The number of UK investors that own at least one investment trust fell to c. 9% (from 12%), according to a survey by Boring Money. That’s the lowest number since the financial research firm started tracking the data in 2021. It should be noted that open-ended fund ownership also declined from 23% to 19%.
It will be no surprise that it’s been exchange traded funds (ETFs) that have been taking up the slack. ETF ownership rose to 20% in the most recent report, up from around 5% just six years ago.
There was a definite chink of light, though. While investment trust ownership among 35-to-44-year-old investors fell five percentage points to 7%, investors under the age of 35 increased their ownership of investment trusts by two percentage points to 9%.
That’s encouraging as this generation is proving to be one of the savviest when it comes consistently to setting money aside to invest. We have, after all, been in a near-two-decade-long bull market for most, if not all, of their adult life.
Movements such as FIRE (financially independent, retire early), have caught on quickly and are predicated on investing a high proportion of your disposable income. There’s also an increasing onus on individuals to save for their pension if they want to escape the rat race. The sheer scale of information on long-term stock market returns has helped, too.
The resulting frugal habits have had an impact on how the young invest, with more of a focus on low fees being the order of the day, both in terms of the vehicle (hence, the explosion of interest in ETFs) as well as platform (a conservative 99% of the finfluencer content Instagram feeds me mentions Trading212).
The investment trust industry will undoubtedly survive and will probably eventually come out the other side in a stronger position, especially if it can continue to show its benefits to younger investors.
There remains a wealth of opportunities for growth-oriented investors to jump on the investment trust bandwagon. A couple of significant themes that crop up both on my Instagram feed and in the monthly check-in of most-bought shares, as well as our sister website’s run-through of the most popular ETFs, are space and chips.
Young investors are rushing to the next big things in innovation and the opportunity within the investment trust landscape is widespread. The obvious starting place is with Seraphim Space (SSIT), a pure play on the inter-galactic theme investing mainly in privately owned firms.
Venture capital specialist Seraphim’s co-founder and CIO James Bruegger told us earlier in the year that the opportunity in SpaceTech could be bigger than in artificial intelligence and with its focus on small and micro sized companies, SSIT is well placed in our view to deliver the stellar returns demanded these days.
While the ordinary shares are on a premium rating (albeit down from a chunky 54% to around 7.2% today), the C shares that were issued in May trade at a c. 16% discount. That might not last as the team deploys the £137m it raised, which it started doing last week.
SSIT doesn’t invest in Elon Musk’s SpaceX, arguably the company that put the SpaceTech industry on the map. Fortunately, there are plenty of options for those wanting exposure to the satellite and AI firm but in a more diversified vehicle.
Scottish Mortgage (SMT) remains the flagbearer for the investment trust sector, offering a really interesting and differentiated exposure than a pure Nasdaq 100 ETF might, given not only its c. 18% position in SpaceX, but also top holdings including the Taiwanese chipmaker TSMC, China’s TikTok owner ByteDance and MercadoLibre, known as the Amazon of Latin American.
The c. 7% discount on which SMT is trading offers compelling value in our view, particularly when allied with the fact that many of its underlying holdings are arguably very highly valued.
The two technology trusts, run by Allianz Technology Trust (ATT) and Polar Capital Technology (PCT), which also have big positions in the chipmakers should also appeal to the younger cohort. Both are simultaneously riding the AI boom and trading on discounts of c. 7%.
We think that although these discounts are narrower than they were in 2023, they remain counterintuitively wide when you factor in the clamour for the types of stocks in which they collectively invest, proving that there still looks to be deep value in the investment trust arena.
The same can be said for emerging markets, the merits of which are starting to chime with younger investors who recognise Asia’s role in the AI supply chain. Two trusts using the investment trust wrapper to its fullest are benefitting from this shift.
Fidelity Emerging Markets (FEML) can go long areas it sees having strong growth prospects and short those industries in decline, while Ashoka WhiteOak Emerging Markets (AWEM) balances punchy exposure to the largest EM firms with a clear bias to the under-researched small- and mid-cap segment.
For those younger investors searching for a more defensive but still aggressive port in the AI-bubble-not-bubble storm, the UK provides just what they’re looking for. Impressive returns have been provided by Temple Bar (TMPL) in the large-cap part of the market, and Fidelity Special Values (FSV) as a go-anywhere mandate.
We see Rockwood Strategic (RKW) as another trust using the wrapper to the fullest. It has generated strong returns by investing in an almost private equity-like manner into the smallest market cap segment in the UK. Manager Richard Staveley and the team work closely with their high-conviction portfolio to proactively improve their ratings, rather than sitting back and hoping things magically improve overnight.
While some will no doubt point to the growth of ETFs as proof that investment trusts have, over the course of 158 years, had too much of a good thing and that the run has to come to an end eventually, we’d prefer to look at things through the lens of another oft-quoted saying: good things come to those who wait.
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]]>But short-term bursts rarely translate into durable returns, with the current gains built on narrow leadership and valuations that leave little margin for error. History shows these cycles inevitably fade as market leadership rotates, and the consistent outperformers are the ones staying anchored to intrinsic value rather than chasing short term sentiment.
Fidelity Asian Values (FAS) has spent three decades doing exactly that. A £1,000 investment on its launch in 1996 would now be worth almost £8,300, three decades years later, compared with £7,300 for the benchmark. This steady compounding has been delivered through every market dislocation from the Asian Financial Crisis to the dot com bubble, reflecting a disciplined value approach built around capital preservation.
Asia is a vast and heterogeneous hunting ground for stock pickers, with close to 20,000 listed companies. FAS’s benchmark agnostic mandate provides managers Nitin Bajaj and Ajinkya Dhavale with the freedom to ignore index weightings and focus purely on bottom up stock selection, supported by one of the largest on-the-ground research teams in the sector.
Their process starts with valuation: the managers carry out extensive due diligence to understand why a company is trading on a low valuation and the potential scope for a re-rating. This value contrarian process targets out-of-favour pockets of the market, while steering clear of those driven solely by momentum, providing a clear margin of safety.
The managers also favour an understandable business model, an established position in a durable market and a strong management team that treats minority shareholders fairly. On the financial side, Nitin and Ajinkya look for strong and repeatable cash generation and avoid companies burdened by high debt, temporary margin uplift or revenue streams overly dependent on a single theme.
This disciplined value framework is anchored in company fundamentals and built to preserve capital and deliver strong returns over the long term, regardless of whichever styles or cycles happen to be in vogue. That doesn’t mean avoiding the AI theme altogether but steering clear of companies where expectations already look fully-priced.
Investors seeking Asian equity exposure might naturally gravitate towards a passive strategy, but the broad regional label masks some hefty concentrations. In the MSCI AC Asia ex Japan Index, Korea and Taiwan now account for more than half of the benchmark, thanks to the dominance of technology-related names such as TSMC, SK Hynix and Samsung Electronics.
What looks like diversified regional exposure is, in practice, a concentrated position in a handful of mega caps. And this concentration feeds volatility, with the MSCI Korea Index falling almost 20% in July due to concerns over the durability of AI spending. Putting this in context, a 20% drawdown requires a 25% gain to break even - a clear illustration of the downside risk of chasing momentum driven markets.
This brings us back to the waiting game over short-term trading. Since FAS’s inception in 1996, Asian small-cap value stocks have comfortably outperformed both large-cap growth and large-cap value indices. The investment philosophy is simple: low expectations drive low valuations, creating scope for a meaningful rerating if companies deliver better-than-expected results.
Instead, the portfolio is tilted towards value, with almost double the index weighting in value stocks. The result is a portfolio of higher-quality businesses trading at a lower valuation premium, with a lower price-earnings ratio than the benchmark index but a higher return on equity. This balance of quality and value is reflected in the trust’s rating, which stands at the lowest discount in its peer group.
The trust currently has a significant weighting to Indonesia: the MSCI Indonesia Index has dropped more than 30% over the past year as capital rotated into Asian tech, leaving the index trading on a forward price-earnings ratio of 9 times, less than half that of Taiwan. Although allocations are not made on a top-down basis, Indonesia offers favourable demographics, a conservative macro backdrop and sound corporate governance. Its geography also makes national expansion more challenging, resulting in oligarchic markets with high barriers to entry.
