According to the annual fund manager poll conducted by the Association of Investment Companies (AIC), emerging markets are predicted to be the best performing region next year, selected by more than a third of respondents (38%). The runner-up is the UK, with 19% of the vote.
On a five-year view, more than a quarter of investment trust managers (28%) consider emerging markets to offer the most attractive prospects, followed by the UK (19%), China and Europe (tied on 14%).
The poll was carried out among investment trust managers between 18 and 26 November 2025.
FTSE 100 tipped to break through 10,000 for the first time
Almost half (48%) of investment trust managers believe global stock markets will rise in 2026, with only 24% saying they will fall. Two thirds (67%) of investment trust managers believe the FTSE 100 index will climb above 10,000 compared to 24% who believe it will stay between 9,000 and 10,000. A more pessimistic 10% think the index will fall below 9,000.
Favoured sectors
The sector considered most likely to perform best in 2026 is information technology, with 19% of respondents picking this sector, followed by consumer staples and healthcare with 14% each.
However, on a five-year view, information technology falls into second place, with energy the most favoured sector on 19% of the votes.
Inflation and interest rates
Almost all investment trust managers (95%) think UK inflation (CPI) will remain above the Bank of England’s target of 2%, with nearly half (48%) expecting it to remain higher than 3%.
But the overwhelming majority of respondents to the AIC’s poll (86%) believe the Bank of England base rate will fall below 4% by the end of 2026. More than two thirds (71%) expect it to settle between 3% and 4%, with 14% expecting it to drop below 3%.
Reasons to be cheerful
Looking forward to next year, the three themes investment trust managers are most optimistic about are opportunities in undervalued companies (33%), a reduction in interest rates (19%), and increased M&A activity (14%).
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “The AI revolution has helped drive global stock markets this year, but it’s emerging markets and not the US that our managers see as the most attractive opportunity in 2026. The UK is also expected to perform well, with most managers expecting the FTSE 100 index to break through 10,000 for the first time.
“No-one has a crystal ball, but the mix of views even among professional investors indicates that it’s wise not to put all your eggs in one basket.”
The AIC has collated comments from investment trust managers on how they have navigated markets in 2025 and their outlook for next year.
UK equities
Simon Gergel, Manager of Merchants Trust, said: “There is an exceptional opportunity at the moment in medium-sized UK higher yielding companies. The stock market is highly polarised and negative sentiment about the UK economy has created a great opportunity set for long-term investors.”
Job Curtis, Portfolio Manager of City of London Investment Trust, said: “UK stock market listed companies remain undervalued compared to equivalents overseas. On our estimates, UK equities are offering a total distribution yield (dividend plus share buyback) of over 5%, which is an attractive starting point for investors.”
Technology
Ben Rogoff, Fund Manager of Polar Capital Technology Trust, said: “While we expect our bullish outlook to be periodically tested by bouts of volatility, we remain AI maximalists. Discontinuous technological progress is difficult to grasp and even harder to predict. AI is advancing at extraordinary speed; we expect 2026 to be the year when the capabilities of these models become unmistakable and the impact of AI increasingly impossible for investors across all sectors to ignore.”
Global equities
James Harries, Co-Manager of STS Global Income & Growth Trust, said: “We’re seeing a reversal of the Berlin Wall phenomenon. Many of the benefits following the Wall’s fall in 1989 – such as access to cheap capital, falling inflation and the rise of globalisation – have been steadily declining. We also live in a world where valuations are elevated, markets are concentrated and economic uncertainty is animated. It has been a fantastic decade for investors, but as we enter 2026 the landscape has changed. Now is a time for caution – and a time to consider where tomorrow’s investment opportunities lie.”
Lawrence Burns, Manager of Scottish Mortgage Investment Trust, said: “Scottish Mortgage allows you to own a stake in the future of the global economy. At a time when technological change is deep, broad and accelerating, we see that as more valuable than ever.”
