We spoke with Head of Investment, James Flintoft, to discuss how market and the AJ Bell fund range performed through 2025 and the outlook for 2026. Here’s what he had to say.
How have AJ Bell funds performed?
We’ve been very pleased with the performance over the year. It's been a good time for risk assets. Equities (another term for stocks and shares) in particular, as you go up the risk spectrum in terms of the funds, have incrementally improved in terms of their returns, particularly those funds that have a lot allocated to emerging markets and Europe.
How did the changes to the portfolio earlier in the year play out?
Last year, in terms of bonds, we shortened duration to create less sensitivity to interest rates, and added inflation protected bonds in the US to our portfolios. They've provided a better journey than broader government bond markets. On the equity side, we increased allocation to Europe, which has been the best performing asset class on a headline basis in the year. We’re quite pleased with how they went.
What were the main themes over the final quarter of 2025?
There's been lots of headlines, particularly political ones, but not too many that have really impacted markets.
For example, there was lots of new around the UK Budget, but in the end, it passed quite smoothly in terms of markets. Over in the US, the government shutdown was the second longest on record. It was quite a headline-grabbing event, but it wasn’t something that the markets were too worried by.
What stood out with shares?
Over the final quarter of the year, there was a lot going on with emerging markets, particularly South Korea and Taiwan. The AI theme was also prominent again, as we've seen across the whole of 2025.
Other regions, like Europe and the UK, also performed well, off the back of different themes, including financials. Miners, particularly towards the end of the year, performed strongly.
What about bonds?
There's been a better environment for bonds as inflation came down slightly. That has allowed central banks in the UK and the US to reduce interest rates a touch. Inflation is still significantly above the 2% target, so there's still a lot of risk out there and some signs of inflation. But in Q4 it was a good environment for bond markets, and corporate bonds as well.
What are the key things to watch in 2026?
Diversification is always key but, given how markets have traded over the last year, it will be particularly important in 2026. Concentration risk in some of those markets, especially around the AI theme, has proven strong, so having other exposures to even out these risks is vital.
Hannah Williford: Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...
