There have been just three initial public offerings (IPOs) of investment trusts between 2023 and 2025, and none of them raised over £100 million. Achilles Investment Company (LSE: AIC), an activist trust, raised £54 million last year, while Ashoka WhiteOak Emerging Markets (LSE: AWEM) raised £30.5 million in 2023. Both have received a reasonable amount of coverage.

By far the smallest and least well-known of the three is Onward Opportunities (LSE: ONWD), which has raised £12.8 million through a listing on Aim in 2023. It has since grown in size to £42 million via several follow-on raises and graduated from Aim to the main market this year.

Onward Opportunities has a focused approach

Onward, which focuses on UK smaller companies and micro-caps, set a target of earning an annualised return of at least 15% and doubling invested capital within a three-to-five-year holding period. A share-price return of 18.5% (and a total net asset value (NAV) return of 26%) over three years means that it has so far failed to meet this goal. Still, it has outperformed the UK Aim All-Share total return index (8.4%) and matched the performance of its peer group, the AIC UK Smaller Companies sector.

The trust is managed by Laurence Hulse, who started his career at Gresham House in 2015. He worked on a number of equity funds – including Gresham House Strategic (which is now Rockwood Strategic (LSE: RKW)), the Strategic Public Equity Fund and the Gresham House Smaller Companies Fund – before he moved to Dowgate Wealth in 2022 to start Onward. Hulse and his team own 5% of the trust, and Dowgate owns 33%.

Onward has a concentrated portfolio of ten core positions and 12 smaller holdings (25% of the portfolio), which the team call “nursery” positions. It looks for profitable, cash-generative businesses, while also aiming to take meaningful positions in situations where an activist approach can unlock value.

The top two holdings at the end of June were Likewise (9.5%) and Angling Direct (8.3%). Likewise is a UK distributor of floor coverings, rugs, and matting that Onward first bought in 2024. It doubled down on the position at the end of last year, arguing that Likewise is well-positioned to outperform its “loss-making and heavily indebted rivals”, whose continued decline is a key part of the thesis. CEO Tony Brewer, who co-founded the firm in 2018, was previously at competitor Headlam, where he increased the firm's value tenfold between 2009 and 2015.

Angling Direct, a leading UK retailer of fishing equipment, has been a top holding for the trust since its inception. Onward wants management to reconsider the company's expansion into Europe amid continued losses and to focus on its app and social channels.

Pottery firm Portmeirion is a recent new nursery holding. While this firm has lost money over the past two years, Onward believes its new CEO Michael Scheepers, who comes from Le Creuset, can help drive the company forward.

Onward Opportunities is too expensive

While Onward is establishing a solid record in the small and micro-cap sector, the fees are quite pricey. The management fee is 1.5% of NAV up to £50 million and 1% above £50 million. On top of this, there is a performance fee of 12.5% of the excess return above a non-compounding hurdle of 6% per annum. While this gives managers an incentive to outperform, it's eating into returns.

Ongoing charges, including the performance fee, hit 4.4% in 2024 and 5.2% in 2025. This makes the trust nearly five times more expensive than the weighted average for its peer group, and 2.5 times higher than Rockwood Strategic, which has returned 56% over three years.

It's a shame that performance accrues to the managers rather than to investors. Strip out the fees and it would be a top performer.

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Joe Studwell is a development economist at Africa Urban Lab, a research centre at the African School of Economics, Zanzibar. He is also a founder and director of the Asian research and advisory firm Gavekal Dragonomics. His books include The China Dream, Asian Godfathers and How Asia Works. How Africa Works: Success and Failure on the World's Last Developmental Frontier is published by Profile Books (£25).

Matthew Partridge: The thesis of your book How Africa Works is that Africa is finally starting to take off economically.

Joe Studwell: We've already seen an uptick in growth in the last 20-30 years, as well as a move to more consistent growth as Africa becomes less dependent on minerals. We don't know at what level continental growth will settle, but I suspect across the 55 countries, we can now expect to see growth averaging something over 4% per annum, with some countries expanding at the sort of rates we associate with East Asia: 9%-10%.

Matthew Partridge: There have been several occasions over the past few decades when it looked as though Africa had finally reached take-off speed, only for it to fall back. How is it different this time?

Joe Studwell: This time the demographic story is different. The central thesis of the book is that demographics have been the main constraint on the continent. African population density in 1960 was equal to Europe's in 1500, so it was unrealistic to expect sustained growth.

But by 2030 the population density of Africa will be equivalent to that of Asia in 1960, and of course Asian density then tripled during its period of fast growth. What's more, while most African countries still aren't well governed, a handful are – and even the poorly governed are still enjoying faster growth.

Matthew Partridge: So, is urbanisation going to drive growth?

Joe Studwell: Yes. Cities are the big drivers of growth in Africa, with the pace of urbanisation faster than anywhere else. You get a much more efficient division of labour within cities, as well as more affordable infrastructure, and then you get higher-yielding agriculture in the surrounding areas as the proximity to the market encourages people to put lots of fertiliser on the land.

Matthew Partridge: Returning to demographics, do you think Africa's younger population, compared with Asia's and Europe's ageing ones, is a positive?

Joe Studwell: It's a positive. But the sweet spot will be when Africa's population matures, so you get a lot of people aged 15-64, the most economically active age. That maybe a little way down the line. What's more, while you do get younger people pushing for political change, Africa is already more democratic than Asia was at the same level of economic development.

Part of the reason for that is the ethnic diversity in Africa. With the dominant ethnic groups accounting for less than 30% of the population in some cases, it makes autocracy much harder to maintain than in East Asia, where ethnic minorities comprise less than 5% of the population.

Matthew Partridge: Africa has received large amounts of investment from China and the Middle East. Do you think that's helping to drive growth?

Joe Studwell: Foreign direct investment is important. It's not just the hard currency that comes in, but also the knowledge. And Chinese firms often say they are interested in Africa because margins are better than they are in China, where manufacturing is phenomenally competitive. The Middle East is branching out into services such as ports and real estate. Hopefully this will be supplemented by more European and US investment down the road.

Matthew Partridge: Could Chinese investments be a Trojan horse? Does China secretly want to secure dominance of those areas?

Joe Studwell: I don't think there is any evidence of some grand strategy. I think that China today is like Korea and Japan before it. It has massive surplus manufacturing capacity and vast amounts of foreign exchange. It is keen to move into both foreign markets.

And just as the Koreans did in the Middle East in the 1970s and 1980s – and the Japanese in Southeast Asia in the 1960s and 1970s – China has decided that Africa is the most natural target for its manufacturing and foreign-exchange surplus. What's more, while there has been some investment by the Chinese state, most of it is spearheaded by China's private companies

Matthew Partridge: You talk about some of the biggest success stories: Botswana, Rwanda, Ethiopia, Mauritius. What do you think are the key lessons from their success?

Joe Studwell: The thing about Africa is that there is no special African recipe, just the approach that worked well in Asia and in Europe after World War II. This was the emphasis on smallholders' agriculture and raising the intensity of production and yields, combined with a focus on manufacturing as a major job creator.

What I found in Africa was that context is very different. All the successful countries have leaders who managed to forge cross-ethnic coalitions. While this wouldn't be necessary in a country such as China where 95% of the population is Han Chinese, it is necessary in Botswana or Ethiopia or Rwanda, as you've got to bridge these big ethnic gaps if you're going to get political traction and enduring policy.

Matthew Partridge: What went wrong in the African countries that haven't succeeded?

Joe Studwell: The application of developmental policy requires leaders who believe in the possibilities of development, and many of the countries that failed couldn't construct cross-ethnic national coalitions to that end.

Worse, you had some utterly dysfunctional countries, such as Sudan or Somalia today where there's so much political disagreement and violence that there's no chance to get anything moving to promote development. This is a tragedy. Sudan has agricultural and manufacturing resources that could easily translate into a 10% growth rate.

But between the failed states at one extreme and a country such as Ethiopia (which will grow at 10% this year) at the other, there's an awful lot in the middle. Nigeria had a horrific civil war in the 1960s and has had governments that have since struggled to bind the ethnically diverse population together. But there is nonetheless a private sector going from strength to strength, with Aliko Dangote, the richest man in Africa, building the first economically successful petroleum refinery in Lagos, something that the government has struggled to do. He is active in a host of other businesses as well.

I'd urge everybody to go to Lagos because it's such a wild and remarkable place, with more than a fifth of the Nigerian economy in just one city. It is often said that everybody in Lagos wakes up that morning not quite sure how they'll eat that day, yet everybody seems to. Kenya would be another example. It is a largely mismanaged state, but with a vibrant private sector and lots of growing firms doing very interesting things.

Matthew Partridge: You talk about the role of governments in promoting manufacturing and industrialisation, but hasn't the state been very bad at picking winners?

Joe Studwell: Nobody who ran a good industrial policy ever set out to pick winners. Instead, you provide a subsidy and support in the context of competition between firms that are receiving that subsidy, and then you let the market decide who wins. You also pressure them to export, as manufactured exports are the most competitive part of the world economy.

But it's true that where it goes wrong, it tends to go wrong because governments fail to understand the role of competition and they do indeed try to pick winners. We had a case of that in Ethiopia with the huge state conglomerate Metals and Engineering Corporation (Metec), which was working on all the sugar mills for the sugar plantations that were being built. But the government has learned there, and is now splitting Metec up into four divisions, which will compete with each other and against other firms.

Matthew Partridge: Which African countries look the most interesting now from an investor's point of view?

Joe Studwell: I'd be reluctant to say. What's more, as we saw in East Asia, the most successful developing countries will take quite a long time to produce a good return for portfolio investors because they retain capital controls and they manage their banking system to direct credit to manufacturing and smallholder agriculture – policies that focus on the long-term good of the country rather than simply maximising investors' returns.

So, you could put money into African banks in countries with liberalised financial systems and you'll probably do quite well. But generally, Africa requires a lot of hard work because top-quality information about African companies is in relatively short supply. I think financial-services firms should be opening small offices and just having a look around rather than trying to woo people to put their money into what remain broadly frontier markets.

Matthew Partridge: How can the rest of the world help Africa to keep growing?

Joe Studwell: I hope that multilateral and bilateral institutions talk to African governments about what they really need and what their ambitions are, rather than turning up with shopping lists of what they think governments should be doing, which has been the weakness of all those institutions around the world.

Moreover, there's not much appetite in multilateral and bilateral institutions for supporting smallholders' agriculture or industrial policy. The latest trend in aid seems to be to treat aid like private equity. Bilateral donors give money to private-equity firms today on the basis that this constitutes a useful contribution to economic development, and I'm not sure that it does. Still, it doesn't matter too much, as the good news about African economies is coming from within Africa.

Matthew Partridge: In 20 years or so, once growth has started to feed through, how do you think the rise of Africa is going to reshape global politics?

Joe Studwell: In 2050, Africa is likely to have 2.5 billion people, up from 1.5 billion today. When we reach 2100, there will be four billion people in Africa, four billion people in Asia, and only two billion in the rest of the world. So, Africans will be demanding to be heard.

But I think what we need to recognise is that Africa is also going to take Asia's crown as the most diverse region of the world in terms of development. There is a huge difference today between the situation in Myanmar and that of Japan, Taiwan or South Korea. That's what we should expect with Africa in the future. We won't talk about Africa as a single monolithic entity; we will discuss it in the same way we tend to talk about East Asia or Southeast Asia.

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Chelvey Court, Backwell, Bristol

A Grade II-listed, 17th-century house currently arranged as two independent homes and a two-bedroom flat. It has a Jacobean staircase and carved stone fireplaces. 9 bedrooms, 4 bathrooms, kitchen, 2 receptions, study, barn, summer house, landscaped gardens, orchard, 5.53 acres.

Price: £1.95m+ Knight Frank 01173-171996

Carestown Steadings, Deskford, Buckie, Banffshire, Scotland

A large property close to the Moray Firth. It has vaulted ceilings and a conservatory. 3 bedrooms, 2 bathrooms, 4 receptions, kitchen, breakfast room, study, indoor swimming pool with sauna, 2-bed cottage, outbuilding with offices, 5.4 acres.

Price: £1.995m+ Strutt & Parker 01463-723595

North Pallant, Chichester, West Sussex

A renovated, Grade II-listed 15th-century townhouse with an extension to the rear adding a bespoke kitchen and living area with sliding doors leading onto a courtyard garden. The house retains its beamed ceilings and panelled walls, and has open fireplaces with wood-burning stoves. 5 bedrooms, 3 bathrooms, guest en-suite bed, 2 receptions, cinema room, roof terrace.

Price: £1.85m Fine & Country 01243-908077

The Grange, West Burton, Leyburn, North Yorkshire

A Grade II-listed, 18th-century house overlooking a river. It comes with three two-bedroom apartments in a converted Grade II-listed stable block, which are currently run as holiday lets. The house has open fireplaces and a large, bespoke dining kitchen with an Aga. 9 bedrooms, 7 bathrooms, 4 receptions, secondary kitchen, garages, mature gardens and pond bordering Walden Beck.

Price: £1.895m Savills 01904-617821

The Downs Barn & The Downs Barn Lodge, Frampton Mansell, Gloucestershire

A former barn with a 17th-century arched, panelled entrance. It has beamed ceilings, open fireplaces and comes with a detached, two-bedroom lodge. 7 bedrooms, 5 bathrooms, reception, 2 kitchens, 1-bed annexe, swimming pool, paddocks, woodland, 5 acres.

Price: £1.95m Murrays Estate Agents 01453-755552

The Old Vicarage, Tintagel, Cornwall

A refurbished Grade II-listed, mid-17th-century former vicarage and attached cottage on the edge of Tintagel. It has wood-burning stoves and a bespoke kitchen and conservatory leading onto landscaped gardens that include a kitchen garden and a stream crossed by a slate bridge. 7 bedrooms, 3 bathrooms, 2 receptions, gym, 17th-century gate house, deconsecrated chapel, 3 acres.

Price: £1.85m Rohrs & Rowe 01872-306360

Griffin House, Swerford, Chipping Norton, Oxfordshire

This 15th-century, Grade II-listed William and Mary house was rebuilt in 1691. It has oak mullion leaded-light windows, window seats, exposed timbers, flagstone floors, oak panelling and open fireplaces. The gardens include a range of outbuildings and a natural swimming pool with a pontoon. 5 bedrooms, 3 bathrooms, 2 receptions, breakfast kitchen, cinema and games room, triple garage with studio flat above, 1.2 acres.

Price: £1.95m Savills 01295-228000

Constance Close, London SW15

This house has been redesigned to include a Western Red Cedar-clad extension with an open-plan kitchen and living area with French doors leading onto the garden. The turret includes a bedroom with panoramic views over Richmond Park, and it has an office at the end of the garden. 4 bedrooms, 2 bathrooms, study, garage, air-source heat pump, solar panels.

Price: £1.9m Knight Frank 0203-8239255

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The first half of 2026 was disrupted by geopolitics. As we sweat through a sweltering summer, could the climate be the major driver in the second half?

Europe’s heatwaves have already had noticeable economic impacts. Barges transporting goods along the Rhine have had to reduce their capacity thanks to lower water levels, while France cut its nuclear power output because rivers were too warm to cool reactors.

And the brewing El Niño – a weather pattern characterised by rising sea temperatures, particularly in the equatorial Pacific ocean – could exacerbate these effects further.

“The macroeconomic impacts of El Niño are hard to both quantify and predict but affect everything from crop production and food prices to hydroelectric power generation and demand,” said Sophie Chardon, head of sustainable investments at private bank Lombard Odier in a research note.

“A warming world is thus raising long-term physical climate risks, with implications for infrastructure and security in sectors from power and mobility to natural resources and food production,” Chardon added.

With the earth warming up, what could the consequences be for your money and your investments?

Commodities could be set to rise

One effect of an El Niño weather system could be a rise in commodity prices, especially for certain agricultural products.

“The last time a major El Niño hit (2023–2024)... cocoa rallied 250%,” said Aneeka Gupta, director of macroeconomic research at asset manager WisdomTree. “Sugar hit its highest price in over a decade. Rice exporters shut their borders.”

While those events felt dramatic at the time, Gupta cautions that the impacts could be even greater this time around given the impact of the US-Iran war and the fertiliser crunch. More than a fifth of the world’s urea (a key ingredient in agricultural fertiliser) is sourced in the Middle East, so its supply has also been disrupted by the conflict.

Global baseline temperatures have climbed further since the last major El Niño, which could exacerbate the impact of this one.

The US National Oceanic & Atmospheric Administration (NOAA) is also predicting a 63% chance of a ‘very strong’ El Niño this year.

“On its own, that would already be worth watching,” said Gupta. “Layered on top of the Strait of Hormuz disruption, which has throttled fertiliser flows from the Middle East at precisely the moment farmers need to be securing inputs, this event arrives at a moment of unusual fragility for global food production.”

Lombard Odier’s Chardon added that the combination could have a particularly strong impact on wheat, corn, rice and soybeans, “with the risk of farming and power interruptions in many key emerging markets”.

This could see increases in food prices, especially for foods based on the products that are most heavily impacted by El Niño.

“Soft commodities have consistently been the strongest performers during El Niño episodes,” said Gupta. “Three of the five soft commodities (cotton, coffee, and sugar) moved to multi-year highs in 2022–23, and in late 2024 orange juice and cocoa reached record highs… Every strong El Niño in the past 55 years has reduced global cocoa production.”

