual funds with strong returns are relatively niche strategies, rallying hard as investor sentiment improved but taking heavy losses when markets panicked.

Source: FinXL

Among the best performers are Sprott Junior Uranium Miners UCITS ETF and HANetf Sprott Uranium Miners UCITS ETF. Uranium and its miners have outperformed the wider stock and commodity markets in recent years, supported by growing interest in nuclear power and a supply deficit.

Uranium prices hit a record high in February and have since come off their peak but were relatively stable when stocks, bonds and other commodities were hit with Liberation Day volatility. However, its miners were still caught up in the sell-off.

Jacob White, ETF product manager at Sprott Asset Management, said: “In a market increasingly gripped by macroeconomic volatility and rising correlation across asset classes, uranium is quietly distinguishing itself, holding firm where others have cracked.”

Other themes can be seen in the list of the strongest funds during the rally, including the resurgence of tech stocks.

Nikko AM ARK Disruptive Innovation, Candriam Equities L Robotics & Innovative Technology, AB International Technology Portfolio and WisdomTree Artificial Intelligence UCITS ETF are among the top performers.

Tech stocks led the market for a considerable amount of time but started to struggle in the past few months as investors worried about excessive valuations and weakening growth.

They were hit hard when it looked like Trump’s widespread tariffs could derail the US economy but have rallied strongly after the 90-day delay was implemented and trade deals started to emerge.

Seventeen workplace pension providers have promised to invest at least 10% of defined contribution (DC) default funds in private markets by 2030, with at least half of this earmarked for UK assets.

M&G, Aviva, NatWest Cushon, TPT Retirement Solutions, now:pensions, Mercer and others have committed to do this by signing the Mansion House Accord. This voluntary agreement doubles pledges made in the 2023 Mansion House Compact, which had a 5% private equity target.

Chancellor Rachel Reeves is planning to introduce legislation later this year to compel pension funds to invest up to £50bn in private assets if they do not make sufficient progress on their own, according to the Financial Times. Mandatory targets would be a last resort.

Signatories claimed that private market investments would enhance returns for pension savers whilst stimulating the UK economy.

Andrea Rossi, chief executive (CEO) of M&G, said: “Private markets play a fundamental role in shaping the world around us through long-term investment in real estate and infrastructure projects, alongside lending to and investing in companies that contribute to economic growth. By enabling and encouraging greater investment into these assets, individuals could benefit from enhanced returns, greater diversification and better value.”

Another benefit of investing domestically is helping people feel more connected with their retirement savings, said Ben Pollard, CEO of NatWest Cushon, the workplace savings and pensions fintech. “These types of investments are real and tangible and show savers how hard their money is working to improve their standard of living in the UK,” he explained.

For instance, NatWest Cushon invests in a sweet pepper farm in Suffolk whose carbon footprint is 75% lower than conventional farms because it reuses waste heat from a nearby water treatment works.

“The low carbon farm in Suffolk is a great example of a real and tangible investment that brings pensions alive for savers. Our customers can visit and physically see how their pension is being invested and then go into a supermarket and literally eat the fruits of their investment,” Pollard said.

Many pension schemes already invest in productive finance and most are open to investing more in the UK, but the government needs to play its part in facilitating these investments, said David Lane, CEO of TPT Retirement Solutions.

“Hurdles remain around value for money considerations and the availability of suitable investment opportunities. These should be a focus for government policy to spur more investment,” he stated.

“The most pressing issue to deal with is that provider pricing practices leave very little room in the annual management charge for investment fees. There needs to be a shift to a value for money approach that considers the returns from an investment and not just its fees.”

Today’s agreement could be “the thin end of the wedge” as far as government interference in pension funds’ investment strategies goes, warned Jason Hollands, managing director at wealth management firm Evelyn Partners.

“However desirable the government’s objectives might be – like boosting economic growth – from a public policy lens, the fear is that pension schemes could be distracted from the interests of the end saver, which should be their primary concern,” he said.

“Pensions have a fiduciary duty to deliver decent risk-adjusted returns for their members, not serve domestic public policy goals. Sizeable allocations to illiquid investments are not without risk.”

Reeves’ threat of mandatory targets also raises alarm bells. “The gnawing concern is that this ‘voluntary’ commitment is really a case of the government wielding a stick rather than offering a carrot,” Hollands said.

“Some heavy-hitting commentators like baroness Altman have called for a mandatory allocation of 25% of UK savers’ pensions into UK assets in order to qualify for tax reliefs. Others in the City are lobbying for measures that would refocus stocks and shares ISAs on UK investments.

“Whether by stick or carrot measures, it is possible that we have passed the era of peak investment flexibility in tax-efficient UK accounts.”

One month after US president Donald Trump jolted markets with his controversial 'Liberation Day' tariffs, most of the initial panic has subsided. Talks have resumed and relations are tentatively improving, even with long-time adversary China. Investors appear to be slowly regaining confidence, though a sobering consensus is emerging: the dollar is on a steady path of decline.

