Darius McDermott, managing director, Chelsea Financial Services explores the sectors, funds and trends that should be on your radar for 2025.
Polar Capital Global Insurance
The Financial and Financial Innovation IA sector was the best-performing of 2024, pipping Technology for the top spot. As long as a recession is avoided, this sector is well-positioned for further robust returns in 2025. A stable or growing economy fuels investor confidence, driving demand for financial services, banking, and insurance.
Polar Capital Global Insurance offers targeted exposure to non-life insurance companies, a specialist and often overlooked area. Insurance remains a cornerstone of everyday life, regardless of economic conditions, giving this fund a robust defensive edge. Coupled with a solid track record, it’s an excellent choice for portfolio diversification and consistent returns.
Pictet Japanese Equity Selection
Inflation poses challenges for most developed economies in 2025, but for Japan, it’s a blessing. After decades of battling deflation, rising prices can finally spur growth in the Japanese economy. Adding to this, Japanese corporations enjoy strong pricing, making them well-equipped for navigating inflationary pressures.
Favouring a large-cap growth-tilted style, Pictet Japanese Equity Selection offers investors excellent exposure to a country whose continued recovery may prove a success story in years to come.
TM Tellworth UK Smaller Companies
Another area where we see good value as we head into 2025 is UK smaller companies. While UK small caps are currently experiencing their longest period of underperformance in years, history tells a different story – over most long-term timeframes, small caps historically outperform their larger counterparts. We’ve survived the Budget, M&A activity is growing and we continue to see companies buy back their shares – major giveaways that they believe their own businesses are cheap.
In this space, TM Tellworth UK Smaller Companies stands out. Its robust and flexible process affords managers Paul Marriage and James Gerlis the necessary freedom to focus on the job of picking stocks.
UTI India Dynamic Equity Fund
On the flip side of that coin, India’s high valuations signal signs of over-exuberance. However, India is home to the world’s fastest-growing major economy, underpinned by favourable demographics and a large and growing population, creating the foundations for strong stock market growth.
The UTI India Dynamic Equity Fund benefits from the quality of the company’s equity investment team, which employs more than 25 research analysts and fund managers with an average of 10 years’ experience each, researching Indian equities. This level of expertise in the domestic market helps give the management team a competitive edge, which has helped contribute to the strong performance.
Premier Miton US Opportunities Fund
The US remains a dominant force in innovation, particularly in AI and hyper-scaler-driven cloud computing, which are attracting global investment. However, we may see moderated returns for US stocks over the next five years, with the S&P 500’s annual returns slowing to single digits due to high valuations and market concentration.
To mitigate concentration risk while maintaining US exposure, consider an actively managed US fund like the Premier Miton US Opportunities Fund. Despite having no holdings in the S&P 500’s dominant “Magnificent Seven”, this fund has delivered an impressive annualised return of 14.55% over the past decade, surpassing the S&P 500’s annualised return of 11.10% over the same period.
