Best Funds For Investors In 2025

In these turbulent times, portfolio returns can swing violently from month to month. To ameliorate this problem, investors sought out funds and trusts to stabilise returns and diversify their portfolio risks. But are funds really a place of safety? And which funds should investors turn to?

To answer these questions, an understanding of equity funds/trusts is required. For example,

• Holdings – most investment entities hold numerous financial instruments according to some pre-defined guidelines. Knowing what these guidelines are is essential. Parameters that dictate holdings include:
  1. Markets – where the fund is operating, eg is the fund a global, regional (eg, Asia Pacific, Europe, emerging markets) or single country (eg, UK, US, China, Japan, India etc)?
  2. Sectors – is the fund sourcing its ideas from a single industry, such as technology, financials, healthcare or mining?
  3. Themes – new investment themes give rise to dedicated funds (eg, clean energy, BRIC, electric automobiles)
• Performance – investment funds generally depend on the performance of its underlying holdings. Market cycles also play a role. In a bear market, most equity funds suffer. A single-sector fund will suffer more if the sector is experiencing a boom-bust cycle.
• Directional bias – most funds are long-biased, that is, funds tend to profit from rising prices.
• Borrowings – is the fund leverage? Some funds explicitly avoid this to make the returns less volatile.

Hargreaves Lansdown has highlighted five funds to their clients for 2025, which they believe should be held for five years. We give our verdict on the funds select below:

Artemis US Smaller Companies

US smaller companies have been widely tipped to perform in 2025 under the new Trump administration.

The idea is that the MAGA (Make America Great Again) philosophy, trade tariffs and alike, will boost the US domestic economy. From which some 77.0% of US smaller company revenues are generated.

The fund’s focus is midterm capital growth, and it seems to be building momentum, with the unit price rising by almost +23.0% over the last quarter.

Managed by Cormac Weldon (the head of the US equity team at Artemis) since its inception in 2014, the fund is diversified across 9 sectors, and the lion’s share of its investment are in stocks with a market cap of $5.0 bln or greater.

The strategy seems to be working and the fund is outperforming the Russell 2000 index year to date, just as did in 2023.

As such, the Artemis US Smaller Companies fund looks well placed to capitalise on a continuing rebound in Small cap US equities.

Baillie Gifford Sustainable Income

This un-benchmarked fund from the well-known Scottish money manager is designed to provide investors with a monthly income in line with inflation, or CPI, as measured over a rolling 5 –year period. And to do so in a sustainable fashion from an ESG standpoint.

The fund currently yields 4.0% and holds a mixture of assets that includes technology stocks, renewable energy and infrastructure plays.

It has just over 31.0% of the fund in global equities, just under 10.0% in property, 21.0% in infrastructure and another 15.0% is split between high yield and investment grade credit.

The fund is overseen by four highly experienced money managers including James Dow Baillie Gifford’s head of global income growth.

The fund’s performance is mixed but looks to be improving and it came in ahead of the sector average in the 12 months to 30-09-2024 though if we look back over 6 months it dipped below that metric.

This is the sort of fund you might turn to, to hedge your bets if you are uncertain about whether an allocation to bonds or equities is right for you, or if you are looking for income with the benefits of diversification.

Invesco Tactical Bond

However, if you are looking for a fund that’s overtly bond-oriented then this might be for you.

Hargreaves Lansdown thinks that bonds will perform well in 2025 against a background of falling inflation and lower interest rates.

The Invesco Tactical Bond fund aims to achieve a mix of income and capital growth, over the medium term (3 to 5 years) by investing in government and corporate bonds, short-term debt, money market instruments and cash.

In terms of performance, the fund has outperformed the yield of 3-month UK government bonds over the 5, 10 and 1-year time frames though it’s underperformed over 3 years.

Co-managers Julian Eberhardt and Stuart Edwards have 45 years of experience between them, and they have an active mandate, which allows them to allocate assets as their take on the macro background dictates.

Legal & General Future World ESG Emerging Markets

A tracker fund that marries the worlds of ESG and Emerging markets investing. That’s a hard circle to square and Hargreaves Lansdown themselves point out that this Legal and General fund was the most carbon-intensive among the 100 funds under its coverage.

That said they believe that this will reduce over time, as carbon footprint reduction is part of the index benchmark’s remit.

The fund is exposed to emerging economies around the globe including China, India, Vietnam and Mexico and it tracks the Solactive L&G Enhanced ESG Emerging Markets Index which is weighted towards companies that score well on ESG criteria.

Its biggest holding is Taiwan Semiconductor, it also has positions in Tencent, Alibaba, Samsung and Infosys. At a sector level communications and technology account for 38.80 % of the fund and banks sector for a further 16.10%.

I note, however, that the top ten holdings account for just 27.0 % of the fund’s portfolio, and that another 1703 investments make up the balance of this very diversified tracker.

The fund was only launched in April 2022 so it does not have a long-term track record, but it’s up by 9.66% since inception, compared to an 11.70% gain in the benchmark index over that time frame.

Troy Trojan

If you prefer to look at something other than traditional asset classes as a safe haven for your capital, then perhaps this fund is for you.

The Troy Trojan fund is managed by Sebastian Lyon and Charlotte Yonge who have four investment pillars under which they operate.

Firstly they invest in large established companies that they believe offer long-term sustainable growth and have defensive characteristics, which allow them to do well in a downturn.

Secondly, they look to government bonds, including US index-linked securities, that should provide a shelter against inflation, this is complimented by the third pillar which consists of gold-related investments, for example, holdings in two physical gold ETFs.

Finally, they hold cash which provides the managers with tactical optionality if and when and when markets stumble.

Between October 2023 and October 2024 the fund returned 8.36% but between October 2020 and October 2021 that figure rose to 12.31%.

If you’re concerned about the downside in the market but still want some equity exposure in your portfolio, then this four-pillared approach could be the one for you.