How did one-stop shop funds fare amid tariff turmoil?

They say diversification is the only free lunch in investing – and multi-asset funds aim to serve it all on one plate.

In theory, these all-in-one solutions cushion losses when one market tumbles, as happened during the stock market sell-off triggered by President Donald Trump’s “Liberation Day” tariffs.

Driven by panic selling, global stock markets experienced a sharp and rapid rout between 2 April and 8 April. The S&P 500 was the hardest hit, falling -11.5% over the week, while the MSCI Emerging Markets index lost -9.7% and the FTSE All-Share shed -8.1%.

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Although US and world stock markets were still down for the year as of 19 June, the 9 April announcement of a 90-day suspension of most reciprocal tariffs (excluding those on China) triggered a sharp relief rally.

Source: Morningstar/interactive investor, total returns GBP to 19 June 2025. Past performance is not a guide to future performance.

Mixed-asset funds did not completely evade the tariff turmoil, with the Investment Association (IA) Flexible Investment sector losing -5.9% – a little over half the drop in world markets.

“In indiscriminate sell-offs everything tends to get hit – there are very few hiding places,” says Fairview Investing director Ben Yearsley.

“However, I overlook the very short term as the worst thing you can do is make knee-jerk reactions. Anyone who sold out of any asset after Liberation Day is probably looking a bit foolish now as markets have rebounded and then the problem is when do you rebuy?”

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Data from interactive investor’s analyst team indicates that multi-asset funds generally behaved in line with expectations. Those with higher equity weightings suffered the sharpest short-term losses but also delivered the most robust recoveries.

“Funds with more defensive asset allocations demonstrated greater resilience, helping to mitigate overall portfolio losses,” says ii fund analyst Tom Bigley.

Source: Morningstar/interactive investor, total returns GBP to 19 June 2025. Past performance is not a guide to future performance.

In the Association of Investment Companies (AIC) Flexible Investment sector, seven investment trusts have capital preservation as part of their objective.

“They generally aim to achieve this through diversification, with allocations to private and public equities held alongside credit, real estate, fund commitments and commodities, with some notable weightings to gold,” says Shavar Halberstadt, a research analyst at Winterflood Securities.

“By virtue of portfolio construction, there should naturally be less cross-portfolio correlation and overall volatility, amplified by any private exposure that has an inherently lower revaluation frequency.”

Three of these trusts – Caledonia Investments Ord (LSE:CLDN), Majedie Investments Ord (LSE:MAJE), and RIT Capital Partners Ord (LSE:RCP) – publish only monthly net asset values, making it impossible to know exactly how they fared during the week-long slump. But most wealth preservation trusts are in positive territory over longer periods this year.

Source: Morningstar/interactive investor, total returns GBP to 19 June 2025. Past performance is not a guide to future performance.

“Each of them focuses on preserving capital over the medium to long term, so focusing on short-term fluctuations in markets may be a bit misleading,” says James Carthew, head of investment company research at QuotedData. “However, this was a major market event – and all of them passed the test with flying colours.”

Top trusts

Winterflood regards Caledonia Investments – one of the top performers in its peer group over the past five years – as an interesting proposition.

“With nearly 50% of share capital owned by the Cayzer family, it has a clear focus on long-term wealth preservation,” says Halberstadt.

Despite a modest 2% yield, it has raised dividends for 58 consecutive years and a 30% allocation to private assets has buoyed returns.

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RIT Capital Partners, founded by Lord Rothschild, also has family office characteristics, although its venture investments have weighed on sentiment.

“Having recently met the managers, there is a clear focus [on] reducing the allocation to venture in the portfolio, while maintaining exposure to start-ups that might be ‘the next Magnificent Seven’, such as SpaceX, OpenAI and Stripe,” says Halberstadt.

“The fund remains highly diversified, and recent management changes will see a re-evaluation of weightings and some parts of the strategy, which we view as a healthy exercise for any fund.”

A big influence on returns has been the weakness of the US dollar over the past few months, says Carthew, who finds it difficult to pick a standout in the sector: “Honestly, it’s hard to choose between them.”

One swing factor might be discounts. Caledonia can be bought at a -34% discount, RIT Capital at -26% and Global Opportunities at 17% (as of 7 July 2025).

“The first two discounts are often blamed on their private capital exposure, but Global Opportunities has none of this and over a third of its assets in cash,” says Carthew. “For the most part, the logic behind these discounts is hard to fathom. Clearly, if these discounts narrow, there’s the potential for additional capital gains.”

For those investors keen to avoid discount volatility, Winterflood analyst Emma Bird notes well-established zero discount policies at Capital Gearing Ord (LSE:CGT) and Personal Assets Ord (LSE:PNL), which trade on discounts of around -2% and -1%, respectively.

Capital Gearing is a core constituent of the ii Super 60 list of investment ideas, having been deemed a strong pick for risk-averse investors seeking long-term capital growth. Its long-tenured manager, Peter Spiller, has demonstrated an ability to add value through skilful asset allocation and shelter investors during periods of drawdown.