As a result, Nitin and Ajinkya have identified a number of cash-generative companies trading at valuations that offer a substantial margin of safety. One example is Indofood Sukses Makmur, a noodle producer with dominant market positions across multiple countries. Despite the company delivering a 14% annual increase in EBIT over the past five financial years, weak sentiment towards Indonesian equities has pushed the shares down to a trailing price-earnings ratio of just 6.6 times.
FAS also has a significant exposure to China, where weak sentiment and macro challenges have driven valuations to low levels, with some stocks trading on price-earnings ratios of only five times.
One such holding is ManpowerGroup Greater China, which trades on a trailing price-earnings ratio of just under six. The managers view its scale and geographic reach as a clear advantage in a fragmented market. The business is asset light, cash-generative and offers an attractive dividend yield, with net cash amounting to around 80% of its market capitalisation.
Over the last three decades, the trust has shown that consistency and durability beat short-term exuberance. Looking ahead, its focus on undervalued, cash generative businesses is built to keep compounding returns for investors - whatever the next 30 years may bring.
Fund data as at 30/06/2026, index data as at 31/07/2026, company data as at 06/08/2026, returns based on GBP and share price returns unless stated otherwise. MSCI Asia Pacific Ex Japan Small Cap Index replaced MSCI Asia Pacific Ex Japan as the fund’s official benchmark from 1 February 2020.
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]]>The Biotech Growth Trust's (BIOG) exceptional returns over the past year reflect a decisive change in a number of factors. Rate cuts in the US have been helpful, as although biotech is funded by equity not debt, the costs are correlated. Perhaps more important has been a reduction in perceived political and regulatory risk. There were fears that the Trump administration could be oppositional to biotech based on the appointment of vaccine sceptic RFK Jr to the cabinet, while its policies on pricing and trade created some uncertainty. However, the administration’s stance on regulation has proven to be helpful, while drug pricing settlements have had minimal negative impact. We also think that the maturity of the artificial intelligence (AI) trade has seen some growth investors look to diversify away from the obvious first winners in that new industry.
However, overall, we think the picture is of broader macro or political factors fading and investors focusing instead on the exceptionally strong fundamentals. Valuations remain very cheap across the sector, looking at market cap to net cash. This means that companies are on average in a strong position financially. Most importantly, this is accompanied by an exciting picture from a medical point of view. Promising advances are being made across a variety of modalities, many of them entirely novel, for a broad swathe of illnesses and conditions with massive unmet medical need.
Industry dynamics are another dimension of this strong fundamental picture. Large-cap pharmaceutical companies are facing a patent cliff over the coming years which has created a need to fund replacement products and revenues. This has led to a strong stream of acquisitions across the industry, many of which have delivered strong gains for BIOG this year. In the second quarter of 2026 alone, BIOG announced the acquisition of a number of portfolio holdings. argenx SE agreed to buy Forte Biosciences at a 40.5% premium to the market share price, with Forte making up 3.03% of BIOG’s portfolio. GSK agreed to buy Nuvalent for a price 40% above the market value, with the latter making up 1.5% of BIOG’s portfolio. Esperion represented 2.5% of the portfolio when it agreed to be acquired by ARCHIMED at a 58% premium, while Apellis was 1.74% of the portfolio when it agreed a deal with Biogen at a 163% premium. The significant size of the positions as well as the premiums have been a real boost for BIOG shareholders and help explain the level of outperformance.
BIOG’s longer-term track record is one of significant outperformance in rising markets and underperformance in falling markets, with a consistent tilt to small- and mid-caps being a factor. We think this makes it an attractive vehicle to consider if a longer-term recovery is underway.
BIOG’s portfolio is spread across various therapeutic areas, and the managers highlight their exposure to multiple new modalities in all the key areas. In oncology, a major area of unmet clinical need, the portfolio owns companies working on cellular therapies, antibody-drug conjugates, bispecific antibodies and vaccines amongst other modalities. The managers highlight there are many ‘firsts’ among the new therapeutic approvals in 2025 and 2026, reflecting breakthroughs in treatments for cancer and elsewhere using new methods. Central Nervous System (CNS) disease is another key area for the portfolio, with BIOG owning companies working on anti-psychotics, depression, epilepsy, neurocognitive disorders like Alzheimer’s, and other areas. This is a key area of interest for large-cap pharma, and there have been many acquisitions in this space including Avidity Biosciences, which was owned by BIOG until it was acquired by Novartis last year.
A key element of the positioning remains the overweight to small and mid-caps. This has only increased over the past year, with a huge overweight of 42 percentage points to small caps, as the chart below shows. This reflects the valuations that Geoff and Josh see as well as the industry dynamics which are pushing a steady flow of M&A.
The managers remain positive on the outlook for innovation in biotech. They note the US authorities are acutely aware of the competition emerging in China, where companies are making a growing number of breakthroughs and there has been a high value of acquisitions by large-cap western pharmaceutical companies. In fact, 30% of new clinical trial starts in the global biopharmaceutical industry are now conducted by Chinese companies, a higher market share than Europe’s and rapidly approaching the 35% of the U.S. Furthermore, In March, China officially upgraded biotech to an “emerging pillar industry”, meaning biotech is now deemed a critical industry for national economic growth. It is clear that the authorities will be supporting the industry going forwards, and the US is being forced to respond, creating a beneficial competitive environment for biotech investors. The FDA has been tweaking regulations to be more supportive and bringing in AI to help accelerate its processes, and the managers highlight AI is proving fruitful in both regulation and drug discovery. BIOG does invest directly in Chinese stocks at times, although as of 30/06/2026 the exposure was low, at 4.5%. However, OrbiMed’s analysts based in Hong Kong and Shanghai mean it is well-placed to take advantage of the opportunities as they emerge. Indeed, over the 2026 financial year the team was able to secure an allocation to the IPOs of Genfleet Therapeutics and Leads Biolabs, Chinese oncology companies whose shares rose 64% and 111% respectively by the year end in local currency terms. BIOG’s Chinese exposure has been much higher in the past, and we expect it to be so again, with a locally-based team giving the trust an advantage versus its peers in this market.
Biotech was something of a forgotten growth market for a few years. With investors now looking to diversify growth portfolios from a more complicated AI story, we think this is a good time to consider buying back into the industry. Exciting advances in medical science are at the heart of the case for owning biotech: this is a source of huge opportunity given the unmet medical need in an ageing and ever-richer global population.
BIOG has a strong track record of outperforming in bull markets, backed by the team’s extensive resources and experience in a highly specialised industry. The returns over the last year are consistent with past performance patterns, and illustrate Geoff and Josh’s ability to add considerable value through stock selection. As such, we think it is an attractive way to attempt to maximise the potential in a continued recovery, always bearing in mind that the small-cap tilt and modest use of gearing (6.9% as of the end of June) is likely to bring downside risks and volatility too.
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]]>In a decision that would make any politician proud, FIFA duly backtracked when it found to its shock that the move would be unpopular with people who actually like football for more than one month every four years.
Investors also had a rollercoaster ride in July, with the rescue by Citadel of Situational Awareness, a hedge fund created by a former AI researcher with very little awareness of any situation in which running with leverage of around 400% might get it into trouble.
The hedge fund’s failure was likely due to the fall in semiconductor stocks, with the PHLX Semiconductor Index dropping by over 20%, although it was also probably a contributing factor in the fall, too, as these things tend to be a vicous circle.
Yet, most (not all) regional markets seemed to escape unscathed and got ready to march upwards once more to start August. So, what were investors buying during the month?
These were the most (and least) popular shares with UK retail investors on three of the largest investment platforms last month:
One theme we saw last month was mega-deals – a continuation of a theme currently defining the UK stock market. Indeed, we’ve written extensively on the fact that while public market investors see little to no attraction in UK plc, private market investors have come to the opposite conclusion.
Trade buyers, private equity firms and more have decided British businesses listed on the London Stock Exchange are trading at such cheap levels, they’re snapping them up on a regular basis.
A bidding war for the budget airline easyJet (EZJ) has seemingly been a catalyst for profit-taking from investors, after the share price doubled from its most recent low point. The orange-liveried carrier has drawn competing bids from the private equity firms Apollo and Castlelake.
Apollo has the highest bid thus far, at £7.15 per share, a premium of c. 73% to its closing price on 29/05/2026 and still 11% higher than the share price at the time of writing on 05/08/2026. Management has said it will recommend Apollo’s bid, but has extended the window for Castlelake to up its offer.