This is the view of Iain Stealey, global fixed income chief investment officer at JPMorgan Asset Management and co-manager of the JPM Global Bond Opportunities fund, who declared: “We have reached peak dollar and peak US enthusiasm”.

“The dollar has been on a one-way trade for the past couple of decades, and that is now being unwound,” he said. “I'm not sure whether it will continue to unwind at the same pace that we have seen over the past month or so, but I do think a structural decline of the dollar has begun.”

Over the year to date, the currency has lost 5.9% of its value against the pound, as the chart below shows, despite regaining some of its losses yesterday.

US dollar in sterling terms over the year to date

Source: Google Finance

The main culprit is politics, Stealey said, but he also pointed to market dynamics in Asia, where support for the dollar has started to wane.

In Asia, people generally prefer to save money in unhedged dollar assets. This worked while the dollar was appreciating, but to avoid volatility, investors now need to adjust their hedge ratios – something insurance companies across Taiwan, Japan and Korea have already begun doing, Stealey explained.

Asian and emerging markets stand to gain significantly from a weaker dollar, the manager continued. “If traditional support for the dollar from Asian holders continues to fade, a weaker dollar – and the resulting decline in real yields – could provide a powerful tailwind for emerging market debt,” he said.

Emerging markets aren’t only benefiting from a positive currency impact, but also from constructive monetary policy.

“Central banks in emerging markets jacked up rates more aggressively and more swiftly than in developed markets, but they haven't cut them as much over the last year or so,” Stealey explained.

This has brought “quite attractively high real yields on offer” in places such as Mexico, where bond yields are over 9% while inflation is running at 4-5%, and Brazil. The £178m JPM Global Bond Opportunities fund has 5.4% in Mexico and 11.1% in emerging market debt.

Stealey isn’t the only manager finding emerging market debt appealing. Mike Riddell, manager of the Fidelity Strategic Bond fund, increased his allocation to local-currency emerging market debt to 16%– the highest level of his career.

For investors, the implications of a structurally weaker dollar are far-reaching, and for some, a prompt to reconsider portfolio positioning. The shift and the subsequent uncertainty have fuelled a surge in demand for traditional safe havens like gold, but at the same time, other so-called safe assets – most notably US treasuries – are facing a more critical reassessment. April’s disappointing performance across US fixed income has led some to question whether treasuries still deserve their reputation as a reliable refuge in times of market stress.

Despite these concerns, Stealey continues to view US government bonds as a cornerstone of stability, maintaining a significant 45.1% exposure in his fund. He argued that treasuries may retain their safe-haven status for some time yet, particularly if president Trump continues to retreat from his aggressive ‘Liberation Day’ stance.
“If nothing changed from the Liberation Day plan, the US would head into a recession,” Stealey said. “But Liberation Day was peak tariff uncertainty, and we are walking back from it slowly but surely.”

Evelyn Partners has launched its Cash & Cautious Bond portfolio service to UK financial advisers, providing a discretionary investment option designed to offer enhanced returns on cash holdings while maintaining low risk during a period of falling interest rates and global uncertainty.

Originally offered to Evelyn Partners’ direct clients from 2023, the strategy is now available to advisers for use with clients requiring capital preservation and liquidity. The portfolio invests in a mix of liquid, short-dated instruments including cash deposits, money market funds, UK Treasury bills, gilts and bonds issued by highly rated global institutions.

The strategy targets a return above those available from traditional cash accounts, aiming to reduce interest rate and credit risk while offering broader diversification than cash management or gilt ladder products. Investments are actively selected from a pre-approved list and tailored to individual liquidity needs and investment timelines.

Matthew Spencer, head of intermediaries at Evelyn Partners, said: “Our Cash & Cautious Bond strategy has been a widely welcomed solution over the past couple of years for direct clients of Evelyn Partners looking for a home for substantial cash balances. Savings accounts are already seeing reduced returns and with central banks expected to continue to cut benchmark rates, as we saw last week with the latest reduction by the Bank of England, this is set to continue.

“There’s a window of opportunity for financial advisers to lock in elevated short-term bond yields for their clients as part of a diversified and low-risk strategy. Current global economic uncertainty and volatile equity markets mean many clients are also looking for somewhere to earn an enhanced return compared to cash, while they wait until the macroeconomic outlook becomes clearer before putting money to work in riskier assets.”

The Cash & Cautious Bond portfolio service has an annual management fee of 0.15%, made up of a 0.10% custody fee and a 0.05% investment management fee. The firm does not apply transaction charges or commissions and invests directly in underlying instruments to minimise costs. All assets are held on Evelyn Partners’ custody platform in nominee accounts.