Paul Green, Co-Portfolio Manager of CT Global Managed Portfolio Trust, said: “The macro backdrop and company fundamentals look supportive for risk assets into 2026. Whilst there are pockets of high valuation, there are also areas which are attractively valued – this should benefit active managers as they deploy capital in search of opportunities.
“We are quite positive on private equity trusts currently, many of which are trading at meaningful discounts to NAV with strong operating performance and a realisation market that should pick up from here.”
Fixed income
Pieter Staelens, Portfolio Manager of CVC Income & Growth, said: “The UK population is ageing rapidly and a lot of people have relied too much on public equities in their asset allocation, while they don’t have enough income in their portfolios. While public equities have done very well over the last few years, equity valuations are at or near all-time highs while uncertainty around the macro outlook is equally at or near all-time highs, which could lead to some large drawdowns. The trajectory for budget deficits is equally concerning, whether we look at the UK, the US, France or Japan. Corporate credit provides investors with a stable income while avoiding the volatility of sovereign debt and equity markets. With the right manager, corporate credit should be a core allocation in any portfolio.”
US equities
Felise Agranoff, Portfolio Manager of JPMorgan American Investment Trust, said: “The US remains the standout market for long-term investors. We expect earnings to stay resilient as capital spending in artificial intelligence, infrastructure and energy continues to accelerate. AI investment alone is forecast to hit around $300 billion a year.
“This spending doesn’t just benefit the big tech names – it ripples through sectors like power generation, logistics and manufacturing. Rather than relying on a small group of large-cap names, we think returns will increasingly come from a broader set of companies and sectors. That’s why we’re investing in high-quality US businesses that can benefit from these long-term structural trends.”
Jon Brachle, Portfolio Manager of JPMorgan US Smaller Companies Investment Trust, said: “US small caps have lagged their larger peers in recent years, held back by higher costs, weaker industrial demand and tighter financial conditions. But that underperformance has left the sector at historically attractive valuations – levels that have often preceded periods of strong recovery. We believe that backdrop presents real opportunities for selective, active investors.
“With strong representation in sectors like industrials, financials and materials, small caps stand to gain from renewed investment in manufacturing and infrastructure. Combined with attractive valuations and the potential for leadership to widen beyond the biggest names, we think conditions are in place for the next phase of small cap outperformance.”
Emerging markets
Omar Negyal, Portfolio Manager of JPMorgan Global Emerging Markets Income Trust, said: “We think the next chapter for emerging markets looks increasingly upbeat. China’s recovery is gaining traction as domestic investors return and valuations remain appealing, while India – still a powerhouse for long-term growth – is starting to look more sensibly priced after years of exuberance. Greece continues to shine as one of the comeback stories of the decade, reaping the rewards of deep reform.
“The real excitement, though, is in technology: firms across Taiwan, South Korea and China are powering the world’s AI and semiconductor supply chains, setting the stage for another wave of growth. With a softer US dollar and stronger domestic demand, we believe emerging markets are entering a new era of opportunity.”
Charles Jillings, Co-Portfolio Manager of Utilico Emerging Markets Trust (UEM), said: “We remain positive on the outlook for emerging markets as many countries, especially within Asia, continue to see strong GDP growth. The long-term outlook for emerging markets continues to strengthen as the international economic order realigns to better reflect the growing economic weight of emerging markets within the global economy. Infrastructure and utility assets will remain fundamental pillars for development, forming the backbone crucial for today’s emerging markets’ needs and tomorrow’s innovation.
“Our focus on operational infrastructure and utility assets in emerging markets has provided resilience through a volatile year. These businesses are essential to their economies and are often supported by long-standing regulatory frameworks which help underpin stable cashflows.”
