Consistency trumps uncertainty: Five funds for an uncertain 2025

Finding bulls or bears in the outlook for 2025 has been challenging. After a tumultuous few years for markets, the only consensus seems to be uncertainty.

Rewind 12 months and the expectation was that interest rate rises were drawing to a close, inflationary pressures were ebbing and some of the doomsday scenarios envisaged at the start of the year were less likely by the end of it. Most of this (barring slightly stickier inflation) came to pass, as has the broadening out of market returns from the big technology companies.

We have seen fewer rate cuts than the markets expected at the start of 2024. People have had to come to grips with the fact that “higher for longer” is very much a reality – and an expensive one for those who either have or plan to renew their mortgage terms.

2025 is unlikely to see rapid GDP growth. US growth is forecast at 2%, with Europe at 0.9% and China at 4.2%, all well below their averages*. As mentioned, inflation is yet to hit the rear-view mirror, courtesy of fiscal spending and the threat of tariff hikes.

Trade policy is likely to fuel further geopolitical uncertainty – something which has been rife in markets in the past couple of years. Incoming US President Donald Trump’s way is to threaten things and then pull back. For example, many believe he will not impose the level of tariffs he has threatened, but will use it as a bargaining chip. He wants Europe to fall into line over policy towards China and wants Mexico to stop letting people across the border – in both instances he will use tariffs to impose his will.

Markets also looked fully valued in a number of areas, not least in the US, driven by the major US tech names – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. Their growth is unprecedented – but is it repeatable?

History would say it is unlikely but, as a recent update from BlackRock points out, there is an argument that since 2020 we’ve been in a business cycle like no other in history. Historical trends are being permanently broken in real time as mega forces, like the rise of artificial intelligence (AI), transform economies**.

Put all this into the melting pot and it is surprising the volatility index – known as the VIX – remains alarmingly low; there’s nothing to say that volatility won’t pick up during the months ahead.

The good news is that a number of fund managers have proven their mettle through the good times and the bad. These funds are ‘Steady Eddies’ because they have shown they can deliver – regardless of what the market throws at them.

Here are five of our favourite Steady Eddie funds

JOHCM Global Opportunities

JOHCM Global Opportunities can invest in any company around the globe, but has a strong bias towards larger and medium-sized multi-national businesses whose revenues are generated from all over the world. The philosophy of this fund is ‘heads we win, tails we don’t lose too much’, and if markets do struggle, we feel the fund’s strict valuation process will help in this regard. The 30-40 stock portfolio also can, and will, hold large cash positions if valuations are unattractive.

Speaking recently to FundCalibre, manager Ben Leyland believes Donald Trump is likely to have an outsized effect on how the first half of 2025 unfolds, with his position on tariffs central to this.

Read more: how two experts plan to navigate 2025

The fund has historically been one of the least volatile global funds available to investors. Over the past 10 years it has returned 160.7%***.

BlackRock European Absolute Alpha

BlackRock European Absolute Alpha, which is co-managed by Stefan Gries and Stephanie Bothwell, is a long/short pan-European equity fund which has a key focus on capital preservation and low levels of volatility. It has produced a positive return in eight of the past 10 calendar years**** but, importantly, it has also outperformed its peers over the long term. In the past 10 years it has returned 56.1% to investors, more than double the average fund in the IA Targeted Absolute Return sector (27.6%)***.

Invesco Tactical Bond

The outlook for bonds has been clouded by the impact of uncertain monetary policy for much of 2024. Although we have started to see rate cuts, they have not been at the speed many expected at the start of this year.

Led by Stuart Edwards and Julien Eberhardt, the Invesco Tactical Bond fund uses an active style, continually adjusting risk according to market conditions, and the fund has the flexibility to invest across the entire fixed-income spectrum. This is a truly differentiated approach to most strategic bond funds and benefits from investing in a very wide opportunity set.

Over the past 10 years the fund has returned 32%***, including a positive return in eight of the past 10 calendar years****. It also offers an attractive dividend yield of 3.6%^.

Fidelity Global Dividend

Manager Dan Roberts looks for companies with understandable business models and predictable, resilient returns, and is happy to pay a fair price for a good company. The criteria for selecting companies falls mainly into two buckets. The first is valuation support, with Dan wanting to make sure he does not overpay for stocks – regardless of how good they look – as he does not want to dilute returns. The second is the quality of the franchise, with the emphasis on investing in resilient businesses which can be depended upon. The fund has returned 166.7% in the past 10 years***, while also offering a dividend yield of 2.4%^.

Ninety One Diversified Income

Targeting a yield of around 4%, this fund is an ideal building block for a risk-averse investor looking to move their cash into an investment fund. The fund is designed to either replace or complement bonds in an investor’s portfolio. The portfolio holds around 200 names, the majority of which are held in fixed income but will also have some equity positions.

The portfolio also uses hedging for downside protection, with the fund targeting half the volatility of UK equities. It has produced strong single-digit returns in nine of the past 10 calendar years (the outlier being a 5% loss in 2022 when markets were hit hard by rate rises)****. It uses a mixture of growth, defensive and uncorrelated assets to build these smooth returns for investors. It has returned 33.9% in the past 10 years***.

*Source: DeutscheWealth

**Source: BlackRock,  2025 Global Outlook

***Source: FE Analytics, total returns in pounds sterling, 11 December 2014 to 11 December 2024

****Source: FE Analytics, full calendar year figures for 2014-2023

^Source: fund factsheet, 31 October 2024