The strategy is rated as level 1 on Evelyn’s internal seven-point risk scale. It has no upper investment limit and permits top-ups at any time. Underlying assets are liquid and can be sold quickly if needed. The firm recommends a minimum investment size of £500,000.

Ian Kenny, investment management partner and head of fixed income at Evelyn Partners, added: “Interest rates and bond yields have been on quite a journey, moving from all-time lows to decade highs over the past few years, and that has fundamentally changed the landscape for savers and asset allocators at the short end.

“Now is a great time to be having conversations about cash or near-cash to make sure that cash balances are well-mapped to need and preference and are working as hard as they can be. The disciplined Cash & Cautious Bond framework allows us to build bespoke portfolios to suit each client’s needs and preferences but within a structure that is mindful of and limits interest rate, credit and liquidity risks.”

Investors may be understandably nervous as president Donald Trump’s fluctuating and contradictory approach to trade has made navigating markets challenging this year.

As such, Trustnet asked three experts which funds they would pair together to weather the volatile market environment of the past few months. One strategy stood out as a clear favourite for all three: Capital Gearing Trust.

When equity markets seem particularly turbulent, Anthony Leatham, head of investment companies research at Peel Hunt, said defensive strategies such as Capital Gearing Trust that “preserve capital over the short-term and build real wealth over the long-term” become extremely compelling.

He highlighted the trust’s positioning, with 30% in risk assets, 38% in index-linked bonds and 32% in dry powder (cash, treasury bills and corporate credit).

Tom Bigley, fund analyst at interactive investor, also praised its asset allocation, in particular the emphasis on index-linked government bonds was highlighted for “offering protection when stock markets fall and providing a shield against inflation”, which makes it well suited to today’s more volatile market environment.

Year to date, the portfolio is up 1.1% while the IA Flexible Investment sector is down 0.1%. As shown in the chart below, it slid much less than its peers following the announcement of ‘Liberation Day’ tariffs, demonstrating its defensive characteristics.

Performance of trust vs sector and benchmark YTD

Source: FE Analytics

Matt Ennion, head of fund research at Quilter Cheviot, explained that, while it is tempting to view the strategy as an “all-in-one solution”, due to current market turbulence, the trust cannot do it all alone.

As such, Leatham, Bigley and Ennion highlighted the funds and trusts that can serve as a complement for Capital Gearing in an investor’s portfolio.

AVI Global Trust

Leatham suggested investors should pair Capital Gearing with a “differentiated, low-beta global equity portfolio”, such as AVI Global Trust.

The trust takes an “unconstrained and high conviction” approach to global equities, prioritising companies trading at a significant discount to book value. This means the portfolio favours different holdings than a traditional global equity strategy, highlighted by its 23% allocation to Japanese equities and 41% allocation to family-run companies, Leatham said.

It is up by 107.2% over the past five years, compared to the IT Global sector average of 40%, the best performance in the peer group.

Performance of trust vs sector and benchmark over the past 5yrs

Source: FE Analytics

Leatham added that while Capital Gearing and AVI Global share an emphasis on valuations and taking advantage of market volatility, AVI Global “has a much higher correlation to equities”. As a result, Capital Gearing makes a compelling “defensive counterweight” to AVI Global’s contrarian approach.

Fidelity Global Dividend

Bigley argued the best complement to Capital Gearing was another defensive fund – Fidelity Global Dividend.

The £3.4bn portfolio is managed by Daniel Roberts and targets “well-established global large-cap companies from around the world”, he said. The fund has a relatively defensive positioning, with high allocations towards financials (25.8%), consumer products (19.4%) and industrials (18.2%).

Bigley added: “The yield of 2.6% currently on offer from this fund is modest versus other income strategies. However, the focus on dividends and dividend growth can enhance stability and provide diversification in an uncertain environment.”

For example, year-to-date the fund is up 6.5%, despite ‘Liberation Day’ tariffs which caused markets to nosedive. This is ahead of the IA Global Equity Income sector, up 0.3%, and the MSCI ACWI, which has slid 4.7% following market turbulence.

Performance of fund vs sector and benchmark YTD

Source: FE Analytics

This builds on a strong medium-term record for the fund, which ranked in the first quartile of the IA Global Equity income sector over the past one and three years.

JP Morgan Global Growth and Income

Ennion also recommended an equity income strategy: The JPMorgan Global Growth and Income Trust.

Managed by FE fundinfo Alpha Managers Helge Skibeli, James Cook and Timothy Woodhouse, it aims to beat the MSCI AC World index while providing a good yield, Ennion explained.

Over the past three, five and 10 years, it delivered top-quartile results in the IT Global Equity Income sector. Over the past decade, it surged 248.9%, the best return in the sector, beating the MSCI ACWI by more than 80 percentage points.

Performance of trust vs sector and benchmark over the past 10yrs

Source: FE Analytics

The trust is a high-conviction portfolio, which has been a challenge for the strategy recently, due to high allocations towards mega-cap tech stocks that have taken a hit this year. Despite this, Ennion argued the strategy remained a solid complement to Capital Gearing.