On the other foot, we’ve started to see M&A activity going the other way, too. GSK (GSK) returned to the list of most-bought shares this month, after the firm made a couple of key purchases, including spending almost $1bn on the Canadian firm 35Pharma, which develops drugs to treat cardiopulmonary diseases, and then buying Nuvalent, a Boston-based creator of oncology therapies, for c. $10.6bn.
Fellow pharma big-dog AstraZeneca (AZN) was on the list, too, suggesting the return to a slight defensive mindset for some investors, as healthcare is generally seen as a recession-proof sector.
Investors continue to rotate their cash around all parts of the AI story, as they try to figure out who exactly the winners will be from the emerging technology.
After a long flirtation with the hyperscalers, such as Google, Amazon and Microsoft – those firms ploughing huge sums into building data centres to power AI, attention then focused on the semiconductor sector.
This seemed sensible, given the hyperscalers were spending heavily on the silicon chips made by the likes of Nvidia, Micron and SK Hynix, meaning their revenue forecasts have skyrocketed at the same time the hyperscalers’ free cash flow has dwindled.
With NVIDIA (NVDA) slipping down our list of most-bought shares, Micron Technology (MU) has been picking up the slack. MU’s earnings per share are expected to more than double in 2027 thanks to these factors. However, shares slipped well into bear market territory throughout July, as investors worried about the sustainability of the money being poured into AI infrastructure. Shares remain up more than 700% over the past 12 months, though.
Talking of AI infrastructure, despite the UK being seen as a laggard when it comes to housing AI stocks, there is a selection of names that are increasingly being seen as beneficiaries. One of these is National Grid (NG).
A recent report from Electric Insights found that the UK’s electricity demand grew for two consecutive years for the first time in 20 years after a protracted period of decline, largely thanks to data centres, which now account for 6% of UK electricity consumption, the International Data Center Authority found. This is a positive for NG, since it owns and operates the UK’s electricity grid.
NG also recently paid $1.75bn for a 35% stake in Joulent, which is building a power generation site to help power a data centre operated by Microsoft.
Moving onto investment trusts, and the top of the list remained broadly unchanged, but we did see some new entries further down the list:
Some have started buying the dip in Asia and emerging markets. The slight cooling in sentiment towards chipmakers has impacted markets such as Korea and Taiwan, which have significant exposure to AI thanks to companies such as TSMC, Samsung and SK Hynix.
Weakness in Korea was compounded by the sheer number of retail investors that have jumped on the bandwagon of soaring share prices. Korean regulators acted in May to allow more people to buy leveraged, single-stock exchange traded funds (ETFs) to try and encourage more people to invest in the stock market.
Ordinary investors piled in, only to see the KOSPI plunge by as much as 40% through June and July, leading many to nurse losses in the region of 60% to 80% in some extreme cases.
Still, the case for emerging markets remains strong. AI stocks are bouncing back and SK Hynix is forecast to make more in 2027 than it’s made in its 27-year history combined. If traffic through the Strait of Hormuz starts to flow more freely, this will benefit those developing nations that import their oil.
The beneficiaries thus far within the UK’s investment trust space have been Henderson Far East Income (HFEL) and Templeton Emerging Markets (TEM).
Another area of the market that has come off the boil recently are metals, particularly gold. After a strong bull run, the precious metal had fallen as much as 25%. This fall has been mirrored by the companies that mine things like gold, silver and copper, with key ETFs tracking the share prices of the former two down c. 40% and the latter down c. 25%.
While participants fret over whether this is the bursting of a bubble, others suspect it might just be a rational profit-taking episode and consolidation before another leg higher. It seems the corollary of this is that BlackRock World Mining (BRWM) has made its way back into our most-popular investment trusts once more.
We’ve seen plenty of turbulence around the globe so far this year and anybody reading the news pages and throwing their newspapers away before reaching the business sections might be forgiven for assuming stock markets around the world were in similar turmoil.
In actuality, global markets as a whole have been remarkably resilient, to borrow a popular phrase from our recent round-up of investment outlooks. In fact, the S&P 500 was back at a record high at the time of writing.
While backward-looking valuation metrics suggest share prices are looking decidedly toppy and that returns moving forward are likely to be low to non-existent, forward-looking metrics paint a more upbeat picture.
The price-to-earnings and cyclically adjusted price-to-earnings ratios (backward looking) on the MSCI USA Index remain high at c. 27× and 40× respectively as of 31/07/2026, yet the forward PE was much lower at c. 20×.
Much of this is predicated on the difference between past earnings and future earnings, with many thinking AI-derived earnings will mean companies are set to earn much more than they have, in aggregate, in the past.
Whether this happens or whether mean reversion is still a driving force remains to be seen and time will tell which is right.
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]]>These US mega-cap tech stocks have largely eschewed dividends, preferring instead to reinvest a large portion of their revenues back into growing the business, in the hope that they would perpetually reward shareholders not with tangible cash, but with ever-higher share prices.
The artificial intelligence arms race has only embedded that, with the US hyperscalers spending heavily on data centres in an attempt to chase AI nirvana. Many believe that this capital expenditure cycle will extend the period of American exceptionalism unabated.
True, these hyperscalers do pay dividends. Microsoft led as far back as 2003, followed by Google and YouTube owner Alphabet, Apple and then, as recently as 2024, Facebook and Instagram owner Meta Platforms.
However, AI capex has gone from 33% of the hyperscalers’ cash flow from operations in 2023 to an estimated 93% in 2026, according to JPMorgan Asset Management (JPMAM). There’s a real sense that AI spend is weakening their balance sheets and lessening their ability to keep servicing these dividend payments, unless the pay-offs are almost immediate.
Looking forward, if technology remains the bellwether of stock market growth, we think investors will need to rethink the assumption that America rules, OK, since the US market is no longer the only game in town when it comes to technological innovation.
Asia has burst onto the scene as a real player in AI. Indeed, the information technology sector now accounts for more than half of the weighting of the MSCI AC Asia Ex Japan Index, versus just over 36% of the MSCI USA Index. It’s a significant amount, and it seems to us that there’s an important shift going on.
Importantly, while a good chunk of the billions of dollars America’s hyperscalers are spending each year on data centres is flowing to the likes of NVIDIA and Micron, much of it is finding its way to Asia, where semiconductor firms from Taiwan to Korea are feasting.
Since January, the 2026 earnings per-share (EPS) estimates for Asian semiconductor names have been revised up 89%, versus 22% and 17% for their US and European peers respectively, according to JPMAM.
The strengthening of Asia’s leadership in AI-related technology sectors comes at the same time authorities in some countries are pushing for corporate governance reforms similar to those seen in Japan.
While not specifically targeting dividend payments, Korea’s Value Up programme is seeking to tackle a Korea discount that has persisted in the past by improving minority shareholder protections and cash returns play into that.
Indeed, dividends from 694 major Korean companies amounted to c. 48trn won in 2025, up 15.3% from 2025. More than half (371) increased their dividends, while 65 began paying dividends after not doing so in 2024. The KRX Korea Value-up Index is up c. 168% over the 12 months to 23/07/2026, versus the KOSPI’s c. 122% advance.
In China, a series of initiatives have been launched since 2023 to provide better rights to shareholders, clarify board structures, and implement international norms for things like audit committees for listed firms. There has also been an active push for an increase in dividends and share buybacks, which we’ve started to see improve.
In most markets, dividend payers tend to have stronger balance sheets and better corporate governance, providing investors with exposure to high-quality, financially stable and profitable companies. That’s particularly true within emerging market regions such as Asia.
That said, it’s important to balance this out with exposure to higher-growth areas of the market, which can and typically does come in the form of companies that pay no or low dividends. This is where active management comes into its own to avoid the low-quality parts of the market.
We think JPMorgan Asia Growth & Income (JAGI) is a gold standard in this respect. Robert Lloyd and Pauline Ng have had management responsibilities since 2018 and 2024 respectively and both have more than 20 years’ experience in the industry.
The basis of the investment strategy is the idea generation by JPMAM’s Emerging Markets and Asia Pacific (EMAP) Equities team, of which Robert and Pauline are members.
