5 Promising Funds for 2025 and Beyond

As 2024 draws to a close, reflecting on key market trends can provide valuable insights into potential investment opportunities for the coming year. Cooling inflation, central bank rate cuts, and strong corporate earnings, especially in the tech sector, have propelled markets to new heights. The S&P 500 recently surpassed 6,000 points for the first time, boasting a year-to-date gain of nearly 28%, while the tech-heavy Nasdaq crossed the 20,000-point threshold in December, surging by 33% year-to-date. This momentum in major indices, driven by industry giants like Apple and Nvidia, has fueled optimism across global markets, with the FTSE All-World index recording a near 19% year-to-date increase.

Navigating the Investment Landscape in 2025

Looking ahead to 2025, investors will be closely watching the impact of the upcoming presidential transition in the US. Victoria Hasler, Head of Fund Research at Hargreaves Lansdown, notes the potential for significant policy shifts, particularly regarding trade. While the actual policies implemented may be less drastic than pre-election rhetoric suggested, an anticipated increase in tariffs could favor domestically focused US companies. Coupled with persistent geopolitical tensions, the market outlook remains uncertain. Considering this complex landscape, Hasler recommends several funds that investors might consider for 2025 and beyond.

Fund Recommendations for a Dynamic Market

Artemis US Smaller Companies (0P00013YAP.L)

Escalating trade tensions, particularly between the US and China, are a key concern for investors. The current administration’s semiconductor export restrictions and the incoming president’s proposed trade tariffs could significantly impact global markets. Hasler suggests that while tariffs generally hinder overall growth, they could benefit smaller US companies due to their predominantly domestic focus. Combined with a supportive monetary policy, this environment could present attractive investment opportunities in domestically oriented US firms. The Artemis US Smaller Companies fund, which focuses on smaller companies with high growth potential relative to risk, is highlighted as a potential option. The fund’s manager’s focus on identifying sectors benefiting from economic trends and policy changes positions it well to capitalize on the new presidential administration’s initiatives. Top holdings include Jones Lang LaSalle and Jefferies Financial Group. The fund has delivered a 53% return over the past year, outperforming the Russell 2000 index by 18%.

Invesco Tactical Bond (0P0000MUWI.L)

With inflation nearing target levels in many countries, major central banks have begun cutting interest rates. The US Federal Reserve, European Central Bank, and Bank of England have all lowered rates in 2024, with further reductions anticipated in 2025. Hasler anticipates strong bond performance in this environment, particularly for high-quality bonds or actively managed funds that can navigate interest rate and credit risk. The Invesco Tactical Bond fund, with its flexible investment approach across various bond types, is recommended. The fund managers’ ability to interpret economic conditions and adjust the portfolio accordingly is crucial to its performance. This fund offers a convenient solution for investors seeking to benefit from the bond market without the complexities of individual bond selection. While its one-year return of nearly 7% trails the Investment Association Sterling Strategic Bond sector’s 9%, its five-year return of over 20% significantly outpaces the sector’s 8%.

Troy Trojan (0P00002AVE.L)

Persistent geopolitical risks, including the Russia-Ukraine war, Middle East conflict, and rising trade tensions, underscore the need for safe-haven assets. Gold has traditionally performed well during periods of uncertainty, with US gold futures surging 33% year-to-date. While such rapid gains may not be sustainable, Hasler believes that continued uncertainty and increased central bank buying, especially in emerging markets, could support gold prices. The Troy Trojan fund is recommended for its strategic exposure to gold without over-concentration. With 12.6% allocated to gold-related investments, including positions in Invesco Physical Gold and iShares Physical Gold, the fund balances stability with diversification. Other major holdings include Unilever and Alphabet. The fund prioritizes steady long-term growth and capital preservation during market downturns. Its one-year return of 8.5% surpasses the UK retail price index but lags the FTSE All-Share index’s 15.8% rise.

Janus Henderson Global Sustainable Equity (0P0001HG2J.L)

While large technology companies remain a market focal point, Alex Watts, Fund Analyst at Interactive Investor, observes a shift towards broader investment returns across various sectors. Smaller and mid-sized companies are gaining traction, and sectors like utilities and financials are rebounding as central banks lower interest rates. Watts recommends the Janus Henderson Global Sustainable Equity fund, which invests in companies with long-term growth potential and positive environmental and social impact. Top holdings include Schneider Electric. The fund’s disciplined investment process, sustainability focus, and long-term perspective make it an attractive option for investors seeking quality global equity exposure. Its year-to-date return of 22% slightly trails the MSCI World index’s 27% but surpasses the IA Global sector average of 21%.

Guinness Asian Equity Income (0P00011R8W.L)

For investors seeking geographical diversification, Watts suggests the Guinness Asian Equity Income fund. Managed by Edmund Harriss and Mark Hammonds, the fund employs a high-conviction approach to investing in dividend-paying Asian companies. Its equally weighted 36-stock portfolio mitigates single-stock risk and differentiates it from the benchmark. Despite potential trade tariff concerns in the region, only about 10% of the portfolio’s revenues originate from the US. The fund’s exposure spans China, Taiwan, Australia, Singapore, and India, with top positions including Inner Mongolia Yili Industrial and Ping An Insurance. Its one-year return of 14.4% aligns closely with the MSCI AC Pacific ex Japan index’s 14.9% gain. However, its five-year performance of 31% significantly outperforms the index’s 19%. The fund also boasts a 3.8% yield, placing it among the top performers in its peer group.

Conclusion: Strategic Investing for 2025

These fund recommendations demonstrate that despite geopolitical and monetary policy uncertainties heading into 2025, strategic investment opportunities exist. By carefully considering market trends and selecting funds aligned with their investment goals and risk tolerance, investors can navigate potential headwinds and position themselves for potential growth in the coming year. Diversification across asset classes, geographies, and investment styles remains crucial for building a resilient portfolio.