He said the emphasis on “superior earnings at reasonable valuations” as well as a 4.26% yield from both capital and income is a key selling point. “This is a combination that we believe enables the trust to achieve consistently good returns for clients," he said. Indeed, the trust has outperformed the MSCI ACWI every calendar year since 2019.

Additionally, with a 0.42% ongoing charges figure (OCF), Ennion argued it is a “relatively cheap way” for investors to access global equity markets.

It was easy to forget about regional diversification when the US was shooting the lights out and US exceptionalism seemed an innate advantage that would endure.

But this year, the S&P 500 has slid from the top to the bottom of the performance charts like in a game of snakes and ladders. 

As such, global equity funds that ignored their benchmarks (which had two-thirds to three-quarters in the US) and pursued a radically different approach to regional asset allocation were best placed to protect investors’ capital this year.

Geographical diversification would also have served investors fairly well over the past decade, as the table below illustrates. A broadly diversified portfolio with a substantial home bias would not have kept up with the S&P 500 but it would have outperformed all other major regions over 10 years.

The grey box in the table below represents a hypothetical portfolio with 25% apiece in the FTSE 100 and S&P 500, then 15% each in emerging markets and Europe ex-UK and finally 10% each in Asia ex-Japan and the TOPIX. By comparison, the MSCI All Country World Index had 64.6% in the US and 3.4% in the UK, as of 31 March 2025.

This diversified portfolio was not the best performer in any of the past seven full calendar years and it only came second once but, equally, it never incurred the worst losses and was only second-worst once. Overall, as mentioned above, its 10-year annualised return in sterling beat every other major region except the US.

World stock market returns vs a geographically diversified portfolio

Source: LSEG Datastream, MSCI, S&P Global, TOPIX, J.P. Morgan Asset Management. All indices are total return, data as of 29 Apr 2025.

Spreading an equity allocation across different regions can also help give investors a smoother ride, as their portfolio is not over-exposed to one market when economic shocks hit, said Natasha May, global market analyst at JP Morgan Asset Management.

“Take 2022: the UK stock market was one of the few regional indices to post a positive total return, as its defensive characteristics and high energy weighting helped returns during high inflation and rising interest rates. Broad regional diversification in this period would have helped limit losses in equity investors’ portfolios, more so than a fully benchmark-aligned strategy,” she explained.

“Investors should expect to experience periods in which one market outperforms for an extended interval. But over the long run, broad regional diversification has proved its worth in insulating equity portfolios from economic uncertainty and geopolitical shocks.”

Ultimately, the chart above suggests that instead of cherry-picking the best-performing market from here on, investors would be better off with a well-diversified portfolio – especially now, with the outlook for US equities being so uncertain.

Indeed, several asset managers have predicted that the US will be one of the worst-performing regional equity markets during the decade ahead.

Ninety One, for example, expects US equities to return 3.6% per annum on average in dollar terms for the next 10 years. This puts the US on a par with Europe ex-UK (in local currency terms), although Ninety One expects the UK, Japan and emerging markets to each deliver more than 5% per annum.

Dan Morgan, a multi-asset analyst at Ninety One, said: “US equities in aggregate now score poorly in many estimates of long-term equity returns, both in an absolute and relative sense, and investors are anticipating a continuation of historically exceptional outperformance of earnings growth well into the future.”

Ninety One’s 10-year local currency return forecast

Source: Ninety One. The chart shows the firm’s forecasts made in September 2024 and March 2025 for returns over the next 10 years. The March forecasts were published last week and have been adjusted upwards due to US equity valuations having moderated.

Morgan agreed with May that investors should diversify their portfolios far more broadly than the weightings of global equity benchmarks.

“On a more strategic investment horizon, it would certainly seem prudent to lean against the concentration in both large-capitalisation growth stocks and the US market to sustain an adequate level of diversification in equity portfolios, rather than let exposure to both drift even higher,” he said.

“Market-cap weighted benchmarks cannot be said to be sufficiently geographically diversified with close to 70% in a single market, even when that market is the US, which offers unparalleled breadth and depth of investment opportunities in companies exposed across all areas of the domestic and global economies. Another simple alternative, GDP weights, fails to account for the global business models of the majority of large, listed companies.”

Instead, Morgan suggested using dividends as a starting point. “For an income-focused investor, a more relevant metric could be the proportion of dividends derived from the US market, which has been very steady at around 40% of global dividends historically and is only slightly higher than this today, even after more than 15 years of US equity outperformance,” he said. A 40% allocation to the US might therefore “make sense as a neutral starting point”.

Stock markets around the world have been thrown into chaos during the first few months of this year as investors reacted to Donald Trump’s volatile policymaking and, most recently, the tariffs he announced on ‘Liberation Day’ on 2 April. 