The EMAP team includes over 30 sector-specific analysts based across the region, as well as several quant, macro, and country-specific analysts. In total, the team has over 100 investment professionals in nine different locations, providing JAGI with highly experienced management alongside a deep and highly resourced team.
Robert and Pauline take a bottom-up, long-term approach to investing, identifying high-quality, dynamic businesses, held in a relatively concentrated portfolio that generally consists of between 50 and 80 holdings.
The managers try to ensure there are limited factor or style biases in the portfolio, meaning that valuation, style and market-cap tilts are all close to that of the index.
Robert and Pauline have been able to ride Asia’s technology boom successfully, with the sector accounting for 49.7% of the portfolio at 30/06/2026. Overweight positions in Samsung and Delta contributing strongly to performance, while an underweight to SK Hynix (due to pragmatic profit-taking) weighed on relative performance, despite its sizeable position contributing good absolute returns.
They’ve also been able to avoid AI losers, which has culminated in an underweight position in India, given the prevalence of IT services companies likely to be disrupted combined with high valuations.
JAGI also uses the investment trust wrapper to ensure differentiation with peers, ensuring shareholders receive a high yield alongside heavy exposure to the AI trend, something few US-focused funds or trusts are able to do.
An enhanced dividend policy that pays out 1.5% of net asset value (NAV) each quarter works out to a yield of 5.5% at 24/07/2026, making it the highest yielding trust in JPMAM’s range and the second highest yielding of its Asia Pacific peers.
In a world where investors are starting to rethink the long-term winners from the AI revolution, we think Asia can no longer be overlooked and JAGI provides heavy exposure to the potential beneficiaries both on a discount and with an attractive level of income.
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]]>The trend for REITs, and investment trusts more generally, to scale up is firmly established and should the transaction outlined above complete, it will be a significant boost to Schroder Real Estate (SREI), both in net asset and market cap terms, as well as being earnings accretive for SREI shareholders through cost efficiencies and further strengthening the sector leading balance sheet. SREI’s current market cap, approximately £225m, is arguably one of the factors in its discount to net asset value, although the 29% discount translates to a dividend yield of 8.3%, which is significantly higher than, for example, UK 10-year government bond yields, currently at around 4.9%.
Clearly the slight decrease in overall valuations marks a pause in the protracted recovery that has been underway since the UK property market nadir in 2024, with the abovementioned bond yields nudging higher during the year on increased political risk. But this only goes to highlight SREI’s debt profile, with rates fixed at 3.4% for over 7 years, significantly lower than the net initial yield of the portfolio as well as bond yields. SREI’s dividend cover dipped below 100% in the year but this comes from a combination of rising costs associated with voids, as well as some bad debts, mainly from the previous financial year, crystalising, and in fact the managers had good success with new leases and reduced the void rate to its lowest level since 2022.
The proposed transaction would, if completed, reshape SREI but we can say in general terms that Picton Property (PCTN) has a similar diversified approach with SREI sector weightings unchanged post deal (e.g. 66% industrial and retail warehouse), and also has a similar debt profile with inherited drawn debt below market rate at 4.4%, so it’s unlikely that a successful transaction would fundamentally change SREI’s proposition as a diversified UK REIT, but the earnings accretion and likely bump in market cap could put it onto a wider range of investors’ radars, and thus reduce the discount to net asset value.
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]]>In all honesty, it feels like we’ve been actively trying to avoid the heat this summer, not helped by the office aircon choosing to clock off on the hottest day of the year. Still, for Jo and me it’s back into the furnace that is our portfolio recap – always done with slight trepidation.
So let’s find out below who has taken advantage of the AI boom and who has missed out…
We’ll start with the investments that had us leaning back on our sunbeds and sipping mojitos, dreaming of early retirement:
It’s fair to say my portfolio has never quite hit peak thematic discipline, being more of a jumble sale of sectors catching my eye, though technological innovation underpins much of the recent outperformance.
Top honours went to the iShares MSCI Global Semiconductors ETF (SEMI) which more than doubled over the six months. It’s a familiar growth story thanks to soaring AI demand, billion-dollar data centre capex and government focus on chip sovereignty.
SEMI spans the whole value chain from designers to manufacturers but the real fireworks came from the memory names, with Micron Technology serving up a stellar 260% year-to-date rise. Pricing should (hopefully) hold while the capex tap stays open, but it’s probably time to lock in some of the gain.
Denali Therapeutics (DNLI) took silver with a 58% gain. It’s one of the more credible pioneers of treatments designed to cross the blood-brain barrier, which are a potential gamechanger for Alzheimer’s, Parkinson’s and ALS. Biotech M&A remains brisk as big pharma stares down its looming patent cliff, and neurodegeneration offers a vast market to tap. That said, Denali has lurched from red to black repeatedly in the three years I’ve owned it, so my vote goes to the broader brush International Biotechnology Trust (IBT) which is also my fund pick for 2026.
Rounding out the group is Pictet Clean Energy which is riding the energy transition, not in terms of solar panels and wind turbines, but the enabling technologies and infrastructure behind it. As always, the devil is in the detail and, surprise surprise, six of the top ten holdings are currently semiconductor-related, providing much of the heavy lifting behind its 40% return. Given I also own NVIDIA (NVID), it’s going to be a one-in-one-out strategy for any further semiconductor holdings.
My investment in Raspberry Pi (RPI) has certainly been up and down. Since we started writing these reviews, it’s been my best-performing stock, then my worst-performing stock, and now it’s back to being top of the charts. Good job it’s not a big enough position to cause sleepless nights.
In typical fashion for the company that makes cheap, miniature computers for hobbyists, the period in which the breathtaking return of 174% came included a c. 35% fall from late February until early March, and since early June, shares have sunk c. 40%.
Shares jumped almost 50% on one single day in February, although the catalyst for the share price surge wasn’t completely clear, according to Reuters at the time. It came not long after chief executive Eben Upton had bought around £13,224 worth of shares, suggesting confidence from management but surely not a big enough bet to move the needle that much.
Reuters also highlighted an apparently viral post on the platform formerly known as Twitter highlighting that RPI’s computers are low-cost and suggesting they may have uses in AI functions as another catalyst that may have turned RPI into a meme stock briefly, although the tweet (or whatever they’re called these days) got just 89 reposts, which I’m not sure counts as viral these days.
Shares in new FTSE 100 constituent Computacenter (CCC) have been on a good run this year and are currently trading at an all-time high. The firm has benefitted from the data centre boom to fuel AI growth, with half-year profits expected to double as the hyperscalers building the AI plumbing infrastructure have been snapping up CCC’s hardware.
The rest of my top-performers have been emerging market related funds and trusts, as the AI boom has helped light a rocket under the Taiwanese and Korean markets where TSMC, Samsung Electronics and SK Hynix have become globally relevant.
Pacific Horizon (PHI) was the standout performer here, up 50%, but the likes of Fidelity Emerging Markets (FEML), JPMorgan Asia Growth & Income (JAGI) and Jupiter Asian Income weren’t far behind. I took some profits earlier in the year here, as I worry that the EM story is now more correlated to the semiconductor bubble, but if the current reversal continues, it could provide an opportunity to top up somewhere down the line.
And finally, those that brought any hopes of quitting the rat race any time soon to an abrupt end:
As you can see, my list of worst-performers is heavily tilted towards my very small ISA that is focused on individual shares. This particular account is just 2.5% of my overall portfolio, but the returns have been worse than my main accounts and I seem to be stuck in a few poor investments.
As is often the case, I understand that cutting your losses is generally a better idea than hanging on in the hope that things start to go right and share prices recover to a level where I can get out at least at break-even, but I’m currently waiting for the latter.
While the stock market remains buoyant, consumers have been tightening their belts recently, with confidence having been dented by still-high consumer prices and mortgage rates, leaving less room to buy the more discretionary items sold by the likes of Lululemon (LULU) and Zoetis (ZTS).
Adobe (ADBE), meanwhile, faces real threats from AI with competitor brands offering simpler and cheaper editing programmes. Turmoil in ADBE’s C-suite hasn’t helped, despite the firm reporting solid underlying revenue.
I take heart in the fact that hedge fund manager Michael Burry, of The Big Short fame, recently added all three firms to his portfolio, while Morningstar highlighted ZTS as a high-quality value stock it likes, with shares currently c. 50% undervalued.
The flipside of backing some more speculative plays is a willingness to grit your teeth through the losses, and thus it proved for a few of my holdings.
