HL Growth Fund Performance Update – Third Quarter of 2025

The HL Growth Fund is our “default fund” for workplace pensions. That means it’s likely to be where your monthly pension contributions are invested if you haven’t made your own investment decisions.

If you’d like to know more, visit our website.

Remember that investing is for the long term, and your pension is typically invested over many years or even decades. You shouldn’t base your investment decisions on short-term events.

This update will help you understand how the stock markets affect the value of your pension investments. Past performance is not a guide to the future. This is not personal advice, please ask for advice if you are unsure of a course of action for your circumstances.

Quarter review - 1 July to 30 September 2025

Investors had reasons to cheer in the third quarter, as asset prices rose across financial markets.

With the USA set to levy punitive trade tariffs from early July, last ditch talks yielded results as deals were struck with two major trading partners, the EU and Japan. And with a deal reached with China back in May, nerves settled as the prospect of an all-out trade war faded.

Investors were braced for a myriad of potentially damaging outcomes (for example if a trade war broke out, or if the explosion of the global trading system plunged the world into a deep recession). But inflation didn’t spike in response to tariffs as some had feared it could, and many significant companies reported strong earnings, which suggests no broader damage to the health of the economy. The stage was set for a “relief rally”, as falling interest rates in many regions mixed with greater clarity over tariffs created a cocktail of investor confidence, pushing prices higher.

In these favourable conditions, the HL Growth Fund rose in value by 8.0%* over the third quarter of the year. Over the period since the fund launched on 15 December 2021, the fund has grown by 26.7%.

To assess the fund’s performance, we benchmark it for comparison purposes against a group of funds with a similar investment mix, represented by the “IA Mixed Investment 40-85% Shares Sector”. Funds in this sector delivered an average return of 5.3% in the third quarter. Since the fund launched, the peer group has delivered an average return of 15.5% - almost half of that delivered by the HL Growth Fund.

The HL Growth Fund invests into a mix of two asset types: shares and bonds. Shares are higher risk but offer greater potential returns over the long term. Bonds tend to experience less ups and downs but generally offer lower long-term returns.

The HL Growth Fund

Benefitting from trade deals and a weaker US Dollar, shares of companies in Emerging Markets were the strongest performing part of the portfolio. But as this is a higher-risk investment, it makes up a relatively small portion of the total fund. As the largest regional exposure, US companies once again contributed the most to the fund’s overall return, although all regions, and the shares of smaller companies from around the world performed strongly. In a very welcome trend, all asset classes within the HL Growth Fund made a positive contribution to the fund’s total return.

Let’s take a closer look at how different investments within the fund performed.

Stock Markets

To diversify, the HL Growth Fund invests globally, including in higher-risk emerging markets and global smaller companies. So how overseas stock markets perform is significant for the fund.

This quarter, shares of IT companies across global markets delivered the strongest returns versus those of companies in other sectors. They are very sensitive to the economy and tend to benefit when interest rates fall, as they have done recently. Tech stocks grew by 14.8% in the three months to the end of September. Many of the world’s largest Tech companies are based in the US, and report earnings in Dollars. However, a large share of these international company’s earnings are made overseas, where customers are billed other currencies, such as Pound Sterling. So when the US Dollar weakens as it has done recently, companies earn more dollars from overseas customers, which helps boost profits. This helps to explain why the US Tech market has done so well of late.

Companies classified as being in the “materials” sector also delivered strong returns. This includes mining firms, who enjoyed strong growth as commodity prices have risen recently. The gold price has reached record highs many times over this year, and other precious metals like Silver have also seen their prices surge. This was a welcome development, as it has supported the strong growth seen in global markets, especially in areas with less exposure to the Tech sector. The UK is a prime example.

Emerging Markets – those with less developed economies - performed very strongly, gaining 12.6%. China is the most important country within the Emerging Market segment, as it’s by far the largest market in the sector. Taiwan is significant too, and added together the two countries make up over 50% of the market. Stocks in both delivered excellent returns, with Chinese companies growing over 22% in the three-month period. Chinese shares benefitted from strong domestic demand and renewed interest following the US trade deal earlier in the year. Taiwanese markets rode on the back of excellent performance from tech-related companies.

Bond Markets

Bond returns are generally less volatile than the ups and downs of investing in shares and perform well at different times too. So the HL Growth Fund has an allocation to bonds to dampen some of the risks of investing.

Bond prices tend to move in the opposite direction to interest rates. So when interest rates go down, bond prices go up. This is because bonds usually pay fixed interest rates to their investors, which look comparably more attractive as interest rates fall.

During the third quarter, we saw interest rate cuts from some of the most significant central banks: the Federal Reserve in the USA, and the Bank of England in the UK. Furthermore, the European Central Bank in the EU and the Bank of Japan also held rates steady at 2% and 0.5% respectively. Given rates were generally falling or stable – but crucially not expected to increase - bond prices enjoyed a broad rally.

High-yield bonds – those which give potentially higher returns, with less certainty of future performance – performed the strongest as investors were happy to take on the uncertainty for higher returns. This is typical during periods of investor confidence.

The UK government’s bonds – “Gilts” – suffered mixed fortunes. While bonds which are due to be repaid in the short term performed well in line with the broader market, those with more time to go until repayment fell in value. This tells us that investors are nervous over the longer-term prospects for the UK economy.

Looking ahead

As we rapidly approach the end of the year, investors will be weighing up whether markets can sustain their run, or if they’ll run out of steam.

On the plus side, the final few months of the year are often strong for markets — global shares have risen in the fourth quarter in 22 of the past 24 years, typically boosted by increased consumer spending over the holiday season. If inflation stays under control and central banks don’t see a need to raise interest rates, that could support a sustained rally towards the New Year.

On the other hand, there are still some uncertainties that could cause bumps along the way. At the time of writing the US government is in shut-down which could spell trouble if it persists for too long. There’s also a chance of a resurgence in inflation, a slowing global economy or a corporate earnings slump if the recent strength was simply a product of front-running tariffs. All of these things could disrupt market momentum. With share prices riding high, investors have lofty expectations of future profits too, which means there’s scope for a sharp correction if expectations change.

The HL Growth Fund remains diversified geographically and across different asset types, to navigate the months ahead.

Past performance is not a guide to the future. The comparator is the IA Mixed Investment 40-85% Shares NR

*The HL Growth Fund launched on 15 December 2021. N/A means full year figures are unavailable. Source: Lipper IM, to 30 September 2025.

Unless stated otherwise, figures are expressed in GBP terms, to show the returns experienced from the perspective of a UK investor.

Important notes

Investing for longer increases the likelihood of positive returns. Over a period of five years or more, investments usually give you a higher return compared to cash savings. But investments can go down as well as up in value, so you could get back less than you put in.

Once invested in a pension, your money is usually no longer accessible until at least age 55, rising to 57 in 2028.

The HL Growth Fund is managed by Hargreaves Lansdown Fund Managers Ltd, a subsidiary of Hargreaves Lansdown Ltd.