Volatile market conditions tend to produce big winners and losers, and that much is evident in the funds space this year.
With investors looking for safe havens, the iShares Gold Producers ETF (SPGP) is up by nearly a third so far in 2025.
Others, meanwhile, look pretty bruised: the WisdomTree Blockchain ETF (BKCN) is off by a quarter, with Molten Ventures (GROW) and Augmentum Fintech (AUGM) each down by around a fifth.
In casting around for examples, you tend to find a few fairly niche funds, and such extreme moves help to reiterate the point that these should be small, ‘satellite’ positions in your portfolio.
Used this way, they have the potential to drive some growth when they do well, but at the same time you’re not betting the farm on something unusual.
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Much as it may sound a less exciting prospect, it makes sense to keep a large part of your portfolio in a ‘core’ fund, covering a spread of markets. These could be tracker funds, or active funds that cover global equities and perhaps dip into other asset classes too.
This said, when it comes to tracker funds, many have rightly urged caution over the fact that US equities now make up 70 per cent of the MSCI World Index.
With US equities struggling this year, that has been painful for funds tracking this index. The SPDR MSCI World ETF (SWLD), which sits in our Top 50 ETFs list, is down by 4.7 per cent in sterling terms for 2025, as of early April.
Diversifying slightly beyond the US has helped only mildly, with the iShares MSCI ACWI ETF (SSAC), which has some exposure to emerging markets, down by 4.3 per cent.
We added an equal-weight S&P 500 tracker to our Top 50 ETFs list in 2023, based on the argument that it should suffer less in a sell-off led by the likes of the Magnificent Seven.
Equal-weight strategies have their own critics, but have held up well this year: Invesco’s MSCI World Equal Weight ETF (MWEQ) is off by just 0.1 per cent so far in 2025, for example.
Other global trackers that focus less on the most dominant US stocks have dodged a bullet, too. Vanguard’s multi-asset LifeStrategy funds stand out in part due to their bias towards UK equities and lower US allocation compared with a standard MSCI tracker, and that has helped of late.
US equities now make up 70 per cent of the MSCI World Index
Vanguard LifeStrategy 100% Equity (GB00B41XG308) is down by 2.3 per cent so far this year. As bonds help offset equities’ struggles, the LifeStrategy funds with the highest bond (and lowest equity) exposure have fared better still.
There are other winners. The Investment Association has several sectors that include multi-asset funds, and the strongest performer from its Mixed Investment 40-85 per cent Shares sector, EdenTree Managed Income (GB0009449710), invests mainly in equities (and mainly in the UK) in its hunt for yield. It appears to have benefited from the fact that income shares and UK large-cap shares have held up well.
One beauty of tracker funds is that they can adapt to the shifting composition of markets over time, meaning the MSCI World index will adjust accordingly if US equities go through a prolonged slump, although this would take a while to play out.
But recent events will remind investors that betting too heavily on one subset of companies can come with risks, and that diversification is the best shot we have at protection in tricky times.