Outsourcer Capita (CPI) was ticking along nicely until it was hit with a hefty fine for failing to protect personal data in its 2023 cyber-attack. Things deteriorated from there, with the company swinging into an annual loss, prompting fresh questions about its ability to service a sizeable debt pile, and then lost its Royal Mail pension contract for good measure. Here’s hoping the arrival of activist investor Oasis Management on the board brings better news for shareholders.
Pershing Square Holdings (PSH) also misfired, and it’s the only one of the three where I’m sitting on an overall loss. Its highly concentrated portfolio of US large-caps can deliver useful idiosyncratic returns during market downturns, but the trust remains on a fairly chunky discount so it’s going on the sell list as soon as it crawls back to breakeven.
And, once again, third place goes to the iShares Listed Private Equity ETF (IPRV), down another 16%. The SpaceX IPO may be one of private equity’s brighter stories but investors remain sceptical of private company valuations, not helped by the lack of clarity around interest rates. I’m giving it a temporary stay of execution until year-end, at which point it might be time to (in the words of Elsa) let it go.
Jo: I ended the six-month period with a 17% gain, helped as much by a rising tide lifting all boats as any pretence of elite stock-picking, though I’d be delighted if the second half of the year served up more of the same. I still think the better returns sit outside the US, so I’ve upped my emerging markets exposure and added some infrastructure ballast. And in a moment of pure FOMO, I’ve taken a little detour into actual space with the Seraphim fund, which shot up by 80% in my first six weeks before gravity reasserted itself.
David: I may lag Jo, but a 9% gain for my main SIPP and ISA rank as a decent result, considering I still have a c. 8.5% cash buffer and the Vanguard FTSE All-World ETF (VWRP) returned c. 12.5%. I hope that the current plateauing out of AI enthusiasm might continue and let me drip-feed some of that dry powder into the markets in the six months until we return. In the meantime, I’ll keep an eye on my direct stock ISA, which returned a rather disappointing 6% and assess whether the money in there could be used for a better purpose (namely, a kitchen extension for our new house).
In the final scores on the doors, David takes the 100 metres in his Raspberry Pi blaze of glory, while Jo’s overall portfolio goes the distance in the marathon. We’ll line up again in six months’ time to see whether we can finally outperform a global equity tracker fund.
All numbers based on the six months ending 30/06/2026 unless stated otherwise, based on share price total returns.
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]]>Precious metals may have monopolised the headlines, but the rather less glamorous steel took the honours in 2021 with a 120% gain, while iron ore did even better in 2020. Gold, meanwhile, has posted negative returns in three of the past ten years, and struggled to top 20% in another five.
Metals may sit in the same bucket, but they behave very differently, making it hard for investors to capture the regular shifts in leadership. A broad commodities ETF is the Route One option, though winners are offset by laggards. In addition, exposure is capped at the underlying price rather than the operational leverage miners can offer, with the MSCI ACWI Select Gold Miners Index rising 155% in 2025, more than twice gold’s 60% return.
This is where active management earns its keep: instead of blanket exposure, specialist managers can target the strongest demand and supply drivers and the mining companies best placed to benefit.
Technology firms can turn out new products in a matter of months, whereas mining companies generally operate on 15-20year lead times for new mines, while also wrestling with declining grades, geopolitics and dependence on one or two commodities. In a sector where supply and demand dynamics can shift quickly, this lack of flexibility leaves investors hitching their fortunes to a slow turning tanker.
BlackRock World Mining (BRWM) aims to offer a ‘virtual mining company’ for investors, spanning precious and industrial metals, single asset names, explorers and diversified producers. This breadth gives managers the flexibility to adjust allocations as conditions evolve.
Evy Hambro and Olivia Markham draw on their combined five decades of experience to assess commodity price outlooks, encompassing regional demand and supply factors, geopolitics, policy developments and the broader macroeconomic backdrop.
Demand drivers vary widely across the universe: gold’s run has been fuelled by fiscal deficits, currency aversion and central bank buying, while silver has been buoyed by solar build-out and a persistent supply deficit running down inventories. Copper is central to the net-zero transition and AI boom, while hyperscalers are looking to uranium to power energy-hungry data centres.
On the supply side, copper has faced significant disruption, with declining grades and ageing assets pushing producers into tougher jurisdictions with higher build costs. Silver supply remains tight, with flat output and heavy reliance on by-product mining. China’s dominance in steel, rare earths and (to a lesser extent) iron ore also exposes supply chains to policy and geopolitical shifts.
The final overlay is company-specific drivers. Key criteria include the quality of the mining assets, balance sheet and capital discipline and the ability to turn higher commodity prices into cash flow. The managers also assess the scope for value creation through reserve growth, production gains or selective acquisitions, which can create meaningful efficiencies and cost savings.
Evy and Olivia are supported by the on-the-ground insight from the wider BlackRock team, from mine visits to third party research. This expertise is critical in assessing operational optionality in terms of which areas to mine, whether to extend mine life or defer undeveloped resources until commodity prices or financing conditions improve.
The proof of the pudding is in the numbers, with BRWM delivering a one year share price total return of 76% (as at 30/06/2025), versus 57% for the benchmark index. This is a clear demonstration of the value of an active strategy over passive exposure, with the managers adjusting portfolio allocations to capture the strongest growth drivers.
As shown in the chart below, the trust offers diversified exposure across both precious and industrial metals, with gold currently accounting for the highest weighting. Copper is the second-highest exposure, underpinned by structural drivers spanning economic growth, the energy transition, defence modernisation and the AI roll-out. Demand is forecast to rise by nearly 50% between 2025 and 2040, according to S&P Global, opening up a substantial supply gap.
The benefit of an active approach was demonstrated in the increase in allocation to gold miners from 22% to almost 40% during 2025, as rising prices fed through to higher margins, cash flow, dividends and buybacks. However, the managers remain mindful of the downside risk from cost inflation, retaining the flexibility to shift from gold miners to physical gold if needed.
China was another case in point, with the managers positioning the portfolio to reflect the bifurcation in Chinese demand. On the upside, they saw strong appetite for copper and aluminium from renewables, grid upgrades and EV manufacturing, but trimmed iron ore and steel exposure in response to softer property and infrastructure demand.
This flexibility also extends across the capital structure, with the option to invest directly in commodities, mining equities and unquoted companies. BRWM can also generate an additional income stream from option writing, debt securities and royalties. Income has accounted for half of the total return over the last five years, helping to limit downside risk if a rally stalls or the economic outlook deteriorates.
Looking ahead, investors are rediscovering the appeal of HALO (heavy assets, low obsolescence) after a decade dominated by capital-light business models. These tangible assets underpin critical infrastructure across energy, industry and defence, offering durability, pricing power and strategic relevance as governments move to secure the supply of critical materials.
AI may be revolutionising the corporate world, but it can't replace a copper mine, steel mill or power grid. BRWM's virtual mining company strategy is well-positioned to capture the most favourable dynamics across the metals universe, as well as the long-term mega-trends of AI and the energy transition.
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]]>2026 has so far proved to be significantly more positive for Greencoat UK Wind (UKW) than 2025, and we note an undercurrent of quiet confidence from the manager’s presentation for the interim results. UKW has a simple model, which puts the trust in a strong position to be a survivor over the short term, and over the long term a valuable constituent of diversified portfolios – for institutions and retail investors alike. UKW’s long standing attributes that underpin its position are that the trust is an attractive proposition at scale (gross assets of c. £5bn), it has a self-sustaining financial model ( long term dividend cover of 1.8x forecast over 2027-31), and that there is low execution risk in the trust continuing to deliver returns into the future, given the strategy is to keep doing what the trust has done for the past 13 years, and does not require a transformational pivot to continue to deliver for shareholders.
Fundamentally, UKW’s proposition remains faithful to its original design, having paid a covered, inflation-linked dividend for the last 13 years. Dividend cover is the key to UKW’s attractions in our view, given it gives the board so much flexibility to deploy capital to the advantage of shareholders. With net cash generation +36% for the six months to 30/06/26 over the same period last year, dividend cover has significantly improved (1.9x for the six months to 30/06/26). Responding to higher energy prices, the managers locked in 20% of annual electricity production for the year ahead at the interim stage, meaning that around 66% of UKW’s revenues for the remainder of the year are now fixed. The team commented that since the half year end, prices for a further 10% of production had been subsequently locked in, mainly in 2027. The managers note that this is not a change in policy, but more a tactical move taking advantage of higher prices. In our view, this should give confidence to shareholders that the target dividend for the year is effectively ‘in the bag’, and that for the full year, there will be significant excess cash for capital allocation.