As a result, many investors are likely to have experienced some gut churning volatility and a significant hit to their portfolios since the new president took office. 

Indeed, it’s precisely this type of market mayhem that has dyed-in-the-wool cash savers wagging their fingers and chiding “that’s why I don’t invest in the stock market!”

However, there are a number of investment trusts that are designed specifically for nervous investors and volatile times like these; they aim to preserve the value of investors’ capital during market downturns while providing cash-beating returns when stock markets are rising.

In the wake of the recent market volatility, I decided to take a closer look to see if their claims stood up to scrutiny.

One of the most prominent funds is Capital Gearing Trust. Founded in 1973, it has been a steward of investors’ capital through booms and busts, market crashes, global economic crises and a pandemic. Despite these hurdles, since Peter Spiller started managing it in 1982, the trust has only lost money in two years, with the worst annual loss being 4% in 2022.

Even so, if you had invested £10,000 at launch you would now have £2.2m sitting in your portfolio today, and with very little stress along the way.

For some more recent context, let’s look at the period of tariff-induced volatility caused by Trump’s tariff announcements. In the four weeks between 2 April and 29 April, the average investment trust rose by 1.8%, although that figure masks a wide disparity; the average North America trust is down by 6.8% and the average China trust down by 9.8% in those four weeks alone, while the average trust in the Global sector was down by 3.4%. Yet Capital Gearing Trust was exactly unchanged.

Other wealth preservation trusts did emerge with profits, with Personal Assets Trust up by 0.59% and Ruffer Investment Company gaining 1.08%.

Analysing performance over more meaningful periods shows that wealth preservation trusts have successfully protected investors’ savings through market wobbles, busts, corrections and crashes. All while passing on at least some of the upside when stock markets are doing well. Indeed, even during times of extreme market stress such as the financial crisis or the Covid pandemic, some of these trusts actually made money.

So how do they do it?

The truth is that there is more than one way to build a resilient, gravity defying portfolio, and each of these trusts takes a different approach. The one thing in common is a diversified pool of assets, at least one segment of which is designed to rise in value when equities are having a tough time. That might be gold, bonds, derivatives or a combination of the three. Either way, they interact with the rest of the portfolio in a way that protects the bulk of investors’ capital.

Spiller explains his method of dividing Capital Gearing into three pots: “We put approximately one third in risk assets such as equities, another third in index-linked bonds and another third in cash or cash equivalents such as high-quality government bonds, which pay a better return than cash on deposit.

“The result has been remarkably consistent. We sailed through the dotcom crash in 2000 and made money when the markets crashed during the global financial crisis and again during the Covid downturn,” he said.

The trust is not bulletproof, however. “A really big fall in US equities could still hurt us and there are no guarantees we won’t lose money,” Spiller acknowledged. “But our long-term record of safely growing our investors’ savings speaks for itself.”

Ruffer Investment Company also focuses on capital preservation and has performed well in turbulent markets, said manager Jasmine Yeo. “The strategy retains a defensive bias with powerful protections but we’ve also got high conviction growth ideas and lots of liquidity to take advantage of the opportunities which volatility bring. We’re trying not just to preserve and grow capital in real market stress, but to use profits from our protections and other liquidity to buy assets to drive the next cycle of returns,“ she explained.

“Our approach has been successful in helping us to protect our clients through the dotcom bust, the credit crisis and Covid-19. The portfolio was defensively positioned going into ‘Liberation Day’ holding potent derivative protections that contributed meaningfully to performance as volatility spiked, offsetting the falls in the portfolio’s equities, while our yen and precious metals exposure allowed us to make positive headway.”

Personal Assets Trust takes a different approach, according to its manager, Sebastian Lyon – focusing on high-quality equities but avoiding the derivatives used by Ruffer. “All the wealth preservation trusts do things in different ways, so I see us as complementary rather than in competition,” he said.

“We dismiss a huge pool of equities because they are too cyclical, too high risk. If you look back through history and see the companies that tend to fall a lot in a recession, there is a theme: time and again it tends to be highly geared companies like retail banks, whether during the Asian currency crisis in 1997 or after ‘Liberation Day’; HSBC, Standard Chartered, Barclays – all went down by around 10% in April.

“That’s why we don’t own these stocks. Nor do we own companies reliant on receiving new capital such as housebuilders or airlines because when things go wrong, profits can collapse really sharply, like they did during Covid, and they are forced to ask for more money at the bottom of the market,” he explained.

“What do we own? Consumer staples. Unilever is our largest holding. It’s boring and predictable and we have held it for 20 years. We like to stick to the middle ground where companies have a tailwind. We have owned Microsoft for many years and we like Visa and Amex because there is a clear tailwind in the trend away from cash.”

Personal Assets also has 11% in gold and gold-related investments. “We love gold because it has risen during every crisis, providing a fantastic safe haven as we’ve seen recently as it has hit successive record highs,” Lyon said.

