How AJ Bell funds performed in the second quarter of 2026

Despite a rocky start to the year with the background of the US-Iran War, markets around the globe have been looking up since the end of March, leaving each fund in the AJ Bell range with a positive return over the past three months, as well as year to date.

The performance of each fund in the range varies, as the cautious funds are built for slow and steady growth while more adventurous funds are for investors prepared to weather the ups and downs of the stock market. Some of the stances we’ve taken across the fund range, such as investing more than the typical amount in emerging markets, excluding China, have paid off this quarter.

Here is the performance of each of the funds in the AJ Bell range over the last quarter, year to date, and past five years.

Below, we’ll cover some of the main areas that have affected funds so far this quarter, and what could be on the horizon. However, it’s important to remember that depending on where you invest, some of these areas might not be very relevant to you. For example, those holding the AJ Bell Cautious fund only have about a quarter of their money in stocks, which means that what’s driving the stock market won’t be as relevant to you as what’s happening in bonds or cash-like holdings, where the majority of the portfolio is invested. If you aren’t sure what areas are relevant to you, you can look at your fund allocation here to get a clearer picture.

AI drives markets forward

The largest contributor to the success of markets this quarter were companies that are essential to the AI supply chain. Many of those sit in the emerging markets excluding China part of the funds, such as Samsung in South Korea and Taiwan Semiconductor (TSMC) in Taiwan. It’s led emerging markets excluding China to return 33% over the quarter. While the prices of these top companies are increasing quickly, so are their earnings, because there’s a large backlog of demand for their products to advance AI production.

One concern we will continue to monitor for this region is the concentration in a small number of companies. A few years ago, emerging markets leaned more towards larger countries like India, but now, the uptick of interest in these chip producers has changed the focus towards Korea and Taiwan. This isn’t necessarily a negative, but it creates the possibility for more volatility because the region is increasingly reliant on just a few companies, meaning that when their share price moves, the index largely moves with it.

The US has enjoyed some big gains in this area too, but not from the names you might expect, like Nvidia or Microsoft. Rather, chipmakers such as Micron and Intel, which produce memory storage needed for AI processing, have soared ahead.

Protecting against AI monopoly

While this growth has been strong, we recognise the risks of becoming too wrapped up in a single sector or theme, and the volatility it can bring. We balance out the allocation with holdings in places like Europe and the UK, which are home to companies that are much less focussed on AI growth, and rely on more traditional businesses, such as banking or healthcare. While Europe has not received as much attention in the headlines, it’s just 2.5% percentage points behind the US in terms of returns this quarter. Importantly, they are serving their purpose of a counterbalance to the AI weightings.

Japan is another region that has performed extremely well, at 11.5%. The recent election and continued to stricter company governance, has attracted investor interest.

Oil prices retreat

The most obvious effect of the US-Iran war was the soaring oil price, where the price of Brent Crude went from $70 per barrel in the days leading up to the conflict to a peak of $118 per barrel. Now that peace talks are in play with a partial reopening of the Strait of Hormuz, oil prices had sunk back down to around $72 per barrel by the end of June.

In the market, this is reflected in the share price of oil and energy companies, like BP and Shell in the UK and ExxonMobil and Chevron in the US. At the beginning of 2026, we took a larger position in US energy in the funds (excluding the responsibly screened fund, where it does not meet the criteria for inclusion). While other parts of the market struggled in the US-Iran war, this holding rose with oil prices, giving investors some balance in a volatile time. Now that oil prices have come back down, these holdings have also pulled back, however we were able to book some profits along the way.

Despite the decrease in prices, we will continue to hold these positions. One of the reasons we originally brought them into the funds as part of a larger AI play, with the understanding that as those companies need more energy to power AI, they are likely to rely on more energy companies. But in the meantime, it’s helped the funds do exactly what we intend: smooth out the ride by having holdings that react differently to unexpected events.

Bonds trundle on

Equity markets have not been the only strong performer this quarter, with many sectors of the bond market making significant gains.

One of the keys to success for some of the lower risk bonds in our funds, such as gilts, has been keeping the lifespan of the bonds short. As politics in the UK and abroad shift quickly, markets have changed expectations for interest rates and inflation rapidly. By keep the duration of our bonds short, it protects from these movements. Another method of protection has been investing in inflation-linked gilts and US treasuries. These types of bonds change their coupons based on inflation levels, which means that the return investors can keep pace with inflation, preserving the value of their investment. While the need for this inflation protection has decreased for the moment as inflation expectations have now fallen again, the investments played their role well in the quarter of keeping returns smooth while broader markets were volatile and we have been adding to these positions more recently

Looking forward

As we head into the third quarter of the year, we’ll be keeping a careful eye on the growth driven by AI advancement and continue to provide protection through holdings in the bond market and stock markets that have less exposure to the theme. One area that could provide disruption in markets is the amount of capital expenditure by large US tech companies to develop AI. These companies have made large investments in innovation, and if there is a rollback in this spending or if companies determine that the investment is not paying off, it could create disruption not only for US tech companies, but for the supply chain companies in emerging markets that have done so well this year.

Our funds are designed for investors that plan to be in the market for the long term. While there will always be bumps along the road, we aim to provide protection from the worst of it. Our funds weathered the bumps we saw in the first part of this year well, and diversification was a key player. Positions like inflation-linked bonds and energy holdings were a helpful counterbalance to the market rough patch, which shows that this diversification is working. But markets are constantly evolving, and we’ll be keeping an eye out to ensure we evolve with them.