The team have guided their expectations are that UKW should throw off c. £120-180m of surplus capital for the current financial year. In terms of uses of this capital, we understand that the board and manager are focussed on disciplined reinvestment which is key to delivering long term cashflows to shareholders, having already repaid £30m of the RCF. UKW’s gearing, at 41.7% is marginally higher than the board’s sub-40% target. The successful refinancing of maturing debt is good news for shareholders, and the team highlight that they expect further refinancing activities will be announced later this year. Progressive debt reduction is one source of surplus cash, but with c. £45m re-paid each year from the Hornsea 1 specific loan, the team suggested achieving the sub-40% target may be a medium-term feature, reached through debt repayments but also through re-investment in the asset base to grow the GAV.
UKW’s target dividend yields 9.8% at the current share price. The portfolio discount rate, less annual charges, implies a NAV total return of c 10.7% per annum. As with any investment there are risks that anticipated returns will not be achieved, and one specific risk for UKW shareholders is the threat of politics. That said, with an anticipated doubling of electricity demand to 2050 (NESO Future Energy Scenarios 2025), wind farms are well positioned to make a strong contribution to an increase in supply, being lower cost and emitting zero-carbon at the same time. Any UK government must in our view be careful not to frighten off private capital, which is key to delivering transformational change for voters.
UKW is projected to have c. £1bn of surplus capital available to invest over the next five years, and so the trust could be a meaningful participant in helping to meet the UK’s future energy demands. At the same time, shareholders stand to benefit from any future price spikes caused by geopolitical instability, which the managers observe is becoming an increasing feature of markets. In this regard, UKW potentially offers an appealing package from a portfolio context: the prospect of attractive returns from a base-case scenario, potentially also offering a hedge to energy price rises in the future. With the shares trading on a discount to NAV of c 18% and corporate activity continuing within the sector, a further narrowing of the discount cannot be ruled out.
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]]>Software has so far been the most consequential victim, though the so-called hyperscalers have also borne some brunt. As the Magnificent Seven have underperformed, market leadership has shifted to the ‘picks and shovels’ of the AI ecosystem, namely the semiconductor firms that make, design and/or supply the chips that are crucial in powering AI.
Conflict in the Middle East has conspired to shut the Strait of Hormuz, a key waterway through which, in normal times, c. 20% of the world’s oil and liquefied natural gas (LNG) flows. Today, that flow has slowed to a trickle and has raised c. 40% in the year to 20/07/2026.
Amid this, we’ve been treated to a record-breaking IPO from Elon Musk’s rocket-launching firm SpaceX, which raised $86bn (£64bn) from public market investors in June. Markets have been surprisingly resilient, a fact cheered by both Invesco and Fidelity.
In its mid-year outlook, Invesco said: “The first half has seen a host of events with the potential to disrupt global economies and markets in a world that appears increasingly fragmented. Yet economic data and corporate results suggest the global economy remains resilient.”
The firm said that it expects the global economy to re-accelerate later in 2026, though it cautioned that this depends on when energy starts flowing again, adding that “the longer the Strait of Hormuz remains closed the more challenging the growth and inflation mix will become”.
Fidelity argues that this steadfastness is unsurprising, given markets have “become well-versed in seeing through the noise and recognising upside”. “An immense AI capex cycle, strong earnings, and relatively strong fundamentals across markets have reassured investors that there’s still plenty of alpha to be captured.”
That brings us nicely onto the question of AI, which has, as we said earlier, been powering markets for a few years now, ever since the emergence of ChatGPT. We’ve spoken about the sheer scale of AI spending before; now, we’re starting to get a sense of how things might play out in terms of the ultimate return companies might get from their AI investments.
Question marks remain and that’s to be expected, especially when the ramping up in hyperscaler capex has almost inevitably meant that hyperscalers’ free cashflow is now falling. JPMorgan notes that AI capex has gone from 33% of the hyperscalers’ cash flow from operations in 2023 to an estimated 93% in 2026. Ultimately, the hyperscalers must “demonstrate that demand is sufficient to deliver a positive return on investment and do so quickly enough to avoid placing too great a strain on existing cashflow” if they are to win back investors’ favour.
Fidelity’s Jonathan Tseng agrees, suggesting that either capex will need to come down or revenue and absolute free cashflow will need to go up. He sees good reasons why the latter will be the case. “The total addressable market for LLM spending is no longer the IT budget but the broader wage budget of the business world,” says Tseng.
Many survey-based indicators, such as the Ramp AI Index, have highlighted increasing corporate adoption of AI, said JPMorgan. This is positive, as current tech stock valuations are predicated largely on AI becoming a powerful source of productivity and profitability across the whole global economy.
The firm is also reassured by the fact that we’ve seen a dispersion of returns within tech itself. Indeed, there’s been a near-100 percentage point difference in performance between the best-performing US hyperscaler (Alphabet) and the worst performing (Meta Platforms) in the 12 months to 17/07/2026.
This suggests investors are “scrutinising individual company fundamentals rather than placing options on the overall market, which would be more common behaviour in the late-stage euphoria of a bubble forming”.
It is, of course, still unclear who the ultimate winners will be, and the market will continue to hazard guesses.
The data centre build-out boom is key for Invesco. It thinks that bottlenecks in supply have driven pricing power for many semiconductor names, while simultaneously looking beyond chips and into companies providing networking, cooling and grid interconnection equipment.
In addition, owners of natural gas-fired turbines and nuclear energy are likely to benefit from data centre builders preferring to generate their own energy, while upward pressure will be exerted on prices for commodities such as copper and rare earth minerals, upon which much of the equipment used in data centres relies.
Fidelity sees some value in selected utilities that have exposure to data centre growth, noting that “escalating NIMBYism across the US will drive data centre growth to Texas, where there are no zoning laws outside cities and the state government and utility regulators are highly supportive of data centres”.
The AI discussion brings us neatly onto the question of whether US exceptionalism will continue. We had seen some evidence that non-US equities might stage a comeback while the US underperformed (but still provided positive and eye-catching returns). Emerging markets were at the vanguard of this shift. For now, that looks to have been transitory and the US has retaken the initiative.
BlackRock thinks America will continue to outperform, reiterating an overweight to the US since, particularly US technology as the AI play. “Even if the ultimate [AI] winners are unclear, many are likely to be found [in the US].”
Interestingly, while noting there are specific AI plays outside of the US, BlackRock has downgraded broad emerging market (EM) equities from overweight to neutral after strong performance, given the largest companies in the EM index are tied to the same value chain (AI) as the largest US firms. Within the EM region, it prefers Latin America.
By contrast, Invesco thinks that both EM equities and EM debt will continue to outperform for a few key reasons. One is its exposure to the AI supply chain, noting that demand for data centre products has led to a boom in exports from South Korea and Taiwan in particular. Consensus forecasts for MSCI Korea earnings per share growth in 2026 is over 200%.
In terms of the oil price, there are a couple of possibilities. The higher energy prices go, the more the energy-exporting parts of the EM universe will benefit. If and when the Strait reopens and oil prices fall, this would give a boost to those energy importers, as well as seeing global economic growth re-accelerate, providing a potential boost to EMs.
Invesco’s final reason is that it expects the US dollar to continue falling. It argues that the US dollar is “one of the more overvalued currencies on most measures, and the fact it has not strengthened much in the face of the recent energy shock is telling”.
The firm also thinks the US Federal Reserve will restart its interest rate cutting programme during the second half of the year, which would pressure the US dollar. EM equities tend to outperform developed markets when the USD weakens.
There’s broad scepticism around China and few are shouting from the rooftops about Europe, given the continent’s lack of AI behemoths. JPMorgan calls UK equities “differentiated” with a “relatively attractive profile”, should their forecast of a weaker pound and less hawkish than expected Bank of England materialise. This “supports internationally exposed revenues, while dividend yields, undemanding valuations, and stronger free cash flow generation provide a solid foundation for total returns”, the firm said.
