5 funds to watch for 2025 – how did our picks perform?

Artemis US Smaller Companies

This fund aims to deliver long-term growth by investing in smaller, US-based companies.

Smaller businesses are often among the most innovative, offering lots of growth potential, but they're riskier than their larger counterparts.

At the start of 2025, US tariffs were expected to have a greater impact on larger business, given that smaller ones are usually more domestically-focused and rely less on taxed imports.

In turn, this implied that funds investing in smaller US companies had the potential to perform – or weather the storm – better.

However, alongside unprecedented market uncertainty earlier in the year, some investors favoured the perceived stability offered by established, larger businesses.

Large US tech companies performed well in the second half of the year. Elsewhere, interest rates, while easing, remained elevated compared to the ultra-low levels many firms had grown used to, keeping borrowing costs high.

A weaker US dollar also benefited larger international businesses more than domestically-focused firms. This meant the market of smaller US companies didn’t perform quite as well as expected.

Over the year, the average fund in the IA North American Smaller Companies sector made a small gain of 0.27%*.

The Artemis US Smaller Companies fund performed much better over this time though, growing 4.58%.

A period of slower growth might present an opportunity to invest at lower share prices, though there are no guarantees – and every chance they could fall again.

This fund remains one of our preferred choices for exposure to this part of the market.

We believe smaller companies offer attractive long-term growth potential, especially in an innovative market like the US, but they can be volatile.

The fund usually invests in 40-60 companies. Holding a smaller number of investments can increase risk, as each has a larger impact on performance.

Baillie Gifford Monthly Income

This fund invests across three broad investment areas – shares, real assets (like infrastructure and property) and bonds.

At the start of the year, we felt infrastructure assets could benefit from increased government spending, both in the UK and overseas. We also thought bonds could perform well if interest rates continued to fall, offering the potential to pay an attractive income.

The shares portion of this fund is made up of large companies that the fund’s managers expect will pay and grow their dividend far into the future.

The fund grew 7.47%* through 2025, with income reinvested. This compares with 11.77% for the average fund in its sector – the IA Mixed Investment 40-85% Shares sector.

While the fund lagged in its sector, it proved far more resilient than the global stock market and its peers during April 2025’s spell of stock market weakness.

Investments in infrastructure and property held up well. These companies typically generate revenues linked to inflation, like property rents that increase in line with inflation each year.

Because of the more consistent and predictable earnings that these companies achieve, their long-term performance is typically more consistent.

The fund didn’t keep up with the rebound that followed, though we’d expect this given it usually invests less in shares than the market and its peers.

Overall, we believe this fund provides diversification as part of a broader investment portfolio, and could add some resilience during tougher times, especially as different investments perform well at different times.

The fund’s yield (a measure of the income it pays) stood at 4.10% as December came to a close, but keep in mind that yields are variable and not a reliable indicator of future income.

The fund can invest in high yield bonds, emerging markets and use derivatives, which, if used, increases risk. It takes its charges from capital, which can increase the yield but reduces the potential for capital growth.

Invesco Tactical Bond

This fund’s managers can invest in all types of bonds, with few constraints placed on them. This includes high yield bonds, emerging markets and derivatives, all of which increases risk if used.

The fund’s performance hinges on its managers’ abilities to interpret the bigger economic picture, and they can alter the fund's investments based on what they see.

They aim to shelter the fund when they spy tough times ahead, and seek strong returns as more opportunities present themselves.

The fund had a respectable year, growing 7.00%* – that’s almost in line with the 7.23% growth rate for the average fund in the IA Sterling Strategic Bond sector.

The more defensive nature of the fund saw it hold up relatively well during more turbulent markets. Part of the fund invests in what the managers call the ‘liquidity’ portion – this is made up of investments that are typically quick and easy to buy and sell, like cash, and short-dated and developed market bonds.

These investments are expected to provide a element of shelter in times of market instability. They can normally be sold quickly when the managers find new opportunities and want to seek increased risk for potentially higher rewards.

The rest of the fund invests mostly in investment-grade corporate bonds, which pay a higher income to compensate for the greater risk of lending to companies over governments.

We still think this is a good fund for exposure to the wider bond market. It removes the hassle of choosing which type of bonds to invest in – or when to invest in them – because the managers decide for you – making decisions with the aim of achieving the fund’s objectives.

Legal & General Future World ESG Tilted and Optimised Emerging Markets Index

This fund invests across a range of emerging markets including Taiwan, China, India, Korea, South Africa and Brazil. It’s a passive fund, meaning it aims to track the performance of a benchmark rather than beat it, like with active funds.

The fund offers a different approach to some other passive funds, though – it tilts its investments away from companies scoring poorly on environmental, social and governance (ESG) criteria and towards those scoring well.

Investing in emerging markets can add risk. The fund also invests in some smaller companies, adding risk. The index the fund tracks also targets an annual reduction in its overall carbon emissions.

The fund did a good job of tracking its benchmark and grew 24.24%* over 2025. More broadly, emerging markets performed strongly over this period, with Latin America, South Africa and Korea performing noticeably well, boosting the fund’s performance.

Some of the fund’s largest investments currently include technology companies TSMC, Tencent and Samsung, as well as HDFC Bank and ICICI Bank. Overall, it invests in a diverse mix of 1,909 companies.

It’s also one of the cheapest ways to invest in emerging markets, and we continue to believe it could help boost long-term growth potential – albeit with some volatility along the way.

Troy Trojan

This fund’s managers aim to shelter investors' wealth as well as boost its growth.

Rather than trying to ‘shoot the lights out’, it targets , building money steadily over the long run while limiting losses when markets fall.

Put simply, it’s trying to provide a more stable ride than the broader global stock market, or a portfolio mainly invested in shares.

The fund grew 9.09% over the year – above the rate of inflation (as measured by the UK retail price index) of 4.18%. And while it didn’t keep pace with global stock markets, we feel it’s a good return for a more conservative fund during what’s been a volatile period for markets.

Importantly, the fund held up much better than the broader UK and global stock markets during April’s sharp fall. It didn’t rebound as much during the recovery, but that’s to be expected.

12% of the fund currently invests in gold, which performed well last year. Geopolitical risks were – and remain – high, and gold tends to do well during times of uncertainty, which has been the case.

Elsewhere, the fund continues to invest in established global companies providing long-term growth potential, and US index-linked bonds, which can shelter investors if inflation remains higher than the US Central Bank’s long-term targets. Its cash holdings can also help provide some shelter during market wobbles.

The fund’s manager has the flexibility to invest in smaller companies, which, if used, adds risk. The fund is also concentrated, meaning each investment can contribute significantly to overall returns, but may prove riskier.

We continue to rate the fund as an option for modest growth potential while providing some shelter during tougher times.