New year, new opportunities
Fund manager forecasts for 2026
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.
“Almost half (48%) of investment trust managers believe global stock markets will rise in 2026, with only 24% saying they will fall.”
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.
“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.”
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.”
“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.”
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.”
“Looking forward to 2026, we see strong catalysts from reforms, infrastructure investment, domestic consumption, and the FTSE Russell upgrade to emerging market status.”
For further manager insights, please read the full press release here.
