He says: “The UK may go into recession next year because the Budget was a complete disaster (anti-growth to the point of negative growth). I did say that it would go into recession in 2025 but I was wrong – however, I am doubling down on that and have been buying more gilts as a result.”
Why diversification will define multi-asset investing in 2026
By Chris Salih on 18 December 2025 in Multi-Asset
Rotation and diversification are the two orders of the day for multi-asset managers in 2026, as they look to take advantage of a broad range of opportunities across equities.
The past 12 months have all been about resilience for financials markets, with the MSCI World index up 13% year-to-date, following strong returns in both 2023 (17%) and 2024 (21%)*. Technology continues to lead the charge as artificial intelligence (AI) and semiconductor manufacturing continued to grow, with corporate earnings remaining strong; a significant number of AI infrastructure deals being unveiled; and strong outperformance in the second half of 2025 in particular.
However, many feel the AI market is now overheated, to the point where certain concerns have made them question their lofty valuations. Rathbone Strategic Growth Portfolio manager David Coombs says there has to be a return to reality on AI as a theme, adding that we will see earnings come under greater scrutiny in 2026.
IFSL Wise Multi-Asset Growth manager Vincent Ropers says we are already seeing more investors start to question AI, citing Nvidia’s shares selling off despite posting record profits in November. “Nvidia is by no means a bad company, it is just that investors are starting to ask more questions about how much they are willing to pay for those revenues. There is simply no valuation buffer for large-cap tech,” he says.
Orbis Global Balanced manager Alec Cutler says an abundance of goods, energy and workers helped set off a global cycle where money is loose and society feels its needs are met – meaning people start to spend more on luxuries and fun.
He says investors start throwing money at whoever has the grandest dreams for the future. Rising valuations signal more investment in those narrow market leaders. Alec says the return of inflation, inequality and instability should see the cycle move towards “tighter money”, with valuation gaps closing and asset prices falling. He says a number of areas have currently been left underfunded as a result, meaning they are finding many undervalued opportunities.
Even if AI does continue to grow, Alec says that resources from undervalued areas will be needed.
He cites Taiwan Semiconductor Manufacturing Company (TSMC) as an example. Their chips are designed for the likes of Nvidia, Broadcom or AMD, but TSMC trades at a discount to those companies.
He says: “Data centres can’t connect to electricity grids without transformers from Siemens Energy and its competitors, who are less able to increase capacity because Silicon Valley has hoovered up the most talented engineers. Grid power has to come from somewhere and has to be reliable. That bodes well for gas producer Shell and gas transporters Kinder Morgan and Enbridge. And amid all this, nuclear power is having a renaissance. As providers of nuclear reactors to several navies, BWXT and Rolls Royce are highly competitive for small reactor projects. The rebalancing is happening already.”
Where else should investors look?
Despite the dominance of technology, multi-asset managers believe there are other opportunities within the US economy. David Coombs says the US is likely to avoid recession and has positioned his portfolio for a recovery in the housing and construction sectors.
He is less confident on the outlook for the UK however – believing that interest rates will come down faster than expected in 2026.
WS Canlife Diversified Monthly Income fund (which is now part of Keyridge) co-manager Craig Rippe says the UK still offers great opportunities for yield – citing names like Sainsburys and Tesco as surprise winners in 2025. He says the outlook for the UK is almost identical to that for Europe.
One area where managers do believe there is value is in emerging markets. Credo Dynamic co-manager Rupert Silver says it is the area they have been adding to most due to valuation opportunities, particularly in relation to developed markets.
David Coombs says Asia in general has valuation opportunities – adding that we are now two or three years into the rate cutting cycle in the US, which is normally positive for the region. “There are plenty of themes to tap into, from demographics, the falling US dollar, faster growth and an emerging middle class. It is not one stock, but across emerging themes from countries like Vietnam, India, Indonesia, Malaysia and Singapore,” he says.
What sectors offer value?
Craig Rippe says banks and financials continue to offer great opportunities, pointing to relatively low valuations. He says his portfolio currently has a basket of financials yielding between 4-8%.
Vincent Ropers says there are valuation anomalies but they are no longer “screaming opportunities”, citing the likes of biotechnology, where the fund has a 15% holding, as well as UK small-caps, which he says continue to stand out as an undervalued asset.
David Coombs says a lot of the undervalued nature of companies is tied into the market being fixated on AI’s role as a disruptor. He says there is a host of stocks where the fear is being overdone on the role of AI on a business/sector. He says: “Most of what people are talking about is speculation; the reality is we are getting flaky answers on what AI can do to many businesses.”
What about bonds?
David says his portfolio recently had the highest equity weighting it has held in the past five years, something which has been offset by having a higher duration bond portfolio. Gilts yielding 5% allows him to run his equity portfolio fully.
Craig says he is focusing on the medium term (4-6 year bond duration market) as he is wary of long-term duration due to fears of fiscal mis-management: “We’ve seen debt to GDP ratios rising and we think that is going to result in some sort of devaluation, via inflation, over the long term,” he says.
Rupert says spreads have little room for error. In addition to short-dated government bonds, his fund also has certain special situations in short-dated bonds from the likes of Barclays and BP, which he says are relatively safe and offer a 5% yield.
Research these funds today
Credo Dynamic
Multi-Asset
IFSL Wise Multi-Asset Growth
Multi-Asset
Orbis Global Balanced
Multi-Asset
Rathbone Strategic Growth Portfolio
Multi-Asset
WS Canlife Diversified Monthly Income
Multi-Asset
This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.
Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.
Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.
Related insights
FundCalibre’s most popular funds and themes
Best funds to invest in: top picks & how to choose
The uncertain future of the US dollar