So take your pick. As you can see from the graphics, all of these trusts have done remarkably well over the long term, smoothing out returns at times of extraordinary volatility, and giving investors a more profitable, arguably less stressful alternative to cash. So for those who want to sleep at night whilst preserving the value of their nest egg, these trusts are most certainly worth considering.

Annabel Brodie-Smith is communications director at the Association of Investment Companies. The views expressed above should not be taken as investment advice.

The US and China have issued a joint statement announcing a temporary reduction in tariffs, signalling a potential thaw in trade tensions. For a 90-day period, the US will lower tariffs on Chinese goods from 145% to 30%, while China will reduce its tariffs on US imports from 125% to 10%.

The news has been met with optimism by equity markets, with the US set for a strong start, as futures point to a 3.3% rise for the Nasdaq and a 2.5% gain for the S&P 500 when Wall Street opens later today, Russ Mould, investment director at AJ Bell, said. Asian and European markets have already responded positively, with Hong Kong climbing 3% and the Stoxx 50 index rising 1.4%.

“Lowering tariffs on Chinese goods from 145% to 30% is a big deal and one that significantly lessens the blow to the Asian economy,” he said.

“Trump has shown he is willing to reduce the severity of the Liberation Day tariffs and that has raised hopes for other countries to secure more favourable trade deals. All this points to the potential for a less severe hit to global trade and lower fears of recession. That in turn has put investors in risk-on mode.”

Investors have started to gradually move away from traditional safe havens, as gold (which gained around 40% in the past year) slipped to a one-week low and fell again in the wake of the positive outcome from the trade talks, said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“The shared intention on both sides to reach a lasting agreement is evident – and that alone should help sustain the current positive momentum in markets,” she said.

“However, some of the optimism could wane if concrete plans to reduce tariffs don’t emerge. Today’s ‘deal’ just heralds the start of a series of negotiations.”

Doubts about how far the deal would actually go were widespread. Any lack of concrete progress in the next 90 days within the scope of the deal will likely just ramp up market tensions once again, according to Lindsay James, investment strategist at Quilter.

“We have seen tariffs suspended only to be reintroduced after subsequent negotiations weren’t seen to be progressing adequately and early trade deals have been announced with fanfare only to be later ripped up,” she said.

Jean-Louis Nakamura, head of conviction equities at Vontobel, has two predictions as to how the summer months might play out.

“In the next two months, we might attend a tug of war between pre-announcements of more sustainable and comprehensive agreements, closer to the initial starting situation, and hard data suggesting a rapidly deteriorating internal demand in the US and exports dynamic in China,” he said.

“If the latter come first, markets should experience another large bout of volatility.”

For Stuart Rumble, head of investment directing, Asia Pacific, at Fidelity International, these announcements won’t reverse the damage done so far.

“Even with these tariff cuts, much of the shift in global trade flows has already begun. Tariff differentials remain relevant and will continue to shape trade flows based on relative competitiveness, infrastructure capacity, and domestic policy responses,” he said.

“While encouraging, this development perhaps should be seen by investors as an easing of tensions within a broader, long-term shift in the US-China relationship towards greater self-sufficiency.”

For now, however, “sentiment may matter more than substance”, he concluded.

A recession in the US might feel like a far-off event for UK investors, but as the old adage goes, ‘when America sneezes, the rest of the world catches a cold’.

The question of whether the US economy is heading for a recession has become a pertinent one, ever since Donald Trump’s ‘Liberation Day’ tariff announcement on 2 April kicked off a stock market sell-off and led to concerns about price rises and the future health of American businesses.

If the US were to plunge into a recession, and if the American stock market tumbled as a result, it could cause a harsh downturn in many investors’ portfolios, as the high US equity allocations that served them well in recent years backfires.

Indeed, the US occupies more than 70% of the MSCI World index and is home to many of the most popular companies amongst global investors’ portfolios, such as Alphabet, Microsoft, Amazon and Apple.

As a result, investors and fund managers are debating whether a recession could occur in the US this year and assessing whether their portfolios are positioned for this eventuality.

Below, Trustnet asks experts whether they expect a recession to unfold.   

JP Morgan Chase – 60% chance of recession

Bruce Kasman, chief global economist at JP Morgan, believes there is a 60% likelihood of a recession this year.

Even after the 90-day pause on ‘reciprocal tariffs’, the universal 10% tariff and the escalating trade war with China could cause a tax hike worth 3% of US GDP – the largest domestic tax rise since the Second World War.

While Kasman conceded that recessions were inherently unpredictable, and not all of this tax rise would be paid, “what remains is still enough to push the US and China — and thus likely the global economy — into a recession this year”, he said.

This will impact the direction of monetary policy. He does not expect the Federal Reserve to begin cutting rates until September, at which point he anticipates “further rate cuts at every meeting thereafter through January 2026.”