Dale Nicholls, Portfolio Manager of Fidelity China Special Situations, said: “Despite cyclical challenges, China’s structural strengths remain clear. The country continues to lead globally in manufacturing scale, innovation and technological upgrading. Its export profile is shifting away from the US towards other emerging markets, while Chinese firms continue moving further up the value chain. Rapid adoption of AI, highlighted by the success of domestic champions such as DeepSeek, demonstrates the ongoing strength of China’s innovation. Combined with its leadership in areas such as electric vehicles and automotive supply chain, digital infrastructure and smart manufacturing, these trends reinforce China’s long-term competitiveness and its role as a key driver of global productivity growth.
“Following a strong recovery year to date, equity valuations have somewhat normalised. The MSCI China Index now trades at around 13 times 12-month forward earnings, still more than 40% below the prospective multiple of the S&P 500.”
Tuan Le, Portfolio Manager of Vietnam Enterprise Investments Limited (VEIL), said: “2025 has witnessed unprecedented volatility amidst global focus on US tariff policy. At VEIL, we managed to take advantage of volatile markets while remaining disciplined and staying true to our conviction about Vietnam’s domestic economic resilience. Looking forward to 2026, we see strong catalysts from reforms, infrastructure investment, domestic consumption, and the FTSE Russell upgrade to emerging market status. Vietnam equities are cheap at a forward price/earnings ratio of 11 on 16% forecast earnings growth.”
European equities
Jack Featherby, Portfolio Manager of JPMorgan European Discovery Trust, said: “Europe’s economy looks set for a rebound, powered by falling interest rates, increased defence and infrastructure spending, and policy reform. The reshaping of US trade policy and Europe’s renewed push for self-reliance are already creating tailwinds for domestically focused small caps, which we believe are the biggest beneficiaries of this new environment.
“Valuations remain unusually cheap, with small caps now trading at a discount to large caps, and we see the biggest opportunities in industrials, technology and healthcare, where innovation and capital investment are accelerating. As money flows back into Europe after years abroad, we expect small caps – the heartbeat of the continent’s economy – to lead the way.”
Financials
Nick Brind, Fund Manager of Polar Capital Global Financials Trust, said: “Looking forward, we expect a positive outturn for the sector into 2026. With inflation forecast to moderate further, in part due to the increased slack in labour markets and weaker commodity prices, and the positive lag effect of previous interest rate cuts as well as fiscal stimulus, economic growth should continue to be supportive for financial markets.
“We expect the sector to see further M&A activity and buybacks reflecting strong profitability, supported by a reduction in regulation that will allow banks in the US and Europe to return excess capital to shareholders. With post-global financial crisis guardrails in place – especially those for bank capital – overengineered and overly complex, this will be positive for the sector.”
Biotechnology and healthcare
Ollie Kenyon, Senior Director of RTW Investments which manages RTW Biotech Opportunities, said: “Biotech in 2025 started with headwinds. Policy uncertainty and regulatory noise weighed on sentiment in the first half, slowing capital flows and delaying deal activity. The second half saw those headwinds turn to tailwinds, with a strong recovery driven by renewed confidence, easing rate expectations, and a surge in M&A.
“We think now is an extremely exciting time to be in biotech, which is in the early innings of a potential multi-year recovery. China is emerging as a major force in the sector. It has surpassed the US in total clinical trials and now accounts for 30% of global trial starts, compared to 35% for the US. Innovation output is increasingly recognised by global pharma, with one-third of all biotech assets licensed by big pharma in 2024 originating from China. Our view is that for global exposure to biotech, you need a presence on the ground in China – we have been there since 2018 and some of our most exciting investments in RTW Biotech Opportunities license Chinese assets, particularly in the obesity space.”
Gareth Powell, Fund Manager of Polar Capital Global Healthcare Trust, said: “Looking ahead, we see the healthcare sector as a prime beneficiary of AI-enabled technologies when it comes to furthering innovation, but also improving access and affordability, as waste and inefficiencies are reduced allowing for more intelligent and prospective healthcare investment around the globe. As the US looks to level the investment playing field, there will be opportunity for others to step up to the plate. Irrespective of geography, our investments will naturally follow wherever innovation abounds and the best and brightest companies are enabled to lead.”