Fidelity said that it was underweight countries and sectors vulnerable to energy shortages such as Japan, but sees appeal in Japanese mid-caps. As Japan’s small-cap segment has outperformed the broader market thanks to shareholder governance reforms, Fidelity thinks mid-caps should start to do well, too. They noted that mid-caps are more domestically oriented, so less affected by geopolitical noise and better positioned to capture recovering local demand.
One other clear theme running through the outlooks is the shifting sands when it comes to the non-equity part of a diversified portfolio. Historically, long-dated government bonds have successfully filled this spot, with the gold-standard balanced portfolio having been seen as 60% equities and 40% bonds.
“A simple split between bonds and equities will not protect investors through all the different inflationary regimes to come in this new era of investing,” said Fidelity.
One big worry is around long-dated government bonds, given the potential for inflation to remain at higher levels, as well as the sheer scale of government indebtedness. BlackRock thinks that after around 30 years of a great moderation in bond yields, we’ve entered a new regime of post-pandemic supply constraints that could keep inflation higher. If this is the case, bond yields that look optically high could prove anything but.
That said, bond yields have now “steadily reset higher around the world, making income an opportunity again”, according to BlackRock. “The key is how investors earn it,” they say. “We prefer pocketing income in shorter maturities over relying on long-term bonds”, for the reasons set out above. Others agree.
Fidelity also suggested considering inflation-linked bonds, which, as the name suggests, have the ability to protect against inflation.
On private credit, Invesco noted that while there are understandable concerns being raised, high-quality direct lending investments offer a relatively attractive risk-reward trade-off.
Elsewhere, real estate offers the possibility for good returns as well as diversification. “With similar volatility to government debt and investment grade credit, real estate has offered better returns over the period since 2005, with small negative correlation on average to other assets, which suggests it has been a diversifying asset,” Invesco said. “Interestingly, given the current environment, our historical analysis shows that real estate performs better than most assets when inflation is rising.”
JPMorgan thinks that if inflationary concerns become more systemic, then “investors will seek protection in assets that can’t be printed”. These include infrastructure (as mentioned), transportation assets, and real estate, which all “sit at the centre of resilience, supply-chain security, energy security, and domestic capacity building”.
“They also offer a useful hedge in a more inflationary world, with tangible replacement value, long-duration cash flows, and potential inflation linkage through rents, contracts, or regulated returns.”
One final asset to consider is commodities, which “has historically helped protect investors through inflationary environments since these are real assets tied to rising input costs, and because of their lower correlations with other assets”, said James Richards, a fund manager at Fidelity.
“For investors concerned about concentration in consensus trades, such as AI capex winners, commodities introduce differentiated return drivers, enhancing portfolio diversification,” Richards added.
Overall, the resilience markets have shown in the face of numerous storms so far this year has certainly reassured most fund groups. Indeed, with expectations of record earnings to come further down the line, “now is not a time to shy away from risk; only to ensure it’s balanced in a well-diversified portfolio that will cushion the inevitable shocks when they come”, said Fidelity.
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]]>As leadership broadened, growth-seekers turned their focus to emerging markets as the main beneficiaries of the hyperscaler spending spree. This proved good business, with the MSCI Emerging Markets Index returning 24% last year, but the best returns were found further off the beaten track, with frontier markets chalking up an impressive 37% return.
Frontier markets may fly under the radar, but they’re home to around 900 million people - more than 10% of the global population - and generate almost 3% of global GDP. Their share of global equity markets, however, is just 0.1%. Even if you widen the universe to include smaller emerging markets (excluding the eight largest emerging markets), the equity market share only rises to 7%, despite representing almost 15% of global GDP.
With leadership rotating away from the US, this imbalance between economic heft and market representation could provide a long-term source of returns for growth investors.
Emerging markets tick the box on geographic diversification, but scratch the surface and they’re primarily another play on the same handful of technology names. The top ten constituents make up 40% of the MSCI Emerging Markets Index, with TSMC and Samsung Electronics alone accounting for nearly a quarter, leaving the index highly exposed to any slowdown in demand from the likes of NVIDIA, Apple, Tesla and AMD.
Smaller emerging and frontier markets, on the other hand, don’t require investors to put quite so many eggs in the AI basket. Their economies are driven by a range of factors - from domestic consumption to export led growth and natural resources to financial services - rather than the fortunes of the global tech giants.
This is demonstrated by the low correlation between frontier and smaller emerging markets: the MSCI Bangladesh Index has a near zero correlation with Chile, Kenya and the Philippines, while the Frontiers index has a meaningfully lower correlation to the S&P 500 than Korea or Taiwan. As a result, they offer genuine diversification from developed market indices.
Frontier and emerging markets have long been seen as the Wild West of investing, dismissed as volatile, fiscally fragile and politically unpredictable, but this perception is increasingly out of date.
Over the last decade, frontier markets have experienced lower volatility in aggregate than even US large-caps, as well as UK and European markets. Emerging markets remain more volatile, but largely because China, Taiwan and South Korea account for almost three-quarters of the index, and the technology sector for nearly half.
In contrast, no single country accounts for more than 10% of the MSCI Frontier & Emerging Markets Select Index, and technology exposure is just 1%. This broader opportunity set helps to smooth returns and reduces reliance on a single theme.
The fiscal backdrop has also shifted, with developed economies carrying significantly higher debt burdens after years of stimulus and rising borrowing costs. Emerging and developing market debt remains below 80% of GDP, compared with more than 100% in the UK and 125% in the US, creating challenges for central banks trying to tame sticky inflation.
A weakening US dollar has added another tailwind, with many emerging and frontier currencies strengthening in 2025, reducing the cost of servicing dollar-denominated debt and improving returns for overseas investors.
Political risk has by no means disappeared, but central bank independence and policy discipline have improved across frontier and emerging markets in recent years. Political developments also tend to be localised, with elections or policy changes in one country rarely spilling over into the wider investment universe.
The opportunity in frontier markets may be compelling but accessing it can be far from straightforward: research coverage is limited, liquidity can be patchy and the political and economic ecosystem backdrop varies widely.
These inefficiencies are precisely where active managers can add value. BlackRock Frontiers (BRFI) takes a different approach to emerging markets by excluding the eight largest economies (with China, India and Taiwan among them) and focusing instead on frontier markets and smaller emerging economies.
These countries have limited ETF coverage, meaning they’re less exposed to the vagaries of investor flows. Valuations also remain attractive: the MSCI Frontier & Emerging Markets Select Index trades at a forward price-earnings ratio of just under 10, almost 50% below the MSCI ACWI.
Managers Sam Vecht and Emily Fletcher draw on BlackRock's extensive global resources to uncover opportunities supported by structural themes rather than being hostage to the fortunes of the Magnificent Seven.
One example is Uzbekistan, a resource-rich economy benefiting from long-term secular demand for commodities, while economic reforms are attracting foreign capital into large-scale infrastructure projects. BRFI has invested in the country’s first IPO of national investment fund UzNIF, which holds stakes in utilities, telecoms, banking and transport companies.
Another theme is financial inclusion: Africa accounts for more than half of global mobile money accounts, yet 1.3 billion adults still lack access to financial services, predominantly in Bangladesh, Egypt, Indonesia and Pakistan, according to LHoFT. The managers have positioned the portfolio to benefit from the continued digitalisation of payments, lending and savings products across underbanked populations.
The trust’s performance is testament to the strategy, with BRFI topping the AIC Global Emerging Markets sector with a 92% share price return over the last five years. Dividends have also become a meaningful part of returns, with the trust yielding just above 3% as earnings growth supports a rising natural income.
In summary, frontier and smaller emerging markets offer something genuinely different: broader market leadership, lower correlations and attractive valuations. As investors look beyond the US and the Asian technology leaders, they offer a credible long term source of growth for investors willing to venture where the index doesn’t.
Data as at 21/07/2026 unless specified otherwise. Returns in GBP.
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]]>Military drums also have a long history, from ancient China, Genghis Khan’s Mongols right through to the 12th century Crusaders and during the Napoleonic Wars. They’re often used as a rallying call. It’s where the saying ‘beating the drum’ originates.
I certainly feel like I’ve been banging the drum for UK mid and small caps a lot recently. They are, surely, too cheap to overlook. One can see the evidence for this in the sheer number of UK companies that are being picked off by private equity and trade buyers who quite obviously see a lot that their public market counterparts don’t.
