Mixed and total return funds review – stock market gains more than offset bond losses

Bond yields have continued their upward march recently.

The initial cause was higher inflation expectations due to higher energy costs. But other factors like geopolitics, concerns around government debt affordability and lots of bonds coming to market from artificial intelligence (AI) hyperscalers, are all adding upward pressure to yields. Yields and prices move in opposite directions, so while yields are rising, prices have been falling.

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This is challenging for mixed asset funds, particularly more defensive options that usually have more invested in bonds than shares. But stock markets have continued to rise, despite concerns around inflation and interest rate increases. And, although bond prices have been falling, because bond yields have been higher since interest rate rises back in 2022, the falling prices have been largely offset by coupons (interest payments) so far in 2026.

So, over the last 12 months, many mixed asset funds have continued to provide positive returns for investors that are ahead of both cash and inflation.

This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice. Investments and any income they produce can fall as well as rise in value, so you could get back less than you invest.

How have stock markets performed?

Stock market returns over the three months to the end of August have been mixed. The MSCI All Country World index, which reflects performance of global stock markets, grew 1.41%*.

Regionally there were quite different returns. The UK rose 5.13% led by gains in the financials sector linked to expectations of interest rate increases. Emerging markets were weaker, falling 1.67%, with the technology sector providing negative returns over the period.

Three months is a very short period when looking at investment performance and as always past performance isn’t a guide to future returns.

How have bonds performed?

Most bond markets had mixed results over the last three months. The IA UK Index Linked Gilts sector saw some of the biggest losses, falling 2.15%, while the IA Sterling High Yield sector grew 1.31%. When bond prices fall, the income paid by higher yielding bonds can help to offset falls in price.

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How have mixed asset and total return funds performed?

Funds with more invested in shares have seen better returns than those investing more in bonds over the longer term. We’d expect this given their longer-term growth potential. Those with less in shares don’t tend to perform as strongly over the long run, but they typically experience fewer ups and downs (volatility) and may provide more shelter during market turbulence.

As a result, funds in the IA Flexible Investment and IA Mixed Investment 40-85% Shares sectors have performed best over longer periods because they generally invest more in shares.

The best-performing mixed asset sector over the last 12 months was the IA Flexible Investment sector, which returned 15.92%*.

The IA Targeted Absolute Returns sector was weakest but still returned 6.79%*. It’s expected this sector won’t perform as well as others when stock markets are strong due to their focus on capital preservation. This is still an attractive return for a one-year period, and the sector tends to hold up better when stock markets are volatile or fall.

The graph below highlights the smoother journey usually provided by funds in the IA Targeted Absolute Return and IA Mixed Investment 0-35% sectors, which has less invested in shares.

How have our Wealth Shortlist funds performed?

Our Wealth Shortlist funds have seen a range of outcomes over the past 12 months. With different approaches and objectives, we don’t expect them to perform in the same way.

Remember, 12 months is a short time when looking at investment performance. Investments should be held for the long term – that’s at least five years.

Investing in these funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest and make sure any new investment forms part of a diversified portfolio.

For more detail on each fund, its charges and specific risks, please see the links to their factsheets and key investor information below.