In 2025, UK stocks saw a return of 24.8% while Europe ex-UK equities surged 26.6%, benefiting multi-asset portfolios. However, most categories fell short of Morningstar target allocation indexes.Currency movements impacted UK investors in multi-asset funds, shaping returns throughout the year. The average fund in GBP allocation categories showed positive returns, with stronger performances seen in balanced and higher-risk sectors.

UK and European equities outperformed US equities in 2025, with UK stocks delivering a standout return of 24.8%. Emerging market equities also performed well, returning 20.8%. Factors such as cheaper starting valuations and improving economic sentiment contributed to this shift in equity market leadership.

Currency movements played a significant role in shaping returns for UK investors in 2025, with the US dollar weakening against sterling. This impacted sterling returns from unhedged US equity holdings, highlighting the importance of active currency hedging strategies in multi-asset funds.

Interest rates were cut as asset classes performed well in 2025, despite expectations of lower returns. Markets navigated a complex macro backdrop, with central banks adjusting policies. Most asset classes delivered solid gains, supported by resilient corporate earnings and the absence of a major economic downturn.

Funds exposed to gold outperformed other asset classes in 2025, with gold serving as a diversifier amid geopolitical uncertainty. UK gilts and corporate bonds also saw positive returns, while index-linked bonds lagged. Gold remained a small allocation in multi-asset portfolios but played a role as a diversifier.

Read more at Morningstar: How Multi-Asset Funds Performed in 2025