Marlborough – Recession is the endgame

Recessions are inevitable, according to James Athey, fund manager at Marlborough. “If someone asks you, ‘will there be a recession?’ the only valid response is ‘over what time horizon?’” he said.

Attempting to time a recession is difficult, but recessions are ultimately a “self-fulfilling prophecy”, he continued. As consumer confidence starts to fall, people will spend less and unemployment will rise, rapidly moving into a recessionary environment. Consumer confidence has already fallen to a level “historically only associated with the worst global crises” and he expects it to deteriorate further.  

“For now, the base case must be that we are in the late stage of a cycle. From here, a recession is the endgame,” Athey concluded.

Wellington Management – The US may already be in recession

Paul Skinner, investment director at Wellington, argued the spike in policy uncertainty is already impacting cyclical data and could easily spiral further. For example, he pointed to the Conference Board Consumer Confidence Index, which fell to its lowest level in five years last month.

The potential for higher inflation due to tariffs has forced the Federal Reserve to delay any further interest rate cuts, adding to market uncertainty.

While he conceded that a more positive resolution to trade negotiations could change things, mutually acceptable solutions for countries such as Europe and especially China will take time. As a result, investors should expect the near term to remain challenging.

“There is a reasonable chance that the US economy is already in recession,” he concluded.

Columbia Threadneedle – The US is embarking on an act of economic self-harm

For Anthony Willis, senior economist at Columbia Threadneedle Investments, the risk of recession is rising but it is “not our base case, for now”. Stagflation (stagnant economic growth combined with high inflation and rising unemployment) is the more likely outcome, he said, predicting sluggish US economic growth of 0.5% and unemployment increasing to 4.7%.

The US is embarking on an “act of economic self-harm” with Trump's volatile approach to tariffs and trade, he argued. This comes at a time when US exceptionalism is being increasingly challenged, as investors begin to worry about government deficits, high valuations and business confidence.

“Consumer sentiment data is very soft across all income levels. The Conference Board numbers are weak and closing in on pandemic levels and the University of Michigan survey of consumer sentiment is close to all-time lows. Worries over employment stand at levels normally seen only in recession.”

Nevertheless, Willis noted that soft data does not always translate into economic weaknesses. While volatility is likely to persist, the hard data does not currently point to all-out inflation, he said.

Stonehage Fleming – Preparing for a soft landing

Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas fund, is at the optimistic end of the spectrum and expects the US to experience a soft landing this year.

“The first point to make is that the hard economic data remains very firm,” he said. Indeed, the US employment figures released in April were supportive, with a larger increase in payrolls, stable levels of unemployment and solid earnings. The US consumer, it seemed, is in a relatively healthy place.

Smit added that the ratio of job openings to unemployment was currently around 1.07, indicating there are more openings than unemployed people, a positive sign for the economy.

He argued that if not for the soft data of tariffs, we “wouldn’t even be having this discussion about a recession”. Tariffs, he conceded, are undoubtedly disruptive and investors are waiting with bated breath in terms of how the 90-day negotiations will go. However, he said that “if nothing changes from here, the hard data will probably remain supportive”.

European funds have produced the best returns of any regional equity sector this year, apart from Latin America.

Even amid Donald Trump’s tariff onslaught, the continent has prospered as some of the headwinds it faced last year dissipated and tailwinds emerged, according to James Piper, fund analyst at FE Investments. German commitments to increase spending on infrastructure and defence have provided a boost to the economy, inflation is more stable and interest rates are coming down, he said.

Performance of top five IA sectors YTD

Source: FE Analytics

Within the competitive European equity space, three strategies stood out to fund selectors: Lightman European, Liontrust European Dynamic and BlackRock Continental European Income.

Performance of funds vs sector over 5yrs

Source: FE Analytics

Liontrust European Dynamic

FE Investments added Liontrust European Dynamic to its portfolios a year ago. The £1.9bn fund’s flexible, adaptable process enables it to consistently navigate difficult periods, Piper said.

Managers James Inglis-Jones and Samantha Cleave look at ‘market regime indicators’, including valuations, investor anxiety, corporate aggression and market momentum, to ascertain which style of investing will be rewarded. Then they adjust their exposure between contrarian value, value, growth and momentum bets.

As such, this fund might suit investors who want balanced exposure to European equities, said Martin Ward, senior investment research analyst at Square Mile Investment Consulting & Research, because “it should not be overly beholden to style shifts within markets”.

“We like the managers’ strict adherence to their process, but this can mean that there will be periods where the market does not reward their stocks,” he pointed out.

Bestinvest introduced Liontrust European Dynamic to its Best Funds list last year. Managing director Jason Hollands said the strategy has a well-established team and delivered outperformance in both value and growth-led markets.