How can you invest with climate change in mind?

Some of the economic impacts that El Niño and climate change are likely to cause will impact your finances, in ways you can’t control – for example, by potentially higher food prices. Higher food prices could have a knock-on effect on inflation.

But there are ways to invest so as to at least benefit from some of the responses and solutions to climate change.

You could, for example, invest in the energy transition commodities that are poised to see demand surge as governments reposition their power supply to reduce greenhouse gas emissions, or in funds that hold renewable energy suppliers. Investment trust Foresight Environmental Infrastructure (LON:FGEN) is a good example; it holds

Chardon talks about climate adaptation as an investment theme.

“Adaptations to improve the resilience of our economies’ infrastructure can enhance productivity, boost resource efficiency and create value, with opportunities in public and private markets,” she said,

One of the key pillars of this kind of investing is water. Climate change is increasing the prevalence of droughts, and of floods – which can be just as disruptive as droughts for water suppliers. Some experts see global water demand outstripping supply by as much as 40% by 2030.

Funds that capture this trend include Pictet Water, the Regnan Sustainable Water and Waste Fund or Allianz Global Water.

Or for exposure to the soft commodities that could be subject to price rises following El Niño, the WisdomTree Agriculture ETC (LON:AGAP) is an exchange-traded commodity (similar to an exchange-traded fund but for commodities) tracking a basket of agricultural futures contracts including for soybeans, coffee, sugar, cotton and cocoa.

Following a considerable run of strength, the price of gold began to settle as this year unfolded. The sudden rise in the price of crude oil and associated products drove the market to free up cash to cover increased costs and buffer against any further uncertainty. As a highly tradeable asset, gold hence fell victim to broad selling.

However, as the market stabilises, an opportunity could appear for those seeking to build up their gold exposure. Gold miners provide a way to leverage bets on gold. Their profits come from the difference between gold prices and the cost of extracting gold and, as gold miners invest in expanding their network of mines, new potential revenue sources appear. Material by-products of gold mining, such as copper, are also valuable and can provide a buffer against declines in the value of gold.

Three gold mining stocks for your portfolio

Barrick Mining Corp (NYSE: B) is a mining company producing gold and copper. Its operations span South and North America, Africa and the Middle East. Barrick was the world's largest gold-mining company until 2019, and its 2026 production guidance totals 2.9 million to 3.25 million ounces of gold and 190,000 to 220,000 tonnes of copper.

Following the broad shift in the industry to an increased focus on shareholder value, Barrick has been a leading example of the success of this move. The firm has strong policies to generate cash flow and a target dividend payout of 50% of free cash flows. A $3 billion share repurchase was authorised in May and the company is moving forward with plans to publicly list its North American gold assets, further strengthening shareholder value.

B2Gold (NYSE American: BTG) is a Canadian mining company operating across Mali, Namibia and the Philippines. It is focused solely on gold mining and produced just under 240,000 ounces in the first quarter of 2026. This smaller output means B2 cannot benefit from the scale efficiencies of larger mining operators, increasing its extraction costs and therefore the leverage of firm value relative to gold prices.

Despite this higher cost base, B2's all-in sustaining cost (AISC), a key metric for the industry, came in lower than predicted in the first quarter, which is particularly beneficial in the current environment of rising fuel costs. What's more, B2's strong financial and liquidity position means that the firm is well placed to deal with any further market shocks or uncertainty. The company's AGM in June revealed a strong commitment from B2's shareholders to leverage this strength to achieve growth and manage risk.

OceanaGold Corporation (Toronto: OGC) is a gold-mining and exploration company based operationally across Canada and Australia. Although costs exceeded expectations for the first quarter of 2026, the company reported strong operational performance. It posted record quarterly revenue and earnings, with a significant year-over-year increase. Furthermore, free cash flow surged by 271% when compared with the previous year.

Despite all this, over the same period, the stock price declined nearly 4%. The strong technical performance paired with observed price weakness suggests a potential buying opportunity. The company predicts a decline in extraction costs as production expands and access to high-grade ore improves. Its Haile mine project in South Carolina is expected to lead to a 35% rise in gold production, while reducing costs by about 25%.

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The London Stock Exchange recently celebrated 25 years of its FTSE4Good range of indices, designed to assess and boost corporate “sustainability”. Strictly excluded were firms involved in areas such as tobacco and weapons that were considered controversial. The restrictions quickly expanded to exclude the defence industry, fossil fuels and gambling.

The subsequent rush to ESG (environment, social and governance issues) saw the list broadened to include airlines, mining, alcohol and anything else that offended progressive sensibilities.

For a long time, this seemed to work as investment flows benefited the favoured areas, such as renewable energy. More recently, a heavy weighting in the tech sector – 44% in the FTSE4Good All-World series against 35% in the FTSE All-World index – has helped performance, even if overall the difference compared with broader indices has been negligible.

But the series for the UK, which has little exposure to technology, shows a worrying pattern for ESG devotees. The FTSE 100 has gained 70% in ten years and the All-Share index 67.5%, but FTSE4Good has managed only 57%. Over five years, FTSE4Good has gained 35% against 46.5% for the FTSE 100 and 38% for the All-Share.

A boom in unethical investing

Shares in British American Tobacco, for example, have appreciated nearly 70% since Bruce Packard wrote about them in MoneyWeek in October 2024, when, in addition, they yielded 9%. Smoking may be in decline, but BAT is moving rapidly into smokeless products, expected to exceed 50% of revenues by 2035.

Imperial Brands has performed less well, but its shares are still up nearly 60% since spring 2024 (when they also yielded 9%), despite a 20% fall since early February.

True, the oil and gas sector had a miserable few years – until the Gulf war pushed up prices. Shell's shares rose more than 30% in the first quarter and are now up 10% year-to-date. BP's shares rose 40% in the first quarter and are up 16% year-to-date. The shares of ExxonMobil, which never sought to reinvent itself as a renewables company, have more than doubled in the last five years and are up 20% this year.

Then the Russian invasion of Ukraine in 2022 caused an abrupt change in attitude towards defence. Since then, the share price of BAE Systems has trebled, although it has traded sideways for the last year due to doubts about the usefulness of much of its hardware in modern conflicts. Rolls-Royce's share price multiplied tenfold in the same time.

Babcock's shares didn't start moving until mid-2023, but are up 250% since. Since the end of 2022, shares in Palantir, hated by progressives for its links to Israel and for delivering strong efficiency gains to the NHS, has multiplied 20-fold in value, even though it is now down 40% from its late 2025 peak.

Gambling firms, on the other hand, have struggled with the transition from the high street to the highly competitive online market. Entain, owners of Ladbrokes and Coral, has fallen 75% since a peak in late 2021, Flutter Entertainment (Paddy Power, Sportsbet and Sky) prospered until a year ago, but has since fallen by two-thirds, while Rank Group (Mecca and Grosvenor Casinos) has been on a downward trend for ten years.

Miners are often excused criticism for the rare metals essential for technology and renewable energy that they extract, but this is only a small part of their business. Most of it is in the dirty business of mining iron ore, aluminium, precious metals and the no-go area of coal. Admittedly, Rio Tinto, up 75% in the last year, exited most of its coal business in 2018, but the proposed merger with Glencore, up 87% in a year and one of the world's largest coal producers and traders, would put it back in.

BHP (up 80% in a year) and Anglo American (up 84%) have significant coal interests, although Anglo American recently sold its Australian coal business. Net-zero evangelists also disapprove of airlines; yet despite the rise in fuel prices, International Airlines is up 51% in a year and 177% in two. EasyJet and Jet2 have traded broadly sideways.

The problem with ESG investing

The conclusion is not that ethical investing has necessarily reduced performance, as it depends on what was bought instead. If that was more technology, that would have concentrated any portfolio in a high-risk area. Opinions about what is and is not ethical vary and change over time, as they have for defence. Tobacco companies are moving to smokeless products; should that not be encouraged?

Mining is a dirty business, but it is an essential part of the global economy. The move to renewable energy, reducing dependence on imports of fossil fuels from some of the most unsavoury and corrupt countries in the world, is surely desirable, but is only possible at the pace allowed by economics, technology and adoption by consumers.

Gambling, whether online or in betting shops, is addictive and impoverishing, but could horse-racing survive without it? Lotteries, described by Samuel Johnson as “a tax on fools”, have paid for many good works.

Restricting the choice of investments available to fund managers makes it harder for them to perform and easier to excuse underperformance. Yet charity trustees who do so risk depriving good causes of much-needed returns. The damage to the businesses they won't invest in is, at best, marginal, but the damage to their cherished causes is very real. Is that really ethical?

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Taiwan Semiconductor Manufacturing Company (TSMC) (Taipei: 2330 and NYSE: TSM) may be the most important business most people have never heard of. Right now, you're probably carrying products that it has made. Most consumers recognise names such as Apple and Nvidia. Yet behind many of the products they sell sits a Taiwanese manufacturer responsible for turning their designs into reality.

Every day, billions of people rely on devices powered by chips produced by TSMC. The company's influence stretches far beyond smartphones. From artificial intelligence to consumer electronics, much of the modern digital economy ultimately depends on a business with headquarters on an island roughly 100 miles off the coast of China.

What makes TSMC remarkable is not simply its scale, but the way it achieved it. Unlike most technology giants, it did not become dominant by creating the best consumer products or developing a monopoly over software. Instead, it positioned itself as a neutral supplier to an industry filled with fierce competitors. In effect, TSMC became the Switzerland of the semiconductor world, doing business with everyone and doing so in secrecy.

How Morris Chang founded TSMC

That strategy was the brainchild of Morris Chang, a veteran semiconductor executive who spotted a flaw in the industry's business model and built an entire company around solving it. Nearly four decades after it was founded, his insight sits at the centre of the global technology industry.

Chang never set out to build one of the world's most important firms. For 25 years, he worked at Texas Instruments, rising high to run its global semiconductor business. During those years, Chang noticed a problem. Brilliant engineers regularly designed innovative chips, but turning those designs into products required vast sums of money.

In the 1970s and 1980s, semiconductor firms were expected to do everything themselves. Designing chips was only half the job. Companies also needed expensive factories, specialised equipment and the expertise to run them. The result was an industry dominated by a handful of large, vertically integrated firms.

Then Chang's own career took an unexpected turn. In 1983, aged 52, he was passed over for the top job at Texas Instruments and left the company. After a brief spell in a senior role at another American chip company, he received an unusual offer. The Taiwanese government wanted to build a domestic electronics industry and was looking for someone with Silicon Valley experience to lead the effort. Chang accepted.

He arrived in Taiwan with decades of semiconductor experience and a conviction that copying America would be a mistake. Taiwan lacked the design expertise, customer relationships and global brands needed to compete. But Chang had spent years watching another problem unfold. The industry was full of talented chip designers who could not afford to manufacture their ideas. What if somebody built the chips for them?

That simple question led to the creation of TSMC in 1987. At the time, the idea looked absurd. Bringing a chip to market required access to a fabrication plant, or “fab”. The industry believed serious companies should own these factories themselves. In practice, that meant chip designers relying on one of the industry giants.

That created another problem. The company manufacturing your chip was often also a competitor. Handing over your most valuable intellectual property required a leap of faith. Chang's solution was that TSMC would make chips for anyone willing to pay, but would never design products of its own.

In 1987, that sounded like madness. When Chang went looking for investors, many of the industry's biggest names rejected him. Texas Instruments and Intel both declined his offer. A factory without its own products looked like a recipe for bankruptcy. How could a manufacturer survive without guaranteed demand?

In the end, Chang persuaded the Dutch electronics group Philips and several wealthy Taiwanese families to back the venture. Even then, enthusiasm was limited. Philips largely viewed the investment as a way of supporting the Taiwanese government's ambitions rather than as a compelling commercial opportunity. It intended liquidating its investment early. Potential customers were hardly more enthusiastic. Many designers saw little reason to outsource manufacturing. A company that only made chips for other people seemed unnecessary.

By now, Chang was a 56-year-old executive pitching an untested business model in an industry convinced it could never work. Then, fortune presented an opportunity. In 1988, Intel found itself short of manufacturing capacity. Faced with the prospect of disappointing customers, it reluctantly turned to TSMC for help. Intel's engineers arrived in Taiwan expecting a low-cost, unsophisticated subcontractor. Instead, they found a world-class operation run by one of the industry's most experienced executives. Passing Intel's quality standards was not easy, but once TSMC secured the American giant's approval, attitudes across the industry changed quickly. If Intel trusted TSMC, others reasoned, perhaps they could too.

That endorsement transformed the trajectory of the company. Designers no longer needed to spend billions building factories before launching a new product. Instead, they could focus on what they did best – designing chips, and letting TSMC handle the rest. Without TSMC, it's unlikely that Nvidia could have existed, nor could a host of other chip companies.

A new generation of semiconductor firms emerged, freed from one of the industry's biggest barriers to entry. While rivals competed to design better chips, TSMC focused on becoming the best manufacturer in the world. By choosing not to compete with its customers, the company turned neutrality into a competitive advantage. That decision would prove far more powerful than anyone imagined. But the success of TSMC's model created an obvious question: if it was such a good idea, why didn't somebody copy it?

Many tried, but almost all failed. For years, Samsung looked like the most credible challenger. The South Korean giant had deep pockets and decades of manufacturing experience. The problem was that Samsung was also a competitor. Unlike TSMC, Samsung sold smartphones and consumer electronics under its own brand. That created a dilemma for customers. Why hand your most valuable chip designs to a firm that might one day compete against you? No customer wrestled with that question more than Apple.

During the early years of the iPhone, Samsung made many of Apple's processors. The arrangement worked, but it became increasingly awkward as the two companies emerged as fierce rivals in the smartphone market. By the early 2010s, they were fighting a series of patent disputes. Apple found itself in the strange position of relying on one of its biggest competitors to make some of its most important components.

TSMC offered an escape route. With the launch of the A8 processor in 2014, Apple shifted production to Taiwan. The move was risky, but Apple concluded that the benefits outweighed the costs. TSMC's neutrality had become one of the most valuable assets in the technology industry. Today, many of Silicon Valley's biggest rivals manufacture their chips at TSMC. Apple, Nvidia, AMD and Qualcomm all rely on the same company, despite competing aggressively in their own markets.

Samsung's problem was a conflict of interest; Intel's was something different: success. For decades, Intel dominated the semiconductor industry. Its factories were among the most advanced in the world. However, the company became increasingly focused on its own products. When Apple approached Intel in the mid-2000s about supplying chips for what would become the first iPhone, Intel declined.

Management believed the opportunity was too small to justify the investment. It was one of the most expensive misjudgements in the history of the technology industry. By the time Intel recognised its mistake, Apple had moved on and TSMC was becoming the manufacturing partner of choice for a new generation of chip designers. When Intel later attempted to open its factories to outside customers, its manufacturing systems had been built around Intel's products, not the needs of third-party designers.

Other competitors couldn't keep up with the investment needs. GlobalFoundries, an American rival, spent years trying to keep pace before effectively giving up on leading-edge manufacturing in 2018. The company concluded that each new generation of chip technology required so much investment that the returns no longer justified the risk.

China's national champion, SMIC, faces a different challenge. Western export controls have restricted access to advanced manufacturing equipment, making it difficult to compete at the industry's frontier.

TSMC's greatest advantage

TSMC's greatest advantage is not its technology, because that can be copied. Its real advantage is the business model Morris Chang created nearly four decades ago. The company sits at the centre of the semiconductor industry, serving customers that often compete with one another. That position generates enormous scale, which in turn funds the next generation of factories and equipment.

The most advanced chips require ultraviolet lithography machines built by the Dutch company ASML. Each cost more than £275 million. A state-of-the-art fab may contain dozens of these machines, helping to push the cost of a new facility beyond £15 billion before production even begins. That creates a problem for potential rivals.

Customers will not trust an unproven manufacturer with their most important products, especially if they don't have advanced fabs. Yet building a state-of-the-art factory requires billions of pounds before those customers appear. Having already achieved enormous scale, TSMC now largely escapes this trap. The company controls roughly 92% of advanced chip manufacturing and generates the cash needed to fund the next generation of technology.

In 2026 alone, TSMC expects to spend nearly £45 billion on new factories and equipment. Few companies in the world could contemplate spending that much. None can do so with the same confidence of earning a return. The result is a powerful feedback loop. Scale attracts customers. Customers generate cash. Cash funds new factories. New factories attract even more customers.

Every year that cycle turns, TSMC becomes harder to catch as the price of entry rises ever higher. That scale gives TSMC another advantage: it allows customers to help fund its expansion. Most manufacturers have to build factories first and hope demand follows. Today, TSMC often works the other way around. Some of its largest customers commit billions of pounds years before new facilities begin production, effectively helping to finance the next generation of capacity.

At the end of 2024, TSMC held more than £7.3 billion of customers' deposits. As production ramped up on newer technologies, some of that money was recognised as revenue, but the balance remained substantial. Technology companies are willing to tie up enormous sums because access to TSMC's manufacturing has become critical to their own growth plans. This arrangement shifts much of the risk away from TSMC.

When companies such as Nvidia sign long-term agreements worth billions of pounds, they provide “visibility” – confidence in management forecasts – that few industrial businesses can match. New factories can be built with a high degree of confidence that demand will be waiting when they open. That helps explain why TSMC can continue investing through industry cycles.