There are headwinds, sure. The UK political climate remains fraught and uncertain, as a new Prime Minister has just stepped into 10 Downing Street; public sector debt is still elevated and there seems to be no let-up in the rising cost of living, crimping consumers’ wallets.
Yet, plenty of UK companies are thriving and, while the ones that have been left to fester on ludicrously low valuations are being snapped up left, right and centre, there are lots more which are rewarding shareholders with rising share prices.
This gives us some confidence in the outlook for UK smaller companies investment trusts such as Right & Issues (RIII) in particular. Some of RIII’s top holdings have seen spectacular performance recently – and for a trust with such a high-conviction portfolio, this can really move the needle.
Ashtead Technologies is a good, successful example of RIII manager Matt Cable’s investment process in action. Based in Aberdeen, Ashtead rents underwater equipment used to service and maintain offshore wind turbines and energy rigs. Providers of these facilities will rent things that are too bulky and expensive for them to own outright, like remotely operated submarines, underwater cameras and heavy machinery, but crucial for their operations.
Importantly, this equipment needs regular servicing, which Ashtead can deliver that helps to bring in additional, regular revenues above and beyond the rents its collects. It also means Ashtead runs an asset-light business model, giving it higher margins than pure rental businesses tend to garner.
After floating on the stock market at 163p in November 2021, shares eventually soared as high as 893p by July 2024, almost a 450% gain. It then got caught up in the US administration’s tariff pronouncements, as well as worries over the oil price, with shares de-rating by about two-thirds.
Matt has known Ashtead ever since its IPO and some of the open-ended funds within Jupiter Asset Management’s UK equity stable, of which Matt is a team member, were already shareholders.
With shares now looking cheap, Matt met with management in Aberdeen and judged that the fundamentals of the business had remained strong; assessing instead that the share price movement was market noise, Matt added it to the RIII portfolio, with an expectation that plenty of patience would be needed.
Yet, as the market has finally caught up with Matt’s view that Ashtead remains a high-quality operator – and, of course, conflict in the Middle East has contributed to a rising oil price – shares have performed strongly, up c. 42% since the start of the year, as of 20/07/2026.
Other successful investments in recent times include the groundworks engineer Keller, which has seen its share price double in the year-to-date; Colefax, which designs and supplies home furnishings; and Hill & Smith, which makes safety components for infrastructure such as road crash barriers. Shares in the latter two are up c. 50% and 40% respectively this year.
That’s not to say that RIII isn’t benefiting from M&A activity. There were a total of four bids for companies held within its portfolio last year – Reynold’s, Alpha Group, JTC and Treatt, with three of those completing. There’s been interest in another, Gamma Communications, too.
It’s a double-edged sword, of course – having companies being bought-out contributes to performance and helps to realise some value, yet it potentially hinders long-term returns, since these companies are obviously seen as being worth more than the market is currently pricing in.
Still, it goes to show the concentrated and high-conviction nature of Matt’s investment process, which we think is a real appeal – each of the 20 to 25 stocks that are in the portfolio at any one time have a sufficiently high weighting so as to have a material impact on performance.
This, of course, brings some potential pitfalls, particularly as one can imagine it will see more volatility over time. However, the investment trust wrapper really comes into its own here, as it means RIII can cope with and even take advantage of that volatility.
Matt seeks companies with classic quality characteristics, including high returns on capital, solid cash generation and strong margins, as well as strong brands and high-quality assets. There’s also an emphasis on competent management teams.
Hence, the portfolio is heavily tilted to quality companies, but there’s also a bias towards value, the companies held in the portfolio must be available at attractive valuations.
There’s a clear bias towards industrials businesses, though Matt still looks to reduce concentration of risk by investing across a range of sectors. That’s helped by a top-down overlay and risk management handled by colleague Tim Service.
We think that RIII is a unique proposition within the UK smaller companies space. Its quality-value approach strikes us as attractive within a space we see as rife with world-leading companies trading at unfairly depressed levels. It also benefits from relatively low charges and a progressive dividend policy resulting in a c. 2% yield.
We see the re-establishment of the trust’s share buyback authority, which had previously been blocked by a large shareholder, as being a potential gamechanger, too. It may have little impact in the near term, but we think this should help to narrow the discount over time, leading to positive shareholder returns.
For a while now, we’ve seen real scope for strong returns from the UK small-cap segment and will continue to bang the drum, despite not knowing what the exact catalyst for a re-rating will be. In the meantime, RIII should see its concentrated and high-conviction portfolio continue to deliver for shareholders, ready for that turning point.
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]]>Now, we’re not downplaying the profound impact AI is going to have; we think it will be revolutionary, powering productivity gains and helping new stock market winners emerge. However, we’re at the point where the haves (those stock markets with significant AI exposure) are beating the havenots disproportionately.
Take Asia, a continent of almost five billion with a total GDP of $40bn. As AI has dazzled, investor attention has been firmly focused on Taiwan and South Korea, supported by strong demand for semiconductors, AI infrastructure and advanced hardware.
This time last year, the MSCI Korea Index was trading on a cyclically adjusted price to earnings (CAPE) ratio of just under 15×; today it’s climbed to c. 45×, higher even than the MSCI USA Index’s c. 40×. Taiwan’s CAPE is higher still, at c. 56×.
We fully believe that the boom for both these countries’ stock markets is warranted. The booming demand for products made by the likes of Korea’s SK Hynix and Taiwan’s TSMC will no doubt drive future earnings for their respective country indices higher than ever before, making them look cheaper on a forward earnings basis.
We do, though, think things have gotten slightly carried away. Investors’ myopic focus on the AI powerhouses of the US, Korea and Taiwan means they are at risk of missing a whole world of opportunity to add diversification away from the increasingly pricey-looking AI trade.
The UK small-cap segment certainly stands out from a valuation perspective, but it must be acknowledged that it’s hardly a bastion of technological innovation. For those seeking both above, we think China should be seriously considered. China is not only cheap on a forward price-to-earnings basis, trading at c. 10×, but the CAPE ratio is a lowly c. 14× to boot.
Innovation and progress in China are thriving, encompassing not only AI (which people seem to have overlooked), but other exciting areas such as robotics, automation, advanced manufacturing and what is often referred to as "physical AI" – the application of artificial intelligence in the real world.
The fact that valuations ascribed to the Chinese are not only low in absolute terms, but also relative to many emerging market peers (the MSCI China Index trades at a c. 30% PE discount to the broad MSCI Emerging Markets Index).
This shows, in our view, that the market is underappreciating the global competitiveness and innovation capabilities of many Chinese industrial companies, particularly those moving up the value chain in the areas we’ve already mentioned.
Hyperfocus on semiconductors and memory chips is all well and good, but the expansion of AI infrastructure also requires substantial investment in power generation, energy management and electrical equipment – areas in which China is increasingly leading.
Companies across solar, batteries, inverters and power electronics are participating in this supply chain, leveraging manufacturing scale, engineering expertise and vertically integrated operations to capture new sources of demand. This adaptability is often underappreciated.
At a time when the AI boom seems to be becoming narrower and focused on fewer companies, China's innovation story is becoming increasingly broad-based. Somewhat counter-intuitively, we think this makes stock selection even more important, since there will be winners and losers along the way.
Fidelity China Special Situations (FCSS) provides exactly that. Dale Nicholls has been managing FCSS for over 12 years now, having worked with the trust’s first portfolio manager, Anthony Bolton, for a few years before taking over full management responsibilities.
Dale also manages the open-ended Fidelity Funds Pacific Fund, giving him a regional perspective on markets. We think the trust benefits from this as it helps to build a picture of the competitive position of companies in China.
Based in Hong Kong and Singapore, Dale spends a lot of time speaking with management teams and competitors of companies in which he invests or may choose to invest, engaging with hundreds each year. He also draws on the work of 16 dedicated Greater China analysts based in Shanghai and Hong Kong.
FCSS has a flexible, all-encompassing investment process that offers multiple sources of alpha, from not only capturing the opportunities in listed markets, but also picking from the best of the privately owned universe, offering an all-round differentiated option for investors.
This process has delivered substantial outperformance over long periods of time and, as investors’ focus starts to become less myopic and broaden out their search for sources of innovation, we see considerable scope for future returns, enhanced by the current discount, which currently sits at c. 7%.
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