Environmental markets
Fotis Chatzimichalakis, Co-Manager of Impax Environmental Markets, said: “Concentrated equity markets have continued to be a challenge for all active equity managers. However, there are signs that investors are once again becoming alive to broader opportunities. At Impax Environmental Markets we have already seen the strong resurgence of renewable energy stocks in 2025. Resurgent economic growth and further cuts to interest rates could stimulate other more cyclical areas of the portfolio, such as construction or mid and small-caps.
“At the same time, we have been increasing our exposure to the AI theme. In doing so, we have been focused on the entire value chain, from companies improving the efficiency of power management and cooling, to the implementors of AI-driven software solutions. Typically, AI is a small but growing part of these businesses, with a real use case and healthy return on investment which underpins valuations.”
Renewable energy infrastructure
Ed Mountney, Co-Lead Investment Manager of Foresight Environmental Infrastructure, said: “Demand for electrification is increasing and the cost competitiveness of renewables is critical in delivering against this demand. Europe and the UK rightly place great value on the importance of energy security, the role renewables play in diversifying the power supply, and enhancing energy independence. While political uncertainty is a factor we monitor closely, we believe the structural drivers of the green economy are strong and the trust remains well positioned to take advantage.
“Our overall outlook for 2026 remains fundamentally optimistic as new innovations emerge every year that go far beyond just generating clean energy via wind and solar. Low emission transport fuel, energy storage, sustainable waste management and environmentally friendly agriculture facilities are all assets within our diversified portfolio, clearly demonstrating how far the green economy has evolved over the last decade. The reality is that globally we have barely scratched the surface of what is possible and the extensive social and economic tailwinds supporting environmental infrastructure as a compelling, multi-decade market opportunity are clear.”
Private equity
Alan Gauld, Senior Investment Director of Patria Private Equity Trust, said: “The big topic in private equity remains around M&A activity. Geopolitical uncertainty – notably tariff rhetoric in the US – dampened M&A activity materially this year, but in the second half of 2025 we started to see early positive signs again. Should these green shoots mark the beginning of a sustained period of stability for markets, 2026 could mark a turning point: a strong year for M&A, a healthy year for exits and distributions, and a welcome boost for the broader private equity industry and listed private equity trusts.
“We are keeping a close watch on core sectors that have had a tough time in the recent past, such as healthcare, where valuations in several areas appear more normalised now. Industrials will also be interesting given the increased spending in defence and the knock-on impact on other industrial sub-sectors. Generative AI is also transforming the technology and software landscape, with specialist knowledge now crucial to identifying those businesses that are innovating to avoid future obsolescence. Furthermore, many of the new ‘Gen AI native’ companies will emerge from the private markets in the coming years.”
Venture capital trusts
Dan Appleby, Chief Investment Officer of Blackfinch Asset Management & Ventures which manages Blackfinch Spring VCT, said: “2025 demonstrated that strong returns aren’t limited to US mega cap tech stocks, and I expect this broadening of performance to continue next year. Emerging markets and UK smaller companies – both publicly listed and within our thriving private markets – are likely to be key areas to watch as this trend develops.”
Flexible investment
Ian Rees, Co-Manager of Ruffer Investment Company, said: “The portfolio has navigated the shifting market environments of 2025 by staying true to our all-weather framework, selectively combining reliable protective assets with high-conviction growth opportunities.
“The portfolio capitalised on the rotation away from the US market at the start of the year, benefiting from allocations to more attractively valued equity markets. During the tariff-driven sell-off in spring, our protective assets, focused on both credit and equity markets, provided a strong defence when traditional safe havens such as bonds and the US dollar underperformed. In the subsequent rebound, the portfolio’s equity allocation participated in the rally, supported by our exposure to gold mining equities. Across each environment, the portfolio delivered positive returns, offering upside participation in rising markets while offsetting risk during periods of volatility.”