“The management team is highly experienced and has demonstrated its ability to take advantage of market inefficiencies, particularly in the closed-ended funds sector, and to effectively vary the fund’s exposure to risk assets based on their macroeconomic outlook,” says Bird.

Capital Gearing manager Chris Clothier was recently interviewed by interactive investor. You can watch the interview, by clicking on the links below.

• Capital Gearing interview: navigating tariff turmoil and investment trust opportunity
• Capital Gearing interview: four investment trust bargains, and two big risks facing markets

Fund picks

Among open-ended funds, Premier Miton’s performance is especially noteworthy, with the Premier Miton Defensive Multi-Asset and Premier Miton Cautious Mlt-Asst funds topping the Mixed Investment 0-35% Shares and Mixed Investment 20-60% Shares sectors respectively in the year to 19 June, with gains of 10.4% and 12%. They dipped -3.9% and -7.2% in the week to 8 April.

“Not only does Miton have numerous eggs; it has numerous baskets, including property and alternative assets,” says Darius McDermott, managing director of FundCalibre.

“Moreover, consistent methodology, combining credit selection and flexible equity positioning seems to have worked well during a period of elevated interest rate sensitivity and inflation jitters.”

Artemis Monthly Distribution, a Super 60 pick for income-seekers, narrowly misses out on a place in the top five, with a year-to-date return of 8.7% and a 6% drawdown during the sell-off.

“The strategy has a strong track record, ranking in the top quartile of its peer group since inception,” says ii’s Bigley.

In the Mixed Investment 40-85% sector, where managers have more room to take risk, Orbis OEIC Global Balanced leads. It lost just 6.2% during the tariff turmoil and is up 17.6% so far this year.

“Orbis is an extremely active fund and has demonstrated that it can deliver in all weather conditions,” says McDermott. “The small drawdown, despite a heavy weighting to equities, shows the importance of high-conviction outperformance amid broader market headwinds.”

Orbis Global Balanced manager Alec Cutler was recently interviewed by interactive investor. You can watch the interview, by clicking on the links below.

• Orbis Global Balanced interview: why gold and defence shares will keep rising
• Orbis Global Balanced interview: momentum building in UK but these stocks still cheap

Source: Morningstar/interactive investor, total returns GBP to 19 June 2025. Past performance is not a guide to future performance.

Smart strategies

Looking ahead, investors face heightened uncertainty, risk and volatility.

“We feel it’s increasingly important to blend positive risk-on positions with genuinely defensive risk-off exposure,” says JM Finn multi-asset manager James Godrich.

Within equities, he sees “great opportunity” in Japan and holds funds such as the Super 60 adventurous pick JPMorgan Japanese Ord (LSE:JFJ). On the defensive side, he favours short-dated government bonds and gold, which he first added to portfolios in February 2024 via another Super 60 fund, iShares Physical Gold ETC GBP (LSE:SGLN).

Fairview’s Yearsley particularly likes multi-asset funds for non-tax wrapped investments and advocates for blending passive and active exposures.

“With many multi-asset funds taking a passive approach to equities to cut costs, the dominance and valuation of US equities is a concern,” he says. “The likes of Vanguard and BlackRock’s MyMap range are obvious ones to think about here. That’s why I blend multi-assets funds together.

“If you have a blend of a few different ones, you hopefully don’t need to sell out – the problem with rebalancing and selling out of anything is that capital gains tax is high and the tax-free allowance is low.”

On the low-cost multi-asset fund front, he likes the CT Universal MAP, BlackRock MyMap and Fidelity Multi Asset Allocator ranges.

The five funds in Vanguard’s LifeStrategy range, a popular way for investors to gain low-cost exposure to both shares and bonds, are also in positive territory year-to-date (to 19 June).

The funds with less exposure to shares fared best: with Vanguard LifeStrategy 20% Equity up 2.2%; Vanguard LifeStrategy 40% Equity up 2.1%; Vanguard LifeStrategy 60% Equity up 1.9%; Vanguard LifeStrategy 80% Equity up 1.5% and Vanguard LifeStrategy 100% Equity up 1.1%.

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But while diversification might be the only free lunch in investing, investors can’t have their cake and eat it.

“The fact is if you want an investment vehicle that is not volatile, that almost certainly means giving up the ability to make higher returns over the longer term,” says David Liddell, a director at IpsoFacto Investor.

“With cash interest rates quite high, it begs the question of how much value is really being added by a conservative fund compared to a high-interest savings account – or even just holding 50% in a global equity ETF and 50% in cash.”

ii Managed ISA

For investors starting out or those who want a simple multi-asset core for their portfolio, the ii Managed ISA offers convenient diversification.

Customers fill out a questionnaire and are matched with one of 10 portfolios, with five different levels of risk and two investment styles (index and sustainable).

“This way, every customer can find the most appropriate portfolio for the level of risk they’re willing to take,” says Dzmitry Lipski, ii’s head of funds research.

“Once invested, the portfolio is periodically rebalanced – in line with the risk level you signed up for. The fund fees are low, and there is no separate management fee as it sits within ii’s existing flat-fee subscription-based charging model.”