AI is a game-changer for the semiconductor industry

For years, Apple was the company's most important customer. The iPhone generated the predictable demand that allowed TSMC to refine successive generations of manufacturing technology and steadily expand its lead. Now a new force is reshaping the industry. AI has become the biggest driver of demand for advanced semiconductors. Training and running large AI models requires vast quantities of computing power, creating an arms race among technology companies desperate to secure enough chips.

The biggest beneficiary has been Nvidia. In 2025, Nvidia overtook Apple as TSMC's largest customer, generating more than £18 billion of revenue for TSMC and accounting for roughly a fifth of total sales. The shift says a great deal about how quickly AI has altered the economics of the technology industry, but the opportunity extends beyond chip design.

Producing cutting-edge AI processors is one of the most demanding manufacturing tasks in the world. The chips themselves are larger, more complex and more difficult to assemble than those used in smartphones. As demand has exploded, bottlenecks have emerged throughout the supply chain. For TSMC, that has translated into even greater pricing power.

The world's largest technology firms are competing for a limited supply of advanced manufacturing capacity. Many have little choice but to accept TSMC's terms because there are few credible alternatives. AI has reinforced the advantages of specialisation. Developing a leading-edge AI chip already costs hundreds of millions of pounds. Building the factory to make it would require billions more. As AI pushes the technological frontier forward, the advantages of specialisation are becoming even more pronounced.

But TSMC's dominance creates a problem. Most of the world's most advanced semiconductor manufacturing remains concentrated in Taiwan. That has become a concern for governments, particularly as tensions between China and Taiwan have intensified. A disruption to TSMC's operations would ripple through the global economy.

Smartphones, data centres, AI systems and countless other technologies depend on its chips. Under pressure from the US and other governments, it's begun expanding overseas. The largest investment is a vast complex in Phoenix, Arizona. Similar projects are underway in Japan and Europe.

Building advanced factories in the US is estimated to be roughly 50% more expensive than doing so in Taiwan. Labour costs are higher, experienced engineers are harder to find and supply chains are less developed. TSMC has reportedly had to transfer experienced staff from Taiwan and create thousands of new operating procedures to support its US operations. Yet even these higher costs have not weakened the company's position.

Customers are willing to pay a premium for chips manufactured on US soil. For many, securing a politically safer supply chain is worth the extra expense. In an ironic twist, efforts to reduce dependence on TSMC have largely demonstrated how dependent the world has become on its expertise.

The future looks bright for TSMC

Whether the company can maintain its current position forever is another question. The semiconductor industry has a long history of dominant firms losing their edge, while geopolitical tensions surrounding Taiwan remain an ever-present risk. Governments are spending heavily to build alternative sources of supply and rivals continue searching for ways to close the gap.

However, history suggests writing off TSMC would be unwise. For nearly 40 years, the company has repeatedly adapted to changes in technology, customers' demands and the structure of the industry. It has survived downturns, outlasted competitors and continued strengthening its position at the heart of the digital economy. The story of TSMC is ultimately the story of how a company became indispensable. In an industry defined by relentless change, that may be its most remarkable achievement.

None of this means TSMC is a bargain. Investors are well aware of the company's strengths and the shares have performed exceptionally well over the past decade. As a result, the stock trades on a valuation that reflects high expectations for future growth. Still, TSMC has qualities that are difficult to find elsewhere. It occupies a dominant position in one of the world's most important industries, enjoys deep relationships with many of the largest technology companies on the planet and continues to invest heavily to maintain its lead.

Most importantly, investors do not need to predict which company will ultimately win the AI race. Whether the future belongs to Nvidia, AMD or some future challenger, there is a good chance that their chips will still be manufactured by TSMC. That does not guarantee attractive returns from today's share price. But betting against the company has rarely been a profitable strategy. For investors seeking exposure to long-term growth in technology and AI, TSMC remains one of the highest-quality businesses in the market.

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Andy Burnham will have a lot of important jobs when he steps into Number 10. One of them will be to try to fix the UK’s apparently broken stock market.

The persistent undervaluation of UK stocks may provide buying opportunities for investors, but it seems to be overseas institutions that are taking advantage, rather than the country’s own DIY investors.

EasyJet (LON:EZJ) is the latest British company to be the subject of an opportunistic takeover bid from a foreign private equity firm. It is unlikely to be the last.

Analysis from stockbroker Peel Hunt showed there have been £165 billion worth of takeover bids for British companies since the start of 2023. In that time, there have been 11 initial public offerings (IPOs) with a combined value of £6 billion. That amounts to a massive shrinking in value of the UK market.

“To say that the UK has a problem in retaining its companies and listing new ones would be a massive understatement in our view,” Charles Hall, head of research at Peel Hunt, stated in a report.

“The situation on the London market is now so serious that it requires bolder interventions to save our stock market,” said Richard Stone, chief executive of the Association of Investment Companies (AIC), an industry body that represents the UK’s investment trusts.

Why aren’t British investors buying their own stock market, and is there anything Burnham can do to change that?

Why aren’t Brits investing?

Part of the problem is the is a lack of investing culture in the UK. The Starmer government attempted to solve this by launching a retail investment campaign, fronted by the mascot Savvy the Squirrel.

It doesn’t seem to have worked, and the disruption in Downing Street appears to be making Brits even more cautious. Research from investment platform IG shows that nearly one in four British investors (23%) have changed their investment allocation as a result of political uncertainty.

“Rather than simply expressing concern about the outlook, many retail investors are actively reassessing where they want their money invested,” said Chris Beauchamp, IG’s chief market analyst.

UK investors have multiple sources of uncertainty to contend with. As well as domestic political upheaval, there is also the persistent geopolitical tension in the Middle East as well as the spectre of persistent inflation.

“That doesn't necessarily mean investors are abandoning risk altogether,” said Beauchamp. “Many continue to look for long-term growth opportunities, but confidence in UK markets will depend on greater political and economic certainty over the months ahead.”

What could Burnham do in order to save the UK’s stock market?

Industry leaders have called on Burnham to reform the tax system around UK stocks in order to encourage domestic investors to buy the country’s shares.

“Abolishing stamp duty altogether would give the biggest financial return to the UK economy by encouraging more investors to buy UK equities and drive economic growth,” said the AIC’s Stone, who also called for reforms to the rules that impact investment trusts and venture capital trusts (VCTs).

He highlighted that investment trusts are currently subject to “onerous double taxation” as they pay stamp duty when they buy UK-listed shares, and investors are then charged stamp duty when they buy the shares of the trusts themselves.

“It’s vital to support businesses at an earlier stage of their growth journey by reversing the decision to reduce tax relief on VCTs,” said Stone. “The cut in tax relief from 30% to 20% is expected to lead to a sharp decline in funding for VCTs, which provide the capital to growing businesses as they scale up and prepare to list on the stock market.

“If we don’t support our home-grown companies, we reduce the chance of seeing successful IPOs on our domestic market,” Stone continued. “We will also continue to see home-grown businesses head overseas, leading to the UK missing out on job creation and wealth.”

The artificial intelligence (AI) boom has so far rewarded the companies building the hardware underpinning it. Experts believe that investors looking towards the future should focus on the companies that will win the next phase of the technology’s rollout.

“The AI story is evolving,” said Lisa Wang, head of EMEA investment strategy at Franklin Templeton Investment Services (FTIS). “For the past two years, investors have been rewarded for concentrating on a small number of technology stocks. We believe the next phase of the AI investment cycle is likely to be broader, creating opportunities across different sectors and markets.”

It may be that the cycle is already beginning to turn against the AI infrastructure suppliers. FTIS recently noted in a multi-asset outlook report seen by MoneyWeek that while AI adoption is continuing apace, there are signs that it is starting to become commoditised and that the customers of so-called ‘hyperscalers’ are less willing to pay for “expensive marginal AI gains”.

If AI is becoming more price competitive, this could play out to the benefit of the companies putting it to use to improve their performance. Where should you go to look for these?

Which sectors are currently using AI the most?

Sanjiv Tumkur, head of equities at wealth manager Rathbones, says the sectors that are currently investing the most into generative AI (genAI) as users (outside the technology sector) are healthcare, financial services, retail and consumer, manufacturing and professional services.

Healthcare

“In healthcare, AI is being used to improve productivity in the pharmaceutical R&D process,” Tumkur told MoneyWeek. “For example, helping design new molecules to optimise potency and reduce side effects, providing tools to create 3D protein structures and predict interactions, identifying promising trial patients, and significantly speeding up the drafting of clinical trial protocols and of regulatory submissions.”

Financial services

Financial services like banking and insurance potentially stand to gain as AI end users as they have substantial middle- and back-office functions as well as customer service operations that could be automated by AI.

“However these sectors are highly competitive and gains typically get eroded and replicated, with few players earning sustainably attractive returns on equity,” Tumkur added, “so we are not confident in the sector being able to see a step-change in profitability through employing genAI.”

An exception to this rule is JPMorgan Chase (NYSE:JPM). Not only is it the US’s largest bank but it is also the one that spends the most on technology, with an annual technology spend of around $18 billion of which approximately $2 billion is thought to be on AI.

“JPMorgan is already seeing significant benefits from genAI (quantified at $2 billion in realised annual value) through cost savings and revenue gains in for example real time fraud detection, much faster processing of loan agreements, and improved regulatory compliance,” said Tumkur.

Retail and consumer staples

Many retail companies have already adopted AI into areas of their business like logistics and online retailing.

Walmart (NASDAQ:WMT) is a prime example of the kinds of retail and consumer staples businesses that are harnessing the benefits in marketing, data analytics, demand forecasting, customer experience and supply chain optimisation that AI potentially offers, according to Tumkur.

Are there buying opportunities in AI end users?

Software, publishing and data analytics companies are all investing heavily into genAI. RELX (LON:REL) for example has a product called Lexis+ AI for legal professionals which uses conversational searching and aids legal drafting.

But these sectors are being punished by the market at present; their “ability to withstand the more general threat of external AI agents is being questioned currently, so stock prices are discounting more risks than benefits from genAI currently”, said Tumkur.

Depending on your perspective, you might see this as a buying opportunity. Many professional investors believe sectors and companies like these have been unduly or prematurely sold off.

But despite its share price falling 39% in the year to 14 July, RELX still trades at 22 times its earnings over the last year – it’s not a cheap stock, but it still has some risk attached to it, so you should think carefully before jumping into opportunities.

How to invest in AI end users

You might feel that you can pick the individual companies that could benefit from being AI end users, and some that the experts see as beneficiaries have been highlighted in this article already.

But in general, picking individual stocks is a difficult challenge, even for the professionals.

As yet there is not a wide array of funds or strategies that specifically target AI end users (without, at the same time, boosting your exposure to the producers).

One possible option to consider though is the iShares AI Adopters & Applications UCITS ETF (LON:AIAA). This exchange-traded fund (ETF) tracks the STOXX Global AI Adopters & Applications Index which mostly includes companies that are adopting AI. Top holdings as of 13 July include cyber security firm Palo Alto Networks (NASDAQ:PANW) and finance companies Barclays (LON:BARC) and Visa (NYSE:V). Meta Platforms is its second-largest holding, though, so it does still add some hyperscaler exposure.

Or, for funds that invest in the sectors that Tumkur highlighted as potential AI winners, you could consider the Worldwide Healthcare Investment Trust (LON:WWH), the Vanguard Financials ETF (LON:FINW) (whose top holding as of 13 July is JPMorgan Chase) or the Xtrackers MSCI World Consumer Staples UCITS ETF (LON:XDWS) (Walmart is the top holding as of 13 July with over 11% of assets).

The second quarter (Q2) of 2026 saw increased enthusiasm from British investors, and they appear to be positioning their assets strategically in order to capitalise on looming challenges for the artificial intelligence (AI) boom.

Data from investment platform eToro shows that their its investors predominantly bought semiconductor stocks, particularly the makers of memory chips, during Q2.

Memory is a key bottleneck for the AI and technology trade. Ownership of memory hardware producer Sandisk (NASDAQ:SNDK) on the platform rose 185% in Q2 compared to Q1, according to the analysis, while ownership of Marvell Technology (NASDAQ:MRVL) rose by 90%.

^{Source: eToro}

“We are entering a more mature phase of the AI trade,” said Lale Akoner, global market strategist at eToro. “Retail investors are no longer just buying the most obvious winners; they are starting to look for where supply bottlenecks, pricing power and capital spending are likely to create the next layer of beneficiaries.”

Despite the rise in ownership of these winners, none were significant enough to knock the AI infrastructure giant Nvidia (NASDAQ:NVDA) off pole position as the most-owned stock for eToro’s UK retail investors.

^{Source: eToro}

Investors became more confident during Q2

According to research from retirement firm Scottish Widows investors were more willing to put funds into their portfolios during Q2 than in the previous quarter.

Average portfolio contributions rose by 47%, reaching £3,554 between April and June, up from £2,413 from January to March, according to the firm’s latest investment pulse survey of 2,000 UK-based retail investors.

“Investors have shown real resilience this quarter, increasing their contributions even as global conflict has escalated and the UK political landscape has shifted expectations,” said Manuel Pardavila-Gonzalez, Scottish Widows’s managing director of investments. “Even as the cost of living continues to bite, most aren’t reacting to short-term noise or alarmist headlines – they’re staying the course rather than making knee-jerk decisions.”

He added that Q2 often sees a seasonal spike in investing as investors top up their portfolios and make use of their ISA allowance around the end of the tax year on 5 April.

The survey also identified a shift in allocations overseas. While UK-held investments remained the largest single allocation at 57% (down from 62% in Q1), allocations to North America increased from 16% to 21% – consistent with eToro’s findings that US tech stocks held high appeal for British investors last quarter.

Similarly, AI was the post popular investment theme – 35% of respondents highlighted this as their favourite theme – followed by renewable and clean energy infrastructure with 25% of respondents.

Where else did retail investors look last quarter?

Memory isn’t the only AI bottleneck that retail investors exploited last quarter.

Energy is another important part of the AI puzzle. With the power demands of AI data centres rising all the time, demands for energy are set to grow, and this was reflected in a dash for clean power and energy infrastructure stocks like GE Vernova (NYSE:GEV), Bloom Energy (NYSE:BE) and NuScale Power (NYSE:SMR).

“Energy remains on retail investors' radar, but the perspective is evolving,” said Akoner. “While traditional oil and gas names feature heavily among the fallers, investors appear to be turning their attention to clean power, nuclear-linked energy and low-carbon infrastructure.”

Akoner added that as well as AI’s increasing power demands, the energy transition away from fossil fuels in order to improve individual countries’ energy security is a further tailwind for clean energy stocks.

Unsurprisingly, given SpaceX’s blockbuster IPO taking place in the quarter, the space economy was another focal point for investors in Q2.

Space infrastructure manufacturer Intuitive Machines (NASDAQ:LUNR) was the fourth-biggest riser among UK users, with holders increasing 62%, while Rocket Lab (NASDAQ:RKLB), AST SpaceMobile (NASDAQ:ASTS) and Ondas (NASDAQ:ONDS) were also among the 20 stocks that saw their ownership on eToro increase most during the quarter.

It remains to be seen whether investors will sustain their current tech optimism going forward, but Scottish Widows’ Pardavila-Gonzalez believes investors should stay the course.

“While we’re expecting more of the same uncertainty in the next quarter, the principles of investing remain the same and it’s important not to let short-term volatility derail long-term plans,” he said.

Since the last time I covered Fuller's – Fuller, Smith & Turner (LSE: FSTA) – in November 2022, the shares have returned around 51% excluding dividends, outperforming the FTSE All-Share index's 41% over the same period. The pub group has not been immune to the headwinds facing the wider hospitality sector, but its robust balance sheet, cash generation and focus on higher-earning consumers in the wealthy areas of London and the southeast have helped it outperform in a tough market. In the past two years, the company has also reorientated its approach to shareholder returns.

How Fuller’s is shifting focus on the customer

For its financial year ending March 2022, Fuller's reported total revenue of £254 million. The following year, the first full year of uninterrupted trading after the pandemic, top-line sales came in at £337 million. However, due to economic uncertainty, rampant cost inflation and disruption caused by Russia's war in Ukraine, operating profit was just £16.5 million and the company reported an operating margin of 3.2% for the year.

Most of this uncertainty-driven disruption is now in the rear-view mirror. For the company's 2026 financial year, it reported sales of £398 million, and analysts at Panmure Liberum have pencilled in sales of £416 million for 2027, rising to £450 million by fiscal 2028. Operating profit was £40 million for 2026 and could hit £51.3 million on current projections.

Fuller's clientele and its aggressive focus on costs are both helping it hit these targets. There is a whole section in the firm's annual report on the customer, which rightly insists that “understanding your customer is key to the success of any business”. To this end, management has invested heavily in a database of 6.9 million customers, 2.6 million of whom are fully contactable to help identify spending patterns and tailor marketing. Fuller's now knows that most of its customers have a household income above £75,000, a group that can be relied upon to spend its spare money on going out.

Management believes that it's this attention to detail that drove like-for-like food and drink sales up 3.5% and 5.8% respectively last year. Meanwhile, continued investment helped hotel sales rise 4.9%. Fuller's has 1,030 bedrooms, up from 1,009 two years ago, with an average room rate of £127.50, up from £120.