“At the heart of the investment process is a focus on free cashflow analysis, which the team believes is a key building block of long-term growth that is often underappreciated by investors who instead often put too much store on profit forecasts. The managers believe that cashflow is a far more reliable guide to future profitability,” Hollands explained. 

Richard Philbin, chief investment officer (investment solutions) at Hawksmoor Investment Management, said the fund has about 35 holdings but its top 10 comprise less than 40%, which “suggests a relatively flat portfolio”. The fund has about two-thirds in large-cap stocks and the remaining third in small- and mid-caps.

“It doesn’t really take massive positions away from the index,” he continued. “Its largest overweight at sector level is consumer discretionary (22% versus 10% for the index) and the largest country allocation is an underweight to Germany (9% versus 19.5%).”

Liontrust European Dynamic is the second-best performing fund in its sector over 10 years to 8 May 2025 and the third-best over five years.

Lightman European

Lightman European is a value fund but, like Liontrust, its managers adapt along with the market cycle. Manager Rob Burnett dials the value factor up and down depending on his bullishness and this macro-awareness has enabled him to ride out periods when value investing has not been in favour, Piper said.

Burnett and George Boyd-Bowman focus on the bottom 20% of their investable universe by valuation and look for catalysts that will spark a turnaround, he added.

Philbin said Lightman European has a concentrated portfolio of 40 to 50 holdings, with about 40% in the top 10. “The managers are not afraid to take large positions against the benchmark from both a country and sector perspective,” he noted.

The strategy has a bias towards higher yielding stocks. “The fund has a yield of around 4.5% for this year and is forecasting almost 5% for next year. This is also done with a portfolio price-to-earnings ratio less than the market,” Philbin explained.

The £934m fund is the fourth-best performing fund in its sector over five years but slipped to bottom quartile over three years.

BlackRock Continental European Income

AJ Bell uses BlackRock Continental European Income in its income portfolios and as a core holding for portfolios with a smaller allocation to Europe, where only one fund is needed.

Head of investment research Paul Angell said: “The managers of this fund prioritise downside resilience within their companies, as they look for quality businesses paying healthy dividends. Holdings are categorised across high yielders, compounders and high quality franchises.”

Tom Bigley, fund analyst at interactive investor, said the fund’s quality bias and style-agnostic approach means its returns differ from most equity income peers, which tend to have a value bias. The fund invests in quality businesses with strong corporate governance, a robust competitive position, earnings stability and sustainable and growing dividends, he said.

“The portfolio is constructed with a degree of pragmatism, tilting towards either stocks featuring above-average dividends or stocks growing their dividends, depending on the opportunity set and expected risk/reward,” Bigley explained.

“The managers' approach leads to a steadier return profile and to outperformance during periods of market weakness, with strong risk-adjusted returns when compared to both peers and the benchmark. The fund is currently yielding just over 3.4% and has historically beaten the yield of the benchmark by 50%.”

BlackRock Continental European is the six-best performing fund in sector over 10 years to 8 May and it is also top-quartile over 12 months. Its three- and five-year total returns are below the sector average, however.

The team changed last year with Stuart Brown joining from Aberdeen to replace Andreas Zoellinger, who is retiring. Co-manager Brian Hall remains in situ.

Angell said the change has been well managed with an extended handover period. The fund also benefits from BlackRock’s deep pool of European analysts, he noted.

Piper thinks Brown will be able to improve the fund. Since joining, he has made changes that have introduced a different element of diversification and he has deep knowledge of all the stocks within the portfolio, the FE Investments analyst said.

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

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

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

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

Performance of fund against index and sector over 1yr

Source: FE Analytics

Please describe your philosophy

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

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

What does that mean in practice?

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

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

How has the strategy evolved over time?

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

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

Are these companies more expensive to buy?

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

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

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

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

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

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

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

Why should investors pick this fund?

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

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

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

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

What do you do outside of work?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Performance of fund against index and sector over 5yrs

Source: FE Analytics

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

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

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

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

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

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

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

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

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

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

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

Performance of fund against sector over 5yrs

Source: FE Analytics

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

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

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

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

Performance of fund against sector over 5yrs

Source: FE Analytics

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

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

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

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

Valuations of mid-caps vs large-caps

Source: Aberdeen, Bloomberg, to 31 Mar 2025

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

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

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

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

Risk vs return of global indices over 25yrs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What history tells us

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

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

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

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

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

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

What’s behind this ‘theory’?

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

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

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

The post-election context

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

Why are there flaws in the theory?

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

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

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

Would you rather think about rotation?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Performance of trust vs sector and benchmark over 10yrs

Source: FE Analytics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Performance of European equities vs other regions YTD

Source: FE Analytics

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

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

Performance of funds vs benchmarks & sector over 10yrs

Source: FE Analytics

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

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

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

Those in favour of Fidelity European

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

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

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

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

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

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

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

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

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

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

Backers of BlackRock European Dynamic

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

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

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

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

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

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

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