Fuller’s champions sustainability

Fuller's has also made progress with controlling costs. Since 2022 it has made a concerted effort to refurbish its pubs and switch from gas to electricity, helping push down energy costs. Its “Too Good to Waste” plan has also helped reduce food waste across its pubs and the group has offset rising costs through labour efficiency improvements and price increases.

One of the biggest problems in the hospitality industry is high staff turnover and inexperienced staff, which can slow service and dent customer satisfaction. To overcome these issues, Fuller's has built a reputation as a leader in training and retaining its staff. Last year, the group opened the new Fuller's Kitchen Academy in Reading, which has already delivered nearly 500 training sessions for chefs, while several thousand team members have also undertaken technical and career-building courses and management training.

New investments in procurement have also yielded significant efficiency savings across the supply chain. Thanks to such initiatives, the overall group operating profit margin hit 11.5% in full-year 2026, up from 7.5% in 2023. The Ebitda margin across the firm's managed pubs – those managed by the group directly rather than leased to individual landlords – hit 21.6%, up from 17.4% in 2023.

Fuller's is a cash machine – here's why you should buy in

With costs under control and margins growing, Fuller's has become something of a cash machine. Last year, it generated £80 million in cash from operations and reinvested £40 million into the business, resulting in free cash flow of around £40 million, suggesting the shares are trading at a free cash flow yield of around 10.5%.

Finance costs were £11.3 million including lease liabilities, or £8.4 million on bank debt and debenture stock (100% of net debt excluding leases). This borrowing looks sustainable given the value of cash flows and assets. The directors' valuation of the entire property estate is £991 million, £397 million higher than the net book value of £594 million, implying a net asset value per share of 1,512p.

Management has laid out plans to continue investing around £40 million a year in its estate, upgrading hotel rooms, adding new rooms to existing pubs (particularly in and around central London to capitalise on a booming tourism market) and pursuing select acquisitions.

The rest of the capital will either be returned to shareholders or used to pay down debt. Fuller's recently declared a full-year dividend per share of 21.2p, up 7.3% year on year. It has also commissioned a series of share buybacks over the past couple of years, in one-million-share lots. Last year, the group retired 2.3 million of its “A” shares and it has returned £54.7 million to shareholders through buybacks since fiscal 2023, retiring around 15% of outstanding shares. Including dividends, total shareholder yield was around 7.5% last year. The forward dividend yield is 3.2%.

As if shareholders didn't need more of a reason to buy, investors who own more than 1,000 A or C ordinary shares can apply to receive a “Shareholder Inndulgence Card”. Cardholders get a 15% discount on food and drinks in any of the group's managed pubs and hotels and special rates on some of its rooms – equivalent to a nice little tax-free dividend.

Rupert owns shares in Fuller's

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

In May 2025, Dario Amodei, the CEO of AI company Anthropic, said that the technology his company is helping push forward could drive unemployment up to 10%-20% in the next one to five years and wipe out half of all entry-level white-collar jobs, as Josh Tyrangiel points out in The Atlantic.

Jim Farley, the CEO of Ford, has estimated that AI will eliminate half of all white-collar jobs in a decade. Sam Altman of OpenAI has opined that it is just a matter of time before we see a billion-dollar company staffed by just one person.

That the advent of a new technology has given rise to predictions of disastrous consequences is hardly new. But that the prophets of doom come not from the ranks of the usual suspects, but from the makers of the new technology and those most in a rush to adopt it, is.

So, are they right? AI is clearly already transforming work, says Tyrangiel. Companies including Meta, Amazon, Walmart, and JPMorganChase have recently announced lay-offs due to “automation”.

Three academics from the Stanford Digital Economy Lab have found that entry-level jobs that are exposed to disruption from AI have already seen a 13% decline since late 2022. So the transformation may already be under way, even if it's too early to be sure (other factors could explain the decline and the evidence is sparse and mixed).

If that transformation unfolds slowly and the economy adjusts quickly, then we may, as economists reassure us, be fine, or even better off in aggregate. But if AI instead triggers a rapid reorganisation of work, compressing years of change into months, affecting roughly 40% of jobs worldwide – as the IMF projects – then the consequences could be huge.

Is AI actually any good for us?

Which will it be? Let's remember that humanity has been automating work for 250 years, as technology analyst Benedict Evans has pointed out. History shows that every wave of automation has destroyed whole classes of jobs and created new ones. The process may be painful for some, but over time and in the aggregate the result has been greater prosperity.

Two concepts from economics give us confidence that this time is unlikely to be different. The first is the “lump of labour fallacy” – the misconception that there is a fixed amount of work to be done and that if some work is taken by a machine then there will be less work for people. But if it becomes cheaper to use a machine to make a pair of shoes, say, then the shoes are cheaper, more people can buy shoes, and they then have more money to spend on other things, and we discover new things we need or want, and new jobs get created.

The second concept is Jevons Paradox. In the 19th century, the Royal Navy ran on coal and people worried about what would happen when the coal ran out. Don't worry, said the optimists: steam engines are getting more efficient, so they'll use less and less coal. Not at all, said economist William Stanley Jevons: if we make steam engines more efficient, then they will be cheaper to run, and we will use more of them and use them for new and different things, so more efficient steam engines means we will use more coal.

That paradox has been at work in relation to white-collar work for a long time, says Evans. In the 1880s, typewriters and carbon-copy paper meant that clerks could produce more than ten times the output of the days when they copied out documents one at a time by hand. The result for clerical employment? Far more clerks were hired. If one clerk can do the work of ten, then perhaps you might want to do more of the work that clerks do – more analysis, or manage more inventory, say. You might build a different and more efficient business that is only possible because of the new technology.

It was the same story when, much later, digital spreadsheets were introduced that could do at the click of a button what might previously have taken a whole team of accountants all week. Employment for accountants went up.

The most recent study into what AI is doing to jobs seems to confirm that this is indeed what is happening this time, as Noah Smith reports on Substack. A study by Ara Kharazian, Lisa Simon and Ryan Stevens, researchers at US technology start-ups Ramp and Revelio Labs, examined private data to determine what happens when companies start using generative AI. The answer is that they hire more humans. The number of entry-level jobs rose, too. So it seems that AI is “still mostly a complement to human labour rather than a substitute” for it, says Smith. For now at least, AI is “behaving pretty much like a normal technology”.

AI is just software

That's the usual pattern, and if AI did indeed start to progress at the rates feared and with the consequences predicted, it would be “unprecedented in human history”, says The Economist. New technologies have never spread fast enough to make large numbers of people unemployed for long periods of time because the diffusion of the technology always proceeds slowly.

To see why that is unlikely to be different this time, remember that AI is just software, as Tyrangiel points out. And the thing about software is that “people hate it almost as much as they hate change”. Before AI can transform a company, it has to access data and be woven into existing systems. A “trade secret of most Fortune-500 companies is that they still run critical functions on lumbering, industrial-strength mainframe computers that almost never break down and therefore can never be replaced”. Integrating such legacy tech with AI would mean big changes involving lots of people with strong opinions about the “right” way to proceed. Meanwhile, months pass, then years – and “the CEO still can't understand why the miracle of AI isn't solving all of their problems”.

Indeed, the idea that “one magic piece of software” will change everything instantly and override all the complexity of real people, real companies and the real economy “sounds like classic tech solutionism, but turned from utopia to dystopia”, says Evans. The reality looks rather different, as Zeynep Tufekci shows in The New York Times. Firms that have experimented with fully automating functions such as customer service have been burned. The result has been scammers talking chatbots into handing over control of key functions, promising refunds or incredible deals, such as a new car for $1. The bot taking orders at McDonald's proved “wildly dysfunctional”.

The key thing to understand is that these incidents are not the result of errors, but of the technology functioning as it is designed to do. Currently existing AI technologies are “not reasoning machines” – they simply produce answers that are probable based on the data they've been trained upon. They have no common sense or intelligence. AI can “do many things with astounding efficiency”, especially if those things are formal and structured and can be tested and checked in real time. Most jobs are simply not like that and still require “good old-fashioned human intelligence”.

This doesn't mean the “job apocalypse” definitely won't happen, says The Economist. Maybe this time will be different. Perhaps the technology will transform in ways we cannot yet predict. If so, you may know the apocalypse by these signs: sharply rising productivity combined with weak real-wage growth in the US, the world's frontier economy. This would show up as an increase in GDP per person above the 2.5% upper limit that is the historical norm in frontier economies and a simultaneous jump in corporate profits, reflecting that the gains from higher output were flowing to capital, not labour. Another sign would be big job losses in lots of industries, showing up in a recession. Which jobs vanish in the next recession will “give a hint about the shape of the AI world to come”.

Is there actually any sign of any of this happening? Not really. The labour market “certainly is not cracking yet”, says The Economist. “The share of the OECD's working-age population with a job keeps breaking records, unemployment across the club of mostly rich countries is just 5%, and America employs more people than ever in ‘AI-exposed' industries, such as law.” American graduates have been struggling to find jobs since before the launch of ChatGPT fired the starting gun on the AI revolution in late 2022. Many economists foresee relatively little disruption ahead. Those at America's Bureau of Labour Statistics think the country will add 5.2 million jobs between 2024 and 2034, increasing total employment by 3%.

Robots can't do your job

There are broader reasons for scepticism. The heaviest users of AI have recently been scrambling to curtail its use as the cost of using it outweighs the gains. Surprisingly few people use the technology on a regular basis and the share of companies in the OECD that have adopted AI remains small (about 20% for the latter, although figures for both individual use and company uptake vary widely across different studies, depending on what is deemed to count.) The basic problem here is that most people just don't know what AI is supposed to do for them, as Evans has argued. There's a box you can type stuff into, and you get text in response. Often the text is roughly right, but precisely wrong. For how many people will that be life-changing? As Pablo Picasso perceptively saw in 1968, “Computers are useless. They can only give you answers.”

The likelihood is that AI will not so much replace jobs, as make certain tasks easier and quicker for some people. Generally, says Evans, jobs are a complex mesh of things that we might not even be able to explain explicitly. You may have a good idea of just why a chatbot is never going to be able to do your job, for example, but will be impressed if someone says that it can of course already do the job of a lawyer or a doctor. The blunt truth is we do not know just what is involved in jobs we are confidently predicting will be gone tomorrow, nor do we know how AI will change them, if at all.

What we should most fear is fear itself. A recent poll found that 70% of Americans believe that AI will reduce their employment opportunities, says Robert Shiller, also in The New York Times. That fear could in itself have economic consequences. When millions and millions of people make economic decisions based upon negative expectations, there is a risk that the fear can actually “help birth the reality”. The leaders of Silicon Valley should learn to do better than peddle alarmist narratives in the hope that the resulting media attention will highlight how powerful their latest AI model is. They will find it harder to sell their wares in future if the result is an economy paralysed by fear and recession.

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Our philosophy at the Guinness Emerging Markets Equity Income fund is based on identifying quality firms, defined as those that have consistently generated returns on capital above their cost of capital.

Such companies tend to pay sustainable dividends because of the cash profits they generate. This sets our approach apart in emerging market stocks, which are often characterised by pronounced volatility.

We avoid rollercoaster cyclical sectors and focus on businesses with stable, consistent financial characteristics that can weather different market environments.

Three emerging market stocks to consider

Largan Precision (Taiwan: 3008) is a Taiwanese manufacturer specialising in the design and production of optical plastic lenses and is a key supplier for Apple. Largan's core business has been the smartphone market, but it has recently been expanding into co-packaged optics (CPO) technology.

CPO is essential for data transmission between AI chips and has proved to be more energy-efficient and less heat-producing than copper wires. Exploiting its existing expertise in precision optical lenses, Largan is developing in-house technical capabilities to manufacture fibre array units (FAUs), a central component of CPO, which may prove to be a crucial element for determining success.

Both the momentum behind FAU technology (currently in client testing) and the continued demand from smartphone manufacturers should help Largan to maintain its growth rate. This can be seen in its recent share-price performance, with the stock gaining 44.1% (in sterling terms) over the year to the end of May.

Arca Continental (Mexico City: AC) is one of the largest Coca-Cola bottlers in Latin America and has delivered consistent returns, gaining 22.4% (in sterling terms) in the year to the end of May. The brand itself provides a structural moat, with its pricing power derived from distributing one of the world's most recognised consumer brands.

Additionally, marketing investment from Coca-Cola itself is at a level that would be impossible for Arca to replicate. This is complemented by geographic diversification across the US and Central and South America. A fragmented bottling market in Latin America offers Arca opportunities for expansion through the consolidation of smaller bottlers.

Brasil Bolsa Balcão (São Paulo: B3SA3), also called B3, is Brazil's sole stock exchange. It integrates exchange, clearing-house and depository functions under one entity, making it structurally irreplaceable within the domestic market. Nearly all organised trading and over-the-counter registration of securities in Brazil flows through its systems. Diversification into data analytics and payments – via Trillia, B3's internally formed data-analytics division, and the acquisitions of Shipay and CRDC – provides a buffer against cyclicality in exchange-traded volumes.

Brasil Bolsa Balcão is also competitive on a global scale, having overtaken India's National Stock Exchange to become the world's largest derivatives exchange by volume in 2025. High Ebitda margins, sustained returns on capital and Brazil's growing retail-investor base underpin the long-term investment case. The shares have gained 33.2% in sterling terms in the year to the end of May.

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Yeomans Drive, Aston, Stevenage, Hertfordshire

A Grade II-listed Georgian former coach house with a Flemish-brickwork façade, round-headed windows, and a wooden clock turret. The gardens include a swimming pool heated by an air-source heat pump. 2 bedrooms, 2 bathrooms, reception, garage with studio annexe above.

Price: £1.5m Hamptons 01992-874223

Redcastle Farmhouse, Great Barton, Suffolk

A Grade II-listed, 16th-century house set in landscaped gardens with a moat, swimming pool, tennis court and a Grade II-listed dovecote. It has beamed ceilings, an inglenook fireplace and a bespoke kitchen. 5 bedrooms, 5 bathrooms, 3 receptions, study, paddocks, 5.3 acres.

Price: £1.5m+ Bedfords 01284-769999

School Farm Barn, Maxstroke, Warwickshire

A converted grain store with landscaped gardens that include a natural swimming pool planted with water lilies. The house has a large open-plan area with a nine-metre high ceiling, a bespoke kitchen, oak floors and floor-to-ceiling sliding doors leading onto a terrace. 5 bedrooms, 5 bathrooms, office, garage, workshop, 0.5 acres.

Price: £2m The Modern House 020-3795 5920

Lower House, Redditch, Worcestershire

A Grade II-listed, 1560s house surrounded by gardens that include a range of traditional outbuildings and a heated swimming pool with a built-in Hydrastar jet function. The house has exposed wall and ceiling timbers, some of which originally came from 13th-century ships, leaded-light windows and a kitchen with an Aga and French doors leading onto a terrace. 5 bedrooms, bathroom, 2 kitchens, 2 receptions.

Price: £1.4m Finest Properties 0330-111 2266

Viola Hill, Petersfield, Hampshire

A contemporary house completed in 2025 in the South Downs National Park with a deck running the length of the house, a swimming pool with an electric cover, a tennis court and an outdoor kitchen. The house has open-plan living areas, floor-to-ceiling windows and a living area with a soaring, vaulted ceiling and a wood-fired stove. 6 bedrooms, 6 bathrooms, reception, cinema room, games room, 7.8 acres.

Price: £5.75m Strutt & Parker 01428-788670

Nant Isa, Rhyd-y-Foel, Conwy

A 17th-century rural property with a converted barn, formal gardens with a swimming pool and woodland and paddocks beyond. It has beamed ceilings, inglenook fireplaces with wood-burning stoves and a large kitchen with an Aga. 4 bedrooms, 4 bathrooms, 2 receptions, study, 2 kitchens, 3-bedroom barn, conservatory, garage, outbuildings, orchard, woods, 27.2 acres.

Price: £1.25m Fisher German 01244-409660

Foster House, Romney Marsh, Kent

A New England-style house on the Kent/East Sussex border close to Rye and Camber Sands. It has landscaped gardens with wildflower areas, an outdoor swimming pool with two cabins, a pool house and a studio. The main house has a covered veranda, beamed ceilings, open fireplaces and French doors leading onto a terrace. 6 bedrooms, 3 bathrooms, open-plan kitchen/living area, barn, 3 acres.

Price: £2.25m The Modern House 020-3795 5920

Howe House Farm, Beckwithshaw, Harrogate, North Yorkshire

A Grade II-listed house with terraces leading to a heated swimming pool and covered outdoor kitchen. It has beamed ceilings and a kitchen with an Aga. 6 bedrooms, 7 bathrooms, 2 receptions, leisure wing, equestrian buildings, floodlit manège, paddocks, 19 acres.

Price: £3.95m Knight Frank 01423-222077

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Segro's roots go back over 100 years. In 1920, Noel Mobbs led a consortium to buy 1.8 million square feet of workshops and 17,000 vehicles on a 600-acre site west of London. It had been a depot for the disposal of vehicles no longer needed by the army, but after disposing of the stock – which took five years – the new owners decided to turn the site into an industrial estate called the Slough Estate.

The venture attracted businesses including Mars, Gillette, Johnson & Johnson and Citroen, some of which are still there. The company diversified away from Slough but the Mobbs family remained involved into the 1980s.

The company's assets expanded across the UK and Europe and it rebranded as Segro (LSE: SGRO) in 2007. Yet industrial property was the Cinderella of the wider sector, less popular with investors than office and retail property. The advent of logistics warehouses and data centres changed that and Segro became the hottest stock in the sector. The shares rose above 1,400p in 2021 and traded at a significant premium to net asset value (NAV).

But over the next four years, the price halved amid rising interest rates. The shares fell to a discount to NAV, which had itself dropped by more than a quarter. In mid June, the shares stood at under 750p. Then Segro became the latest UK property company to receive an unsolicited bid. US logistics giant Prologis (NYSE: PLD) has proposed an all-share deal valuing Segro at a little above NAV. Segro's board says this is “opportunistic” given “the highly attractive underlying business and strong prospects”.

Segro is operating in a shunned sector

Marcus Phayre-Mudge, manager of the £1 billion TR Property Trust (LSE: TRY) had avoided the shares but rebuilt a holding in the last year. In his latest webinar, he listed 16 takeover bids by other listed companies and 16 by private equity across Europe to illustrate the attractiveness of the sector to corporate buyers at a time when investors have been shunning it.

“There is very little oversupply, rental growth is coming through and there is no speculative development,” he says, “the opposite of the early 1990s and before the financial crisis.” In addition, “a huge rise in costs means a low level of construction and an undersupply of prime space.” The weighted average discount to NAV in the sector is over 30%. This is below the peak discount of 45% in 2022, but still in the cheapest quartile since 1990.

To capitalise on this, TRY has geared up: borrowings equal 17.6% of net assets, close to its maximum of 20%.

The sector is still waiting for an upturn

A sector upturn is far from certain. Property faces many challenges. Population growth across Europe is, at best, static. Retailing continues to move online. Demand for office space is restricted to prime locations. The rush to build logistics hubs has abated. Student housing is a mature market. Leases have become shorter. Buildings become obsolete faster than ever, requiring expensive refurbishment or rebuilding.

TRY – which currently has 35% in the UK and 65% in Europe – has seen NAV fall 7% over five years, while the shares are down 8%. However, it has outperformed its benchmark in 14 of the last 15 years. A 32% gain over three years suggests an upturn, but performance has been flat over one year.

Still, a 9% discount to net NAV and a dividend yield over 5% means investors are paid to wait. Phayre-Mudge and his team continue to find niches of undervaluation, opportunity and growth. Consolidation will make the sector “more attractive to wealth managers who struggle to justify large positions in sub-£500 million companies”, he says.

That does not apply to Segro with a market value of £12 billion. This bid marks another milestone in the endless contraction of the London Stock Exchange. Its departure would be a short-term gain for investors, including TRY, but a dismal outcome for the UK.

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Is the shine coming off the Nasdaq 100?

The index – effectively a benchmark for US big tech, since it includes the largest 100 stocks listed on its namesake exchange but excludes finance companies – reached an all-time high of 30,730 on 3 June.

Over the next month, the index fell by 4.6%.

Increased fears over a potential artificial intelligence (AI) bubble bursting have played their part in this demise.

The AI boom over the last few year has been driven largely by a consensus that the enormous sums spent on AI infrastructure would inevitably pay for themselves.

“Now that is changing, and some [tech companies] are issuing debt to fund their AI operations,” said Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC) – an industry body that represents the UK’s investment trusts. “It’s understandable that some investors are looking to diversify their portfolios away from the AI boom and many investment trusts offer a great opportunity to do this.”

Any passive investments you hold will likely be heavily exposed to the big tech stocks that form the bulk of the Nasdaq 100 and the S&P 500.

“Correlation is the real risk in current markets,” said Saftar Sarwar, chief investment officer at model portfolio service manager Binary Capital. “A ‘diversified’ global portfolio is often not that diversified. Five companies account for around 30% of the S&P 500 – a very high level of concentration.”

But could these investment trusts offer some diversification and protect you in case the bubble bursts?

How to diversify away from AI

One of Sarwar’s first tips for diversifying away from AI is to avoid the “obvious emerging markets” of Korea and Taiwan.

These, he says, “are now significant technology-exposed equity markets”.

Instead, he recommends “so-called emerging frontier markets” like Poland, Egypt and Turkey, and picks out BlackRock Frontiers Investment Trust (LON:BRFI) as a route to gaining exposure given its 52% weighting towards financials.

Tomiko Evans, chief investment officer at portfolio manager Crossing Point Investment Management, recommends European stocks as another market that could offer diversification.

“Europe gives investors access to a broader mix of companies across sectors such as industrials, financials, healthcare, consumer goods and infrastructure-linked areas,” she said.

“Within this space, JPMorgan European Growth & Income (LON:JEGI) is one option we find interesting. The trust provides exposure to growth, but through a diversified European equity portfolio,” Evans continued. “Its approach combines quality, value and earnings momentum, allowing the managers to seek companies with attractive growth prospects while remaining disciplined on valuation.”

Buy British to avoid AI?

Both Evans and Sarwar believe undervalued UK stocks provide fertile ground for anyone looking to reduce their exposure to AI.

“UK equities have spent a decade unloved, and undervalued, for exactly the reason that now could look like an important advantage: minimal AI and technology exposure,” said Sarwar. “Trusts such as Merchants Trust (LON:MRCH), City of London (LON:CTY) and Law Debenture (LON:LWDB) own UK value or UK traditional equities with dividend yields of around 3% to 4%... These are good investment trusts if you want to move away from the whole AI theme and believe that the UK offers more compelling equity valuations relative to other markets.”

Sarwar also highlighted Temple Bar Investment Trust (LON:TMPL) for its value discipline and its heavy weighting towards the UK in comparison to the US.

Evans, meanwhile, picked out Murray Income Trust (LON:MUT). “Rather than simply owning the traditional large cap UK income names, the managers can look across a broader range of companies that can generate cash, pay sustainable dividends and offer scope for capital growth,” she said, adding that the trust offers “UK equity exposure, income discipline and relatively limited direct technology exposure” for investors that want to reduce their tech exposure without moving fully into defensive assets.

Good news for shareholders in the International Biotechnology Trust: their fund has a significant holding in US cancer research business Nuvalent, for which GSK has just agreed to pay $10.6 billion– 40% more than its share price prior to the deal being announced. Even better: Nuvalent is the sixth company in the portfolio to have been acquired at a premium this year.

The deals are part of a spree of merger and acquisition (M&A) activity taking place in the global biotechnology sector – to the benefit of many investment trusts and open-ended funds specialising in this area – as part of a marked reversal in fortunes. For much of the past few years, sentiment in the sector has been downbeat – preoccupations about risk, volatility and rising interest rates have overshadowed optimism about the undoubtedly huge long-term potential of the products. More recently, however, the tide has turned. “The outlook is looking increasingly constructive,” says Jo Groves, an analyst at Kepler Trust Intelligence.

The fundamentals of investing in biotech are compelling. You're backing companies that are developing new treatments for health problems ranging from life-threatening cancers to lifestyle-related illnesses. The demand for such treatments is huge, particularly in the context of rising and ageing populations as life expectancies increase. The United Nations estimates that the number of people in the world aged 65 or over will rise from 800 million in 2024 to two billion by 2067. No wonder biotechnology is such a high-growth industry. Precedence Research forecasts average annual growth of 4% over the next decade, which would see the market grow from $1.8 trillion today to $6.3 trillion by 2035. At the same time, biotechnology companies are finding new ways to respond to demand, developing ever more sophisticated treatments, even for the most complex diseases and conditions. For example, they're harnessing technologies such as AI to accelerate drug discovery and to move into areas that scientists previously considered too ambitious.

Another positive factor is the so-called “patent cliff”. Pharmaceutical companies are only entitled to exclusive rights to the drugs they own for a limited period; once this period ends, rivals can make their own versions of the drug. This adds to the demand for biotechnology companies that develop new treatments while individual companies continue to benefit from the enhanced revenues that the patents generate.

Biotech M&A generates positive returns early

All of this can add up to exciting returns for investors in biotechnology companies working on new drugs in high-value areas. And often, those returns materialise early, because a biotechnology company with a promising pipeline of treatments is an attractive takeover target for the global pharmaceutical industry. The biggest companies do blockbuster deals – Novartis alone spent $29 billion on M&A last year.

Investing in biotechnology also carries risks and potential downsides. In particular, most biotech companies are relatively small and focused on a handful of specialist projects – perhaps even a single drug candidate. Trials that start out looking highly promising can – and often do – fail later on, leaving the business without a product to sell. When investors are feeling broadly optimistic, they're more willing to take such risks, but during less confident times their appetite for danger may be diminished. Global trade tensions and international conflict have therefore been challenging headwinds for biotech investment in recent times.

Another factor is the cost of finance – partly as biotechs often borrow to fund their early-stage work, but also because investors are effectively being offered returns that will come in the future rather than today; such returns needed to be discounted by what investors could earn elsewhere on their cash in the meantime. In this context, rises in global interest rates during 2024 and 2025 were unhelpful to biotech businesses; more recent reductions have been a positive.

Policymakers can also have an impact on the industry in other ways. Most countries attempt to regulate drug prices in some way or to restrict intellectual property rights. The US, the world's biggest spender on pharmaceuticals, is especially important; the industry was certainly anxious about the approach Donald Trump would take in his second term of office.

Ebbs and flows in all these positive and negative factors feed the cycle of biotech businesses' share-price performance. The sector performed poorly through most of 2024 and early 2025, but has been much stronger over the past 12 months. The Nasdaq Biotechnology index has risen by more than 51% over the last year; the MSCI World Biotechnology index is up by more than 15%.

Still, sometimes it's also important to look past the numbers. One fascinating part of the biotechnology story is the incredible science that businesses are pursuing – and the advances they're making for humanity. “The development I find most compelling is RAS-targeted therapy,” says Oliver Kenyon, a senior director at RTW Investments, pointing to cancerous tumours caused by mutations in the RAS family of genes. “RAS mutations drive roughly 90% of pancreatic cancers, 40% of colorectal cancers and 30% of non-small-cell lung cancers. It's one of the most common drivers in all of oncology, and for decades it was considered ‘undruggable' – that's now changing fast.” We are seeing the “combination of genomics, gene editing and AI accelerate both the discovery and development of new medicines”, adds Chris Hollowood, CEO of Syncona Investment Management.

AI is helping biotech companies deliver

AI is also helping, says Hollowood. Researchers are analysing complex biological and clinical datasets and identifying promising targets in a “more efficient and robust” way. “The last decade saw the development of a huge number of new ways to make drugs; gene therapy, cell therapy, RNA, gene editing and many others. So as these new targets emerge in the next decade, developers and patients have many more ways to address them, meaning medicines will be more precise and have greater impact.”

So much is possible. “A real hope would be if something works for Alzheimer's disease,” says Marek Poszepczynski, portfolio manager of International Biotechnology Trust. It has been especially tough to find efficacious drugs in this area, but “the industry continues with its efforts and perhaps we will see something in the next decade or so”.

And breakthroughs in mental health are possible, too. “Around a third of the 300 million people living with depression globally don't respond adequately to existing antidepressants,” says Kenyon. “Conventional psychiatry has largely run out of answers for that population, but psychedelic-derived medicines are starting to change that.”

It's not just about developing cures to diseases and conditions previously thought untreatable. Geoffrey Hsu, general partner of OrbiMed, points to the huge and ongoing impacts of weight-loss drugs. “Their effects are not purely cosmetic,” he says. “These medications in clinical trials have reduced the incidence of strokes, heart attacks and diabetes, and have helped alleviate symptoms of patients suffering from sleep apnoea and osteoarthritis.”

Biotechnology firms are at the heart of innovation in all these areas, says Groves, who points to data from industry analyst IQVIA showing that the number of clinical trials currently stands close to all-time highs. “The rapid development of biologic treatments and therapies is constantly expanding the [range] of products, particularly in chronic and complex diseases,” she says. “There has also been a healthy pipeline for novel drug approvals, with recent approvals for treatments for lung cancer, leukaemia, haemophilia, schizophrenia and Alzheimer's, amongst others.”

All of this points to a potentially exciting period for the biotechnology sector – and the prospect of further gains to come. Further M&A would help – while the pace of deals has accelerated in recent months, many analysts think there is more to come. Partly, that reflects the patent-cliff issue, with pharmaceutical companies now approaching a particularly precipitous drop-off. Between now and 2030, the industry will lose exclusivity rights to drugs currently generating $230 billion of revenues a year; they won't forfeit such money overnight, but as patents run out, rivals will be able to produce much cheaper alternatives. Other drivers of M&A include the increasing desire of many pharmaceutical businesses to diversify their holdings, acquiring biotechs with drugs that take them into new areas, and the accumulation of deal finance during a period of fewer deals. It also helps that the US government appears to be taking a more laissez-faire approach to regulation.

In this case, there is still some time to join the biotech party. At an aggregate level, valuations remain reasonable by historical standards – and while there have been good gains from many stocks, the sector's performance has been eclipsed by, for example, the surge in the technology arena. Still, the vast majority of investors will prefer to get exposure through a collective investment fund rather than by buying individual stocks themselves. The science is just too advanced for non-specialists to make realistic assessments of the prospects of individual businesses and their key drugs.

A fund offering diversified exposure to a pool of companies chosen by a professional manager therefore provides relative comfort. Indeed, managers in the sector are often more qualified and experienced than peers investing in other industries, with relevant clinical experience of their own as well as professional investment experience. We look at some of the best options in the box below.

The best biotech stocks to buy now

A broad range of collective funds invest in the sector, but there's a strong argument for considering a closed-ended trust over other types of fund. Biotech can be an illiquid area and prone to exaggerated shifts in sentiment that drive significant inflows and outflows of cash. A trust, where you're buying exposure to the underlying portfolio of assets, provides some insulation from that.

The Association of Investment Companies' healthcare and biotechnology sector offers seven investment trusts to choose from. Its top performers over the past 12 months are the Biotech Growth Trust (LSE: BIOG), with a total share price return of 103%, the RTW Biotech Opportunities Trust (LSE: RTW), up 93%, and the International Biotechnology Trust (LSE: IBT), which has returned 83%.

Alex Trett, a research analyst at Winterflood, points to the potential of two in particular to continue benefitting from M&A activity. “RTW Biotech Opportunities has seen ten M&A-related transactions in the last 12 months, all resulting in an immediate uplift to net asset value,” he says. Worldwide Healthcare Trust (LSE: WWH) is another beneficiary. “In addition to its portfolio holdings, the trust maintains a basket of M&A swaps that provide exposure to potential takeover activity across the sector.” Should the current pace of M&A activity persist, “we believe these trusts remain well-positioned to benefit. They combine extensive sector resources with teams possessing deep scientific and medical expertise, enabling them to identify innovative firms and emerging technologies, which in some cases become attractive acquisition targets.”

That's not to say open-ended funds should automatically be excluded. If you prefer this type of vehicle, Dzmitry Lipski, head of funds research at investment platform interactive investor, picks out the Candriam Equities L Biotechnology Fund, run by Linden Thomson. The Luxembourg-domiciled fund has holdings in around 75 companies.

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The MoneyWeek ETF portfolio saw its annual rebalancing at the beginning of April, as the Middle East crisis raged. We cut a bond position that was stale and superfluous, and held the cash to reinvest once the outlook was clearer. This week, I set out to write that promised update – only to see the conflict ramp up to its worst for at least a month.

Nonetheless, this is still a good time for a decision. The point of the ETF portfolio is certainly about sharing our top-down views on markets, but it is also about having a process for investing. Holding lots of cash for too long because of fears of what might happen is a good way to earn worse returns over the long term.

The most protective part of our portfolio lies in very short-dated government bonds (essentially a cash proxy with a near-4% low-risk yield) and short-dated inflation-linked bonds (we think there is a growing risk of inflation picking up on a one-year view). These invest in US bonds, but are hedged back to sterling. We would hold UK bonds instead for simplicity, but the equivalent ETFs don't exist.

Oil stocks have benefited us in this crisis and remain reasonably attractive, but we would consider trimming them if peace sets in.

Gold has not done as well lately as many investors expected and with hindsight we can be grateful that rebalancing in April automatically took some profits from a strong run-up. My view is that gold often doesn't shine in the immediate phase of a crisis and the key factor is whether fears about inflation and the dollar's role as global reserve currency continue to increase gold's appeal over the longer term.

Balancing tech exposure in our ETF portfolio

Meanwhile, our equity positions viewed together mean we are far less concentrated in the US than the global index. Our decision to switch into the equal-weighted version of the S&P 500 last year – to reduce our concentration in the tech mega-caps – was early, but has not hurt us too much: the market has shown signs of rotating away from them lately. We have done well in Japan and in emerging markets. However, we need to be very aware of the extent to which non-US markets are geared to the AI trade.

I have discussed this several times with regard to emerging markets recently, and this leads us to an obvious decision. Last week (issue 1319), I suggested using the new WisdomTree True Emerging Markets (LSE: WEMP), which does not hold China, Korea and Taiwan, as a way to balance some of the tech and East Asia bias that is dominating the emerging-market index. Using some of the cash to add 5% in this should give us more diversification, although note that since this is not a well-established core index, it is a bit harder to be sure what performance we can expect in different scenarios. That leaves 5% still in excess cash, which I will look at next time in conjunction with the one position I have not yet discussed – real estate.

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EasyJet has put up a good fight. Over the past two months, its board has turned down a series of higher and higher offers from Castlelake, a US investment firm with more than $25 billion in assets. On Monday, it finally blinked. The board said it was minded to accept the latest £5.2 billion offer, and serious negotiations will now start to tie up the sale.

There are still obstacles. Castlelake needs to find a way of complying with EU rules that state that airlines based on the continent have to be majority-owned by European shareholders. It will need to be cleared by the British competition regulators. And it will still have to be put to a vote of shareholders. But if those can be overcome, easyJet will disappear into an American firm specialising in asset-based investments, including aircraft leasing.

That is good news for anyone with easyJet shares. The share price has risen by more than 80% since the lows touched in May before the takeover talks were revealed. And Castlelake may well prove a decent long-term owner. But it is a bad deal for the British economy more widely.

EasyJet is one of the most successful British companies of the past 30 years. It has built one of the best route networks in Europe, with a strong brand, and is well positioned in one of the continent's fastest-growing industries. With 90 million passengers a year, it is already the fifth largest airline in Europe, just behind Air France-KLM and slightly ahead of Turkish Airlines, and has an unblemished safety record.

Perhaps most importantly, it has carefully positioned itself in the middle of the market. It is a lot cheaper than the traditional national carriers, but it also offers a slightly more civilised experience than the hyper-aggressive approach of Ryanair. It has occupied the middle market, with lowish fairs and acceptable service. For most industries, the middle market is where, over the long run, the most money is made, and there is no reason to think that aviation will turn out to be any different. As European air travel steadily grows, and if its mid-market, low-cost model can be replicated in US or Asian markets, then it also has the potential to grow.

Over the last few years, investors have been far too quick to sell out British companies. In the past few months alone, sugar manufacturer Tate & Lyle has been sold to US rival Ingredion; Intertek has been sold to private-equity firm EQT; and Evoke, the owner of the William Hill betting chain, has been sold to Greek casino operator Bally's Intralot. This week Sky's American parent Comcast agreed to buy ITV, Britain's largest commercial broadcaster. The list keeps getting longer.

EasyJet shareholders should reject the deal

We can all understand why. Britain has become a very hard place to make money. The economy has stagnated, real wages are barely growing and the government is determined to squeeze more tax out of companies wherever possible.

It is surely worth reflecting that if easyJet did not have to pay higher national insurance charges, if rates at airports (a £40 million rise last year at Gatwick, one of its main hubs) had not been increased so much that they were passed on to airlines in landing fees, and if air passenger duty has not gone up by so much (rising another £2 a ticket on short-haul flights in the last Budget) then its profits would have been significantly higher, and it would not have been a target for a takeover in the first place.

Likewise, a moribund, over-regulated stock market means many basically good businesses are undervalued by global standards. One by one they get taken over by foreign rivals and there are no new companies coming along to replace them. Britain's economic base is steadily getting hollowed out.

Britain can't afford to lose easyJet. It may not exactly be a national treasure, but it is a decent business with a solid future. If we had lower taxes on businesses, if the stock market was deregulated, and if demand started to grow, British firms would not be quite so vulnerable to foreign predators.

Just for once, perhaps the airline's shareholders should reject the advice of the board and demand that it remains an independent company listed on the London stock exchange.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

The UK’s Defence Investment Plan (DIP) will boost UK defence spending to £80 billion by 2029 – but that figure is still set to fall short of the NATO target of 5% of GDP.

It sits nonetheless in the context of rising defence spending across the world.

“Global military expenditure hit a record $2.9 trillion in 2025, the 11th consecutive year of growth,” Tom Bailey, head of research at ETF issuer HANetf, told MoneyWeek (citing figures from the Stockholm International Peace Research Institute).

Much of that increase was driven by Europe; military spending rose 25% across the continent in 2025. But the UK’s defence spend fell 2% in the year.

“Even over the longer term, the UK’s increase looks relatively modest. UK defence spending is up 32% over the past decade, but that compares with much sharper increases in countries such as Germany, Poland, Spain, Japan and Italy,” said Bailey. “If Britain wants to remain a serious global military power it has to increase defence spending.”

This imperative has prompted criticism of the DIP. Former defence secretary John Healey and armed forces minister Al Carns both resigned their posts on 11 June, with Carns saying afterwards the bill was not sufficiently funded and the government was planning to spend money on outdated systems and Healey saying the bill “falls well short of what is required for defence and the country at this dangerous time”.

Fixing the defence spending deficit won’t be a case of waving a magic wand for Andy Burnham, who is widely expected to become the UK's next prime minister.

“Fiscal constraints and sluggish economic growth means it’s not just a simple question of increasing spending,” said Neil Wilson, UK investor strategist at investment bank Saxo. “Debt markets will punish extra borrowing – Starmer pointedly [ruled] out ‘war bonds’ as just extra debt. Germany’s decision to scrap a new warship programme underlined the problem facing governments without the same level of fiscal constraint.”

What does the Defence Investment Plan contain?

Having initially been expected at the end of last year, the DIP was delayed as the Ministry of Defence (MoD) had been pushing for an additional £28 billion of defence spending over the next four years but the Treasury would only permit £10 billion.

In its current form, the DIP allows £298 billion of investment into defence over the next four years – £15 billion in additional spending.

The bill includes provision to spend £20 billion more on the country’s nuclear deterrent over the next four years compared to the previous four, including the purchase of F-35A stealth fighter jets – capable of carrying nuclear warheads.

It also contains £5 billion of investment in drones and autonomous systems over the next four years.

“That may look modest beside the roughly $55 billion for the US’s multi-year Drone Dominance programme,” said Bailey. “But measured against each country’s previous annual defence spending, the UK number does not look small, being roughly 7.5% of 2025 UK defence spending, compared with around 5.8% for the US figure. As a share of GDP, both are also very similar.”

There is also £3.2 billion allocated for space capabilities and £2.5 billion for cyber and electromagnetic defences.

Which companies could benefit from higher UK defence spending?

UK defence spending tends to be quite internationalised with an understandable slant towards domestic companies.

“Since 2019, around 45% of MoD procurement spending has gone to UK-headquartered firms,” said HANetf’s Bailey. “Higher UK spending can benefit UK-listed names but also foreign-listed companies with meaningful UK defence exposure.”

There is a notable attempt to shift from over-reliance on US firms – understandable given the US’s unpredictable foreign policy so far this year.

In terms of the companies that could be expected to benefit, BAE Systems (LON:BA.) is notable due to its central role in the design of the Tempest jet being made jointly by the UK, Italy and Japan. Its shares rose nearly 10% between 29 June and 2 July.

Besides BAE Systems, Wilson also highlights Chemring (LON:CHG) as a potential beneficiary of the MoD’s more technological shift.

“We see Chemring, a specialist in sensors, electronic warfare and counter-drone technology, coming out of this rather well,” he said.

“Rolls-Royce (LON:RR.) gets a lift from nuclear power/Tempest engine considerations, while QinetiQ (LON:QQ.) is one to watch in the field of artificial intelligence, robotics and autonomous warfare,” he continued.

He also highlights some interesting prospects further down the market capitalisation ladder, including SpaceX supplier Filtronic (LON:FTC), Concurrent (LON:CNC) – an embedded computing specialist with significant defence contracts – and MS International (LON:MSI) which, among other things, manufactures navy guns.

Why hasn’t the defence bill boosted UK defence stocks?

These stocks, on the whole, haven’t risen off the back of the DIP.

If anything, the opposite is true. Despite its initial surge after the DIP’s announcement, BAE Systems is up just 2.4% in the 12 months to 8 July. Rolls-Royce is up a healthy 45% over the same period but most of these gains predate the DIP’s publication; between the DIP’s publication and 8 July, the stock fell 1.1%.

Chemring’s share price fell 2.1% over the year to 8 July, while Qinetiq is down 5.3%.

The main reason the DIP hasn’t lifted these stocks substantially is that it was fairly underwhelming. Markets had expected a much more substantial uplift in UK defence spend, and this became priced in.

“Shares in various defence contractors rose last year on expectations for more spending, but lately investors have been left disappointed,” said Saxo’s Wilson.

How to invest in UK defence stocks

Besides buying the shares directly there are few pure-play routes to investing in UK defence.

You could pick an exchange-traded fund (ETF) that offers some exposure.

Two obvious examples are the HANetf Future of European Defence Screened UCITS ETF (LON:NAVY) and the WisdomTree Europe Defence UCITS ETF (LON:WDEP). Both these are specialised in European defence companies; whereas a global defence ETF like iShares Global Aerospace & Defence UCITS ETF has less than 12% of assets invested in the UK (as of 7 July), NAVY and WDEP have approximately 25% of assets (both as of 8 July).

Open-ended funds and investment trusts focusing on defence are thinner on the ground.

JPMorgan Claverhouse (LON:JCH) also offers some UK defence exposure through holdings like Rolls-Royce, Serco (LON:SRP) and BAE Systems – though as of 31 May these three stocks make up just 7.7% of the portfolio.

Whilst only tangentially related to defence, Seraphim Space (LON:SSIT) holds private companies that relate to the space technology theme. Some of these overlap heavily with defence; All.Space, for example, has contracts with the MoD as well as the US Department of Defence.

Whether you’re decades into your investing journey or just starting out, time can be a double-edged sword.

Investing is a long-term game and while many fear the ups and downs of the market could ravage their returns, that’s only true if you’re trying to ‘time the market’.

Most people who invest and stay invested for the long term end up significantly better off.

Much of that is due to the power of compounding, which is more powerful the more time you have for it to take effect. Yet for younger investors – those at the start of their journey – the effects of inflation will have a huge impact on how they approach financial matters.

Younger generations aren’t apathetic when it comes to investing. A recent Vanguard study reveals that 68% of savers without investments say they plan to start investing in the next two years, rising to over 90% among Generation Z (Gen Z) and more than 80% among Millennials.

What motivates Gen Z investors?

Vanguard found that Gen Z accounted for nearly 780,000 new investors in the past two years, contributing £25 billion. These younger investors have a larger appetite for new, esoteric investments like cryptocurrency (crypto) compared with older demographics.

The survey of 2,000 UK adults shows Gen Z favoured crypto as their first investment, a move made by 33% of the cohort.

The report, The British Money Mindset 2026, says the danger of having a higher risk appetite early in your investment journey is that it could disproportionately expose younger investors to the volatility of crypto assets.

“Negative early experiences can discourage participation and reinforce misconceptions about investing,” it says.

Discretionary fund manager Albemarle Street Partners (ASP) suggests the main driver for this higher risk appetite is the need for their money to work harder, which stems from an early experience of inflation.

ASP managing director Charlie Parker says Gen Z is at a critical moment in life: coming of age, starting to take financial responsibility and pay their own bills, while at the same time they’ve been confronted with two enormous external disruption events.

“First, they had the pandemic and then they had the inflationary surge that followed.”

How inflation shapes your financial decisions

Behavioural economists suggest that experiencing a significant bout of inflation in a formative period of life can change everything about the way they think about saving, investing and risk-taking for the rest of their life.

Parker recalls the common shortage of hot water when he was growing up.

“If you wanted more hot water you had to approach your mum and ask to put on the immersion heater, which was like you were asking to burn liquid gold. Because my parents had come of age during the oil shock of the 1970s, lodged in mum’s psychology was this idea that energy ‘is the thing which is going to get me.’”

Today’s younger investors are facing their own challenges. According to Finder.com, in 2007, the average age of a UK first-time buyer was 30.3. Now, it’s 33.9. Home ownership is moving out of reach faster than this generation can save.

This leaves young people in a scenario where gradual savings into a “boring” multi-asset fund won’t cut it.

“They don’t think the world is working in their favour in order to do that,” says Parker. “So if they’re going to do any investing at all, it’s going to be a financial ‘prayer for redemption’. They’ll think, ‘I’m going to buy some cryptocurrency; something which gives me some hope that it might make me enough money to make a real difference’.”

Gen Z is investing at a younger age than any generation that came before them – more of them started in adolescence and early adulthood than other cohorts. They take more risks without necessarily knowing the consequences. Parker cites World Economic Forum data showing that 64% of Gen Z investors adjust and review their portfolio at least once a month.

As well as cryptocurrency, they are also the most active user group of alternatives, derivatives and non-fungible tokens.

What are the financial milestones at different ages?

As time works both for and against you as an investor, it’s a crucial factor in setting your priorities, whatever your age.

If you’re a Baby Boomer, some of the biggest moments are not financial but psychological. Navigating the transition to retirement is one of the biggest challenges for people in this lifestage, according to Parker.

Another shift that many Boomers have to contend with is acknowledging that they can spend their money. Many financial advisers say they’ve got clients who just can’t get their heads around drawing down from their pension pot while they’re not earning.

By age 65, half of people stop going abroad on holiday; it’s either too hard physically or emotionally. Healthy life expectancy in the UK is just 61.

“That’s not to say you’re bedbound. But there’s something going on with your health that makes things a little more difficult,” said Parker.

The average age of needing care is 84 and life expectancy is 83 for a woman and 79 for a man.

For Gen X, the pressure is on. If you’re in your 40s or early 50s, you’ll likely be earning the most money you’ll ever earn, perhaps have recognised that you can’t take your health for granted and that the workplace presents more challenges.

Parker explains: “If you’re in a physical job, you might be less able to do certain things. There are always fewer jobs at a more senior level than you. It’s quite easy to get to middle management but it’s harder to get beyond. The workplace can be an increasingly difficult and challenging place for people in their 40s and 50s and 60s, given technology and the pace of change.

“This is a generation that’s nearly running out of time to get the benefits of compounding, that’s in need of urgent intervention if pensions haven't been established, and good habits haven't been established in early life,” Parker continued. “They might still have just enough time to benefit from the power of regular contributions, but they need to act very, very quickly.”

Losing the title deeds for an inherited home is a headache – and while tracking them down can be easy, it's not always so straightforward.

Title deeds are documents confirming who the legal owner of a property or piece of land is and trace the history of ownership over time.

Deeds also usually include whether the property has a mortgage on it, how much it was last sold for and details of any ‘restrictive covenants’ – promises not to do certain things with the land, like not building on a certain area.

But around 10% of properties in England and Wales aren’t registered with Land Registry, making tracking down title deeds a lot trickier.

Historically, title deeds, also known as a title register, were a collection of physical papers, but Land Registry started phasing in digitally-formatted ones from the early 1990s.

Because title deeds say who the legal owner of a property is, they are essential if you inherit one, particularly if you want to sell it – no buyer’s solicitor is likely to let their client buy a home if it can’t be proved who owns it by law.

Paula Higgins, chief executive officer of property advice website HomeOwners Alliance, said: “Title deeds can be particularly important when inheriting a property that you intend to sell, as the executors or administrators will need to establish that the deceased was the legal owner before the property can be transferred or sold.”

How to locate title deeds on an inherited property

Before doing anything, you need to find out if the inherited property is registered with HM Land Registry. This is the process that applies to properties in England and Wales.

More than 90% of land in these two countries is registered, according to the Land Registry, so it is more than likely an inherited property will be on its database.

You can find out whether a property is registered via gov.uk.

If the property is registered

If the inherited property is on the Land Registry’s database, you can typically source a digital copy of the title deeds for a small fee.

David Fenwick, lead probate solicitor at Co-op Legal Services, said: “Where a property is registered, the original paper deeds are no longer needed to prove ownership. Official copies of the title register…can be obtained from HM Land Registry and are accepted in place of the historic deeds.”

If the property isn't registered

If the property isn’t registered with Land Registry, this is where the process can get trickier. As a first port of call, contact the solicitor involved in the initial sale of the deceased’s house or the mortgage company – either of these might have the original paper deeds.

The deeds may also be in a safe deposit facility with the deceased person’s bank or with other family members who have helped with their affairs.

If, after this, you still can’t find your title deeds, you’ll need to get legal help from a conveyancing solicitor.

They will be able to apply to HM Land Registry for what’s called a “first registration” which will ensure the property is registered and on its database.

They’ll gather a host of documents that can prove to the Land Registry that the property you’ve inherited belonged to the deceased.

Fenwick said: “This might include historic conveyancing documents, mortgage records, council tax bills, copies of documents held by previous solicitors, or statutory declarations from individuals with knowledge of the property's ownership history.”

Do note, HM Land Registry says it can take up to 12 months to process a first registration application.

You can apply for a first registration yourself, but it can be legally complicated, so it’s worth getting a conveyancing solicitor in to help, although they will charge you for their services.

In any case, Land Registry will charge you up to £1,105 to apply for first registration and fill in the relevant form, which could be a TR1, TP1, AS1 or other form.

How to sell an inherited property

If the property is registered with the Land Registry and the deceased person was the only person who owned the home, you will need a Grant of Probate or Letters of Administration to sell it.

You will need a Grant of Probate if the deceased person left a valid will naming you as an executor and Letters of Administration if there is no will or it is invalid.

Grants of Probate or Letters of Administration are usually issued within 12 weeks of applying but can take slightly longer depending on the complexity of the application, according to the Courts and Tribunal Service.

If the title deeds have been lost, you’ll need to first go through the first application process to ensure the property is registered with HM Land Registry.

Once probate or administration has been granted, you need to arrange a valuation of the property with an estate agent to gauge its market value before putting it up for sale.

The process of selling an inherited property is similar to selling a regular one, except there are tax implications to consider.

If the value of the property has increased since the person who owned it died, you may owe capital gains tax, if the gain is over your annual exempt amount of £3,000. You can deduct estate agent or legal fees to reduce how much any profit is taxed at.

You may also owe inheritance tax of 40% if the value of the deceased person’s home combined with the rest of their estate breaches the nil-rate bands.

Crypto investors are being urged to ensure they have reported any capital gains to HMRC or face fines worth hundreds of pounds amid new transparency rules being introduced next year.

Financial Conduct Authority (FCA) data suggests around 8% of UK adults, roughly 4.5 million people, now hold cryptocurrency such as Bitcoin.

But commentators warn that those who have got into it as a side-hustle or to make quick profits amid Bitcoin price rises may not realise that they need to pay capital gains tax (CGT).

HMRC has previously clamped down on those failing to pay owed CGT.

As many as 101,024 CGT warning or ‘nudge’ letters were sent to investors in crypto assets between 2020 and 2025, according to Freedom of Information (FOI) data obtained from HMRC by comparison platform BrokerChooser.

Crypto investors will have no excuses from 2027 when platforms have to start reporting user data to HMRC.

Here is what you need to know.

Crypto tax changes explained

Owning crypto has never been tax-free and any profits from sales of the asset could result in a CGT bill if above the £3,000 threshold.

Currently investors have to report this to HMRC themselves but under the UK’s incoming Cryptoasset Reporting Framework, UK cryptoasset service providers began collecting user data in January 2026, with their first reports to HMRC due between January and May 2027.

Providers must record each user's name, address, date of birth, tax residence and, for UK residents, their National Insurance number or Unique Taxpayer Reference.

If you give inaccurate information or do not provide details, you could get a penalty of up to £300

HMRC expects the measure to raise an extra £315 million over four years.

If you have not paid owed tax and HMRC finds out, you may get a penalty of up to 100% of the tax due plus interest.

Harvey Dhillon, chief executive of at accountancy firm Zmartly said the person caught out is not the sophisticated trader but the everyday holder or side-hustler who bought a little, sold or swapped some, and never thought to put it on a tax return.

He added: "Crypto was never untaxed. It was just unseen, and that is the only thing changing. Selling a coin, swapping one for another or being paid in crypto can trigger Capital Gains Tax or Income Tax, and always could.

"Reported to HMRC is not the same as declared by you, and the gap between the two is where the penalties live. The person caught is not the full-time trader but the everyday holder who bought a little, sold some, and assumed a small pot could never be taxable.”

How to prepare for crypto tax

Crypto prices have soared in recent years, especially if you have bought and sold Bitcoin or Ehtereum in your investment portfolio.

With the capital gains allowance frozen at £3,000, even modest disposals can be chargeable.

Dhillon added: "If you have ever sold or swapped crypto, check your history now, work out the gains for each year, and correct anything missing before the reports land. The anonymity was the only thing protecting an unpaid bill. In 2027 it goes."

Graham Nicoll, financial planner at NCL Wealth Partners, urged people to review their transaction history.

He added: "This isn't a new tax, but it is a significant shift in transparency. I’ve seen investors who made substantial gains during previous crypto rallies wrongly assume those profits didn't need to be declared. As HMRC receives more data directly from crypto providers, those historic gains are likely to come under greater scrutiny.

"At the same time, investors shouldn't overlook losses. Properly reporting capital losses now can allow them to be offset against future gains, potentially reducing tax when markets recover or from gains on other assets.

“Anyone who has bought or sold crypto should review their transaction history, calculate any gains or losses and, if necessary, correct previous tax returns before HMRC comes knocking. Good records are now just as valuable as good investment returns."

Tens of thousands more households could be dragged into paying the ‘mansion tax’ under rumoured plans, if Burnham becomes the new Labour leader.

The prime minister-in-waiting could potentially lower the threshold at which people start to pay the High Value Council Tax Surcharge from £2 million to £1.5 million, according to reports in The Mail on Sunday.

An estimated 150,000 additional households could be pulled into paying the surcharge if the levy was brought down to the reduced amount, based on calculations done by think tank Tax Policy Associates.

The so-called mansion tax was first announced by chancellor Rachel Reeves during her 2025 Autumn Budget and is set to come into force in April 2028.

As it stands, the measure will see those with properties worth over £2 million pay between £2,500 and £7,500 per year depending on the value of their home. It is expected to bring in £430 million in 2029/30.

But should Burnham win a Labour leadership contest, he will need to find ways to fund an ever-growing welfare budget and multi-billion pound hole in the Defence Investment Plan (DIP).

Lowering the entry level at which households pay the mansion tax could be one way of doing this alongside potentially scrapping the triple lock pension system.

MoneyWeek approached Andy Burnham’s office to comment.

What is the mansion tax and how will it work?

The High Value Council Tax Surcharge will take effect from April 2028 and apply to homes in England worth £2 million or more.

The Valuation Office (VO), which is part of HMRC, is set to carry out a valuing exercise to assess which homes the surcharge will apply to.

Homes valued at £2 million or more but less than £2.5 million will be charged £2,500.

Properties worth £2.5 million or more, but less than £3.5 million will need to pay £3,500. Homes worth between £3.5 million and £5 million will need to pay £5,000. Properties worth £5 million or more face a £7,500 surcharge.

These charges are set to be increased each year in line with the Consumer Price Index (CPI) measure of inflation. Revaluations will be conducted by the VO every five years.

How a reduced threshold of £1.5 million on the levy would be applied exactly is unclear, but would almost double the amount of households paying it, according to calculations done by Tax Policy Associates.

The think tank predicts around 243,000 households would have to pay at least something, up from 127,000 under a £2 million entry-level threshold.

What else is Andy Burnham considering?

In a major speech on 29 June, Burnham said he intended to reform business rates to support high streets and pubs which have taken a battering in recent years.

According to the British Beer and Pub Association, a trade body for the sector, 161 pubs closed across Britain in just the first three months of 2026. UK Hospitality, a trade body for the hospitality sector, has forecast six hospitality venues will close each day in 2026.

Rumours have been swirling about what else Burnham could introduce if he were to become the next prime minister of the UK.

The MP for Makerfield could reportedly look at reforming Capital Gains Tax (CGT) by bringing the rate paid in line with income tax. Basic-rate taxpayers currently pay a CGT rate of 18% while higher and additional-rate taxpayers pay 24%.

Burnham could also replace stamp duty with a ‘land value tax’ – an annual tax based solely on the value of the land itself.

One of the best ways to gauge how your fellow investors feel about the market is to follow the money.

The flows of cash in and out of European exchange-traded funds (ETFs) during June suggests a pivot back towards US stocks and funds and away from their European counterparts, according to analysis of etfbook.com data from investment manager Fidelity International.

June was a strong month for European ETF flows overall, attracting just under $45 billion in total funds – 29% above the three-month average monthly flow and 19% above the 12-month average.

“Strong corporate earnings, combined with new record highs in equity markets, have boosted investor confidence,” said Stefan Kuhn, European head of ETF and index distribution at Fidelity International.

If you’re considering where to invest for the coming months, it can help to have an idea of which way the money has been going recently.

Fund flows shift from Europe to America

Funds investing in North American equities saw $14.7 billion of inflows during the month, more than three times the monthly average for the region over the past year.

Much of the strength in American stocks will have been driven by demand for artificial intelligence ETFs, with the US still the major player in the theme. The sector also received a sentiment boost in June from SpaceX’s record-breaking initial public offering.

At the same time, though, European investors appear to have abandoned their domestic markets, with Europe-listed ETFs targeting European stocks registering $2.2 billion in outflows in June.

^{Source: etfbook.com via Fidelity International. Data as of 30 June 2026.}

“The story of the second quarter was the return of the United States,” said Kuhn. “While investors were allocating more heavily to Europe and other regions at the start of the year, we are now seeing a clear preference for the US market again,” he added.

June marks the third consecutive month of outflows for Europe-focused funds according to Fidelity.

Commodity ETFs slide as investors snap up active ETFs

Demand for commodity ETFs waned during June, coinciding with a decline in gold prices as expectations for higher interest rates (particularly in the US) rose and the war in Iran appeared to be simmering down.

“With the immediate escalation phase now behind us, some of the geopolitical risk premium has faded from commodity markets,” said Kuhn. “At the same time, many investors expect central banks to keep interest rates higher for longer, making non-yielding asset classes such as gold less attractive.”

Actively-managed ETFs, though, continue to soar in popularity. June was a record month for flows into this category of funds, according to Fidelity’s analysis.

“Strong demand for active ETFs shows that investors increasingly want to differentiate between regions, sectors and individual companies,” said Kuhn. “In a market where the gap between winners and losers is widening, active security selection can provide real added value.”

The UK is obsessed with cash. Out of the 15 million adult ISA accounts that were in use in the 2023/24 tax year, almost 10 million were cash ISAs, making up around 66% of the total.

We love cash because it is simple and we know that when we need to access it, we won’t find that the value of our savings has fallen to zero. Put simply, cash is risk-free.

But that is not the whole truth, according to Andy Reed, head of behavioural economics research at Vanguard.

Speaking to Kalpana Fitzpatrick, digital editor-in-chief , on the MoneyWeek Talks podcast, Reed said there is a significant opportunity cost in hoarding more of your savings in cash than you might need.

In the UK, there is over £200 billion of excess cash languishing around, research by Vanguard found.

This does not include savings that it may make sense to hold in cash, like what is needed for an emergency fund or short-term spending..

Reed said: “When you dig a bit deeper and start to ask ‘why are you sitting on the sidelines? Why are you not invested?’, they realise that there is a risk-return trade-off that they’re making and they tend to say they prefer a more conservative approach. They feel like cash is safer.”

Reed says this is partially a result of inertia.

“[Savers] are going with the flow. They’re maintaining the status quo. The status quo feels safe. It doesn’t feel risky. But what they don’t realise is that investing is risky, yes. But not investing is also risky.”

That is because every moment that your money is not growing, it is being eaten away by inflation.

This has been particularly true in recent years as the UK, and many other western countries, have had to deal with price growth above the 2% target.

In Britain, inflation reached a recent peak of 11% in 2022, while the latest data shows it reached 2.8% in May 2026.

As cash ‘stuffed under the mattress’ earns 0% interest, it will be worth less in real terms after years of inflation. But cash in savings accounts are not entirely safe either.

“The risk is that your cash is not going to keep up with inflation because the interest on cash can be very low while inflation might be higher and so your purchasing power is going down over time.

“But inflation is out of sight, out of mind for many people, so they don’t realise the hidden cost of cash.”

That is not to say that cash is inherently evil and all your savings should be diverted to investments.

Reed says: “Cash is a story of too much of a good thing. You need enough for emergencies, say your dishwasher breaks, or your car breaks down, you also arguably need cash in case of job loss.

“That’s where highly liquid assets like cash are super valuable because they give you that flexibility to withstand bumps in the road.

“But having cash above and beyond those short-term emergency needs means you’re incurring opportunity costs. What you’re giving up by not investing is quite a bit larger than what you might realise.”

Listen to MoneyWeek Talks for our full interview with Andy Reed, where he discussed how emotions can affect investor behaviour, the barriers to investment in the UK, how different generations invest, and much more.

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Artificial intelligence (AI) could be embedded into every aspect of a financial services business by 2030 as millions of savers and investors are already making use of the tools, research by the Financial Conduct Authority (FCA) has found.

The City watchdog asked executive director Sheldon Mills to review how advances in AI could transform retail financial services.

The Mills Review, published this week, found one in five UK adults - equivalent to 11 million UK adults - are already open to AI making decisions for them in areas such as pensions and investments but there are concerns about trust and control.

The review found that while AI has the potential to improve access, personalisation and efficiency, it could also amplify risks associated with fraud, cybersecurity, consumer harm and market concentration.

Mills said: “Artificial intelligence will transform financial services by 2030. It creates significant opportunities for consumers, firms and the wider economy. This report sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector.”

Here is how the FCA expects AI to reshape financial services.

Changing roles in financial services

The regulator suggests human roles in financial services will change.

It highlights that many firms are already piloting and rolling out AI tools and by 2030 they could be more independent and cover every function from customer support and underwriting to compliance, claims and product design.

AI may become the main method by which they process information, serve customers, and evidence outcomes, the FCA suggests.

This could mean the role of people within firms changes from operators close to each decision towards collaborators, approvers and, eventually observers who monitor outcomes and step in when systems move outside agreed parameters.

The FCA said: “This is a substantial organisational shift, requiring new skills and a clearer account of what human oversight actually involves.

“Firm governance will extend existing model risk management to cover more complex systems and deeper reliance on third-party providers. Successful AI deployment should lift productivity and support economic growth, though the benefits will reach consumers only where firms remain accountable and markets stay competitive enough to pass them on.”

The review suggests the human role becomes one of challenge, judgement and review rather than direct production of every output.

The rise of agentic AI

Consumers are increasing using AI applications to act on their behalf and automatically follow preset instructions, known as agentic AI, and the FCA predicts this could grow in financial services.

This may involve easier bank switching, embedding insurance into other platforms, auto-rebalancing in savings and investments and pension pot consolidation.

The FCA said: “Overtime, AI systems will move beyond offering information and recommendations towards trusted AI agents that can act continuously for consumers within agreed limits, providing ongoing financial management and optimising people’s financial lives.

"If done well, this could help consumers achieve more while doing less, addressing long-standing problems such as low switching, advice and protection gaps, and improving outcomes for people with lower financial capability.”

The FCA warns that consumers will still need to be able to oversee, understand and challenge AI-driven decisions, especially when things go wrong, the report adds: “Unequal access to high-quality applications risks widening inclusion gaps - but well-designed AI systems also present an opportunity to radically improve outcomes for those who need more support.”

Changes in market power

The rise of AI could reshape who holds the power in financial services.

Investors and savers may flock to well-known investment platforms or providers now but the FCA says AI has the potential to drive greater beneficial competition in financial services and to support new entrants.

This could make the suppliers more powerful and there are risks of dependance on a few technology firms.

The FCA said: “Control of the AI-mediated customer interface may become a major source of market power.

"As consumers rely on agents to search, compare and transact, the owner of that AI layer may influence which products are visible, how choices are ranked and where value is captured, shifting the customer relationship away from financial services providers.”

AI risks

While AI could help consumers manage their finance more effectively, the FCA review wants that there will also be more fraud risks.

The report said: “Deepfakes, synthetic identities and personalised social engineering are taking fraud and cyber risks into a new era and changing how fraud and cyber-attacks are conducted. Existing weaknesses can be exploited far more quickly than before, and defenders will need to keep pace.

“Defensive, supervisory and enforcement capability must evolve at least as quickly as the threat. To remain effective, firms, regulators and their partners will need access to many of the same AI capabilities as those used by attackers.

"They will also need to share the right information with those best placed to act, when it matters and before harm escalates.”

Is AI regulated?

Artificial intelligence isn’t regulated but Mills suggests that existing rules such as the Consumer Duty and Senior Managers Regime should cover some of the risks associated with how savers and investors may use AI.

The review does add that regulation may have to evolve though to focus on shared models between firms though rather than focusing on individual conduct.

It also suggests that the FCA review AI tools such as ChatGPT and Claude to assess if there are regulatory overlaps and risks in the results generated.

Commenting on the report, Amal Jolly, chief executive of the AI company Saturn, which specialises in financial advice, said: "AI brings new opportunities to close the advice gap, improving the financial lives of millions of adults, but as this report shows it also brings huge risks.

“In financial services, AI is the new Wild West: consumers are left with no protection. Only 9% of people have access to regulated human financial advisers, but 100% of people have access to ChatGPT and other AI platforms. This is not just a theoretical problem, but can cause real harm to people who are entrusting major life-changing financial decisions to unregulated AI.”

SpaceX has joined the Nasdaq 100, meaning passive funds that track the index will now automatically hold positions in the company, which listed on 12 June.

SpaceX (NASDAQ:SPCX) joined the index today (7 July), a week after it was added to the Russell 1000 Index (29 June).

Bloomberg reported SpaceX could look forward to an estimated $5.4 billion of inflows as a result of ‘forced’ buying by index funds that track these two indices.

Elon Musk’s space exploration company was fast-tracked for inclusion following rule changes by the index providers, put in place to reflect the unprecedented size of some initial public offerings (IPOs) coming to market.

Nasdaq’s new rules now allow freshly listed companies to be included in as few as 15 trading days, rather than its previous minimum period of three months after an IPO.

What will SpaceX index inclusion mean for flows?

Nasdaq says globally, there is around $1.4 trillion in assets tracking its component companies’ combined market capitalisation (market cap) of $31.5 trillion, around half of which do so through exchange-traded funds (ETFs). The other half is in derivative products, such as futures and options.

The Nasdaq 100 index represents the largest 100 companies, excluding financials, listed on the Nasdaq Stock Market. Often described as a tech-focused index, it contains all ‘Magnificent 7’ names – Alphabet, Amazon, Apple, Tesla, Meta, Microsoft and Nvidia. But it also contains many other companies with a value of $100 billion or more from healthcare, industrials and materials, for example, with representation across 10 of the 11 standard industry classification sectors.

When a stock joins an index like the Nasdaq 100, funds tracking that index are effectively forced to buy its shares so that they still reflect the index. This creates additional demand for a stock and could push up its share price.

The UCITS version of Invesco’s Nasdaq-100 ETF (LON:EQQQ) is the largest Nasdaq-tracking ETF available to UK investors. Barclays Smart Investor platform lists it as the seventh most popular purchase during the week of 26 June to 2 July.

Alongside the uplift from index fund inclusion, several investment banks have issued positive analyst statements on SpaceX, marking the end of the ‘quiet period’ that typically follows an IPO. Morgan Stanley, Goldman Sachs, UBS and Bernstein Research are among the names backing the stock with ‘buy’ recommendations or equivalent, based on asset strength and long-term growth prospects.

Average house prices have increased for the first time since the outbreak of the Iran war in a boost for homeowners.

The newly-named Lloyds House Price Index, rebranded since the bank retired the Halifax name, showed average property values rose 0.2% in June.

The slight rise in house prices is an improvement on the previous month's 0.2% fall, while annual growth was at 0.6% compared with 0.5% a month before.

This put average UK house prices at £299,330.

It is the first monthly rise in average prices since February as confidence has been dented by the Iran conflict.

But hopes of a peace agreement and lower swap rates may now be filtering into the housing market and mortgage pricing, helping to boost demand.

Amanda Bryden, head of mortgages at Lloyds, said: "Recent price trends continue to reflect wider economic uncertainty, including the impact of global events on inflation and interest rate expectations."

Affordability remains stretched for many buyers, said Bryden, but this has been mitigated by mortgage rates easing from their recent highs.

"While latest industry data shows the number of new mortgage approvals dropped in May, this wasn’t unexpected given the spike in rates seen earlier this year, and we ’d expect to see activity recover assuming borrowing costs continue to fall," Bryden added.

Where are house prices rising?

The housing market has been quieter in recent months as the volatility caused by geopolitical tensions has pushed up swap rates, making mortgages more expensive and hitting buyer demand.

More stock is also on the market, which some attribute to a landlord exodus linked to the Renters’ Rights Act.

Higher supply and reduced demand has pushed price growth down.

But there have been signs of life in the housing market more recently as tensions have eased in the Middle East.

Northern Ireland continues to record the strongest annual house price growth in the UK, with average prices up 7.4% over the past year to £229,000, Lloyds said.

Scotland has the next highest annual growth at +3.9%, with an average price of £223,277.

In Wales , property price growth has strengthened by 0. 9% on annual basis to £ 231,142.

Meanwhile in England, stronger price growth remains concentrated in northern regions. The North East saw prices rise 2.8% over the year to £181,133, while the North West recorded annual growth of +2.4%, with the average property now costing £248,218.

In contrast, southern markets continue to see prices fall. The South East led declines, with prices down 2% year-on-year to £381,654, while London saw average values fall by 1.1% to £534,831 .

Will house prices rise in 2026?

The housing market has struggled to get going in 2026 and while the latest price rise may look good if you are hoping to sell your property, analysts remain cautious.

Amy Reynolds, head of sales at Richmond-based estate agency Antony Roberts, said "On the ground, the picture is more nuanced than national headlines suggest."

While the rate-dependent end of the market is exhibiting caution, well-priced family homes in the right roads are still seeing sustained interest from cash- or equity-rich buyers.

Reynolds suggests there is the familiar pre-summer push from families wanting to be settled before the new school year, but warns that the mood is steady and selective rather than booming or stalling, adding: "We expect a quieter, price-sensitive summer, with activity firming again in the autumn once buyers have more clarity on rates and the geopolitical noise has died down."

Sarah Coles, head of personal finance at AJ Bell, said the small rise in prices in June will owe something to the Iran peace agreement, which lowered inflation expectations and brought mortgage rates down, but warns that one swallow doesn’t make a summer.

"One small bump doesn’t mean the end of tougher times for the property market," said Coles. "There’s still a huge amount of global uncertainty as the peace deal remains fragile. Closer to home, the picture has started to look marginally more positive, with unemployment falling a little and economic growth edging up. But this is unlikely to move the dial just yet."

Coles highlights that unemployment has been trending up for the past four years and while economic growth might be positive right now, real household disposable income still fell in the first three months of this year, so prospective buyers may be feeling overstretched already.

Bryden is a bit more optimistic, saying: "We expect the housing market to continue moving at a measured pace. Lower borrowing costs should provide some support for demand, though affordability constraints remain an important factor. The outlook for house prices will depend largely on inflation continuing to ease and household confidence gradually improving."

Investment trusts are often a sound investment but picking one that stands out from the crowd can really boost your returns.

So if you’re trying to decide where to invest for the second half of the year it could pay to see which trusts and sectors have outperformed the rest over the last six months.

The top funds and stocks for DIY investors have reflected a slant towards technology so far this year. Investors who followed that trend were rewarded, as technology-focused investment trusts delivered greater returns than any other sector.

According to the Association of Investment Companies (AIC), an industry body representing the UK’s investment trusts, the average investment trust performed better than the UK stock market’s flagship large cap index, returning 9.4% during the first half of the year compared to the FTSE 100’s 5.7%.

Some investment trust sectors generated average returns well above this level.

The top-performing investment trust sectors of H1 2026

Tech was the top-performing investment trust sector, returning over 50% in the first six months of the year.

“The historic boom in AI spending continued to drive returns in the first half of 2026, most obviously in the technology sector,” said Annabel Brodie-Smith, communications director at the AIC.

^{Source: theaic.co.uk / Morningstar. Share price total return in % to 30/06/26.}

Tech and AI might be more heavily represented in the top-performing investment trust sectors than is initially apparent: the theme is also having a significant impact “in Asia and emerging markets where some of the world’s largest AI hardware and microchip manufacturers are based”, said Brodie-Smith.

It has also been a good six months for global small caps, with the sector returning 23.7% on average to make it the fifth-best-performing investment trust sector. The average Japan-focused investment trust, meanwhile, returned 18.2%.

Which investment trusts were the top performers in H1 2026?

While technology was the top-performing investment trust sector overall, the top-performing individual investment trust came from the commodities sector.

Baker Steel Resources (LON:BSRT) returned over 65% in the first six months of the year. The trust is a diversified commodities investment trust; it holds producers of precious metals like gold and silver, but as of 31 March its portfolio has the largest weighting towards tungsten producers – making up 23% of assets.

^{Source: theaic.co.uk / Morningstar. Share price total return in % to 30/06/26.}

Technology is unsurprisingly a recurring sector in the rest of the 10 top-performing investment trusts list. Three of the trusts – Polar Capital (LON:PCT), Manchester & London (LON:MNL) and Allianz Technology (LON:ATT) – are all designated to the technology and innovation sector by the AIC, while Seraphim Space (LON:SSIT) and Schiehallion Fund (LON:MNTN) have significant overlap with technology as a theme.

Asian and emerging market trusts like Pacific Horizon (LON:PHI) also featured amid the AI boom. Pacific Horizon’s top two holdings as of 31 May were chipmakers Samsung and Taiwan Semiconductor.

“The strong performance is extremely welcome, but this is only a snapshot. It is important to remember that investing is a long-term commitment and that any sector or trust should form part of a broader, diversified portfolio,” said Brodie-Smith.

Baltimore-based Constellation Energy, a $90 billion company, generates electricity on a vast scale. And AI's voracious appetite means that electricity is now becoming a very valuable commodity, and the companies that can generate it reliably, cleanly and at scale will see a lot more attention than they're currently getting.

Investors have re-priced entire industries, assuming AI will transform the global economy. Electricity gets less attention, yet the chips, AI models and data centres are all useless without power. Vast data centres consume enormous quantities of power to train and run increasingly powerful models. Electric vehicles, battery factories, semiconductor plants, air-conditioning systems, industrial re-shoring and electrification more generally are all pulling in the same direction.

Tap into the great electrification with Constellation Energy

Constellation Energy (Nasdaq: CEG) owns the largest fleet of nuclear reactors in the US and has more nuclear power stations than anyone else at a time when hyperscalers are searching for reliable and cost-efficient power. Investors increasingly view Constellation less as a utility and more as the owner of scarce infrastructure – an essential asset – which explains its appeal as a long-term growth stock.

Constellation Energy currently generates about 10% of US clean energy. It produces enough electricity to power about 27 million US homes. It is the largest nuclear-energy company in the country and its power stations sit alongside a fleet of gas, hydro, wind, solar, geothermal and oil-fired assets. These produce 55 gigawatts (GW) of capacity.

To put that into perspective, the UK's recent winter peak demand for electricity was typically around 60GW, according to the National Energy System Operator. Constellation has 2.5 million customer accounts across the US and counts 80 of the country's 100 biggest firms by revenue among them.

Results in May showed first-quarter sales up 64% from $6.8 billion to $11.1 billion year-on-year. While impressive, roughly $2 billion-$3 billion of that reflected the acquisition of Calpine, a largely gas and geothermal power generator. Constellation Energy generated roughly $25 billion of revenue over 2025 as a whole. Earnings per share were $2.74 in the quarter, up 28% over the year and beating analysts' estimates by 14 cents.

The firm's nuclear fleet achieved an excellent 92.3% capacity factor, meaning its reactors were producing electricity at close to their maximum potential for almost the entire period. Management isn't seeing any slowdown in demand from the hyperscalers, with projected spending levels continuing to rise to reflect the growing need for computer processing.

Management has reaffirmed its expectation of 2026 earnings per share of around $11, up from $9.39 and $8.67 in 2025 and 2024 respectively. It's targeting 20%-plus annual earnings per share through to 2029 led by higher prices and rising demand, including improved long-term contracts.

Analysts have $13.50 pencilled in for 2027. Their 12-month share-price target is $362, about a third higher than now. Of course, in a world hungry for electricity, existing generation capacity may prove considerably more valuable than investors currently assume.

Don't chase the chips

The curious thing is that investors can currently buy a company expected to grow earnings by more than 20% annually at a valuation broadly in line with the wider market. Usually, investors are asked to pay a substantial premium for that combination of growth and strategic importance. The market's comfortable paying premium valuations for businesses that consume computing power. But it's a lot less interested in businesses that sell the vast amounts of electricity that makes such computing possible now and in the future. Look beyond that “utility” label and there is an opportunity to be had.

The immediate objection is that electricity is hardly scarce. If demand goes up, the power generators can build more capacity. But new power stations need planning permission, endless environmental reviews, financing, engineering expertise, political support and years of construction. And then transmission networks need upgrading.

This is where Constellation Energy's nuclear fleet becomes particularly interesting. Investors spend a great deal of time discussing technological moats. Yet there may be few barriers to entry that are more formidable than a collection of fully operating nuclear reactors. The market's growing interest in Constellation Energy reflects a simple reality: it already owns large-scale electricity infrastructure that is built, connected and delivering cleanly at scale. Building more is possible, but doing so quickly is another matter.

Nobody can yet say with certainty which company will dominate AI. What already seems clear, however, is that the modern economy wants far more electricity. Investors have spent the first phase of the AI boom chasing the chips. The second phase may belong to those pumping the power. Investors may find it easier to back the latter than gamble on the eventual winners of the AI race.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Dr Douglas Williams is a veteran senior executive and board member for several biotech companies. During his time at Biogen, ZymoGenetics, Amgen Immunex and Seattle Genetics, he was involved in the development of several multibillion-dollar treatments, including Enbrel, Tecfidera and Spinraza.

Matthew Partridge: The time and cost of clinical trials has been seen as one of the big stumbling blocks to the emergence of new drugs. Do you see any developments that could help speed up the process?

Douglas Williams: Anything you can do to speed up the process is beneficial – after all, time is money. I think the real benefits will come as we become more efficient at targeting better-defined populations of patients [those who meet highly specific and uniform criteria, thus making it easier to gauge the exact effect of drugs]. In a field with a high rate of failure, improving the chances of success by even a small percentage can have a huge impact on the bottom line.

Matthew Partridge: Have the recent changes at the US Food and Drug Administration (FDA), the regulator of federal health, helped or hindered the clinical-trial process?

Douglas Williams: It's all a bit chaotic at present. You're seeing reversals of long-standing policy with political interference in what should be scientifically driven decisions. The “willy-nilly” nature of the Department of Government Efficiency's (DOGE) cuts has also led to a brain drain at the FDA itself, with some of the most experienced staff leaving.

Matthew Partridge: The FDA is seen as a gold standard when it comes to getting drugs approved first. Could there come a day when drug companies start looking to regulators in Europe or elsewhere?

Douglas Williams: This is already happening at the front end of the clinical-trial process, where Australia has become a key destination for early phase-one studies [the first of three stages of clinical trials, when scientists test the safety of the drug]. The regulatory process there is relatively quick and streamlined, making it a cost-effective place to run studies. And Australia's consolidated healthcare system makes the process of finding patients and enrolling them in studies more efficient.

Similarly, I've been working with Chinese companies and the system's low cost of capital, overall efficiency and rapid trial process are remarkable.

Matthew Partridge: The Trump administration has been threatening tariffs on drugs. Do you see geopolitical issues as a major risk for the drug and biotechnology sectors?

Douglas Williams: I do think there is logic in wanting to onshore some of the manufacturing for crucial drugs. There has been this enormous migration offshore from the US on the manufacturing side. So to try to bring some of that back, certainly for vital components of key drugs, makes a lot of sense. But there are surely better ways to achieve this than tariffs, which are a blunt instrument.

Matthew Partridge: Do you think America's dominance of the biotech and drug sectors is at risk?

Douglas Williams: I think that it's very much at risk for a variety of reasons. There definitely need to be some major changes to the FDA to bring the regulatory regime closer to what's happening in China and Australia. Firms are moving to the latter for early-stage studies, although people will still want to enrol patients in later-stage trials in the US and Europe.

The other thing that's happening in the US that I worry about from a longer-term perspective is that the reduction in the National Institutes of Health's funding for basic science grants is chasing away a whole generation of PhD students and postdoctoral candidates. This is already starting to create a hole in the pipeline for talent, and the longer this goes on, even if it's just for the four years of the current administration, the longer it will take to rebuild.

The engine driving the innovation that creates new companies in the sector and allows for new intellectual property to be created and new breakthroughs to take place is being eroded.

Matthew Partridge: What should the UK do to make itself more friendly to biotech and pharma companies?

Douglas Williams: The UK can streamline the process of starting studies and enrolling patients quickly and easily through the NHS, and raising patients' awareness of the trials on offer. More specifically, it could learn a lot from what the Chinese have done around streamlining the rules governing which particular regulatory bodies you need to secure approval from to begin a trial.

Matthew Partridge: Turning to the wider sector, GLP-1 drugs are changing the way we deal with weight-loss, diabetes and perhaps other conditions as well. Do you think the firms that pioneered GLP-1s are going to be able to stay ahead of the competition, or will it be like the computer industry, where firms such as IBM were unable to maintain their control of the industry?

Douglas Williams: The biotech industry is based on the expectation that there will be a rotation of dominance, as patents only last a certain amount of time before rivals are allowed to produce generic versions of a drug, causing prices and profits to collapse. But until that happens, the first-movers in this area, such as Novo Nordisk and Eli Lily, will dominate it. They've also pursued new approaches for delivering the drug – shifting from injectables to oral tablets, for instance. So they're creating scope for multiple waves of innovation, which could extend their dominance.

However, biotech is ultimately all about building a better mousetrap: there are other young companies coming in that are attempting new methods that don't come with the side effects, such as muscle loss, that are associated with the GLP-1s, for instance.

Matthew Partridge: Are there any other big leaps forward that could take place in the next five years or so?

Douglas Williams: I find the work around the role of sleep in dementia and brain conditions very interesting, and the idea that deep sleep can help combat those conditions is certainly an elegant theory. Neurology, in general, has become much hotter from an investment perspective. I'm involved with several companies in the neuropsychiatry sector, including being chair of Draig Therapeutics, a Cardiff-based company developing treatments for major depressive disorder.

The analogy people have used is that neurology is going to become the next oncology, where the precision approach to well-defined populations of patients is going to dominate drug development. So, you'll essentially be treating slices of the populations that have a particular broad definition of a disease.

Matthew Partridge: What about advances in medical imaging, such as MRIs and CT scans?

Douglas Williams: During my career, I was involved in the early development of some of the first approved drugs in the amyloid reduction arena and what really turned the tide was being able to understand what these drugs were doing inside the brain; it's hard to do without some way of looking at the target. I think faster and more effective scanning technology has already fed back into neurology-drug development.

Matthew Partridge: Do you think in five years' time the range of treatments for neurological conditions, things like dementia, could be radically different?

Douglas Williams: Yes, there's so much activity in this area, a reflection of the problems posed by ageing populations.

Matthew Partridge: How is AI going to change drug development?

Douglas Williams: It depends on your definition of drug development. Taking the all-encompassing view, where a fully integrated company does the discovery, drug development, manufacturing and sales and marketing, it will change the whole process. One example is in manufacturing. Already, we can take real-time data from the bioreactors that are used to manufacture proteins, and AI can use this to tweak the process to make sure that you maximise productivity. There's an increasing amount of work now on using AI in the clinical-trial process, both in terms of designing the trials and dealing with back-office operations.

I've been in this field for 40 years, and it's remarkable what some of the young companies I'm involved in are doing with AI. I'm optimistic that in the next ten years, we'll start to see the impact of AI on designing new molecules and finding new drugs too.

Matthew Partridge: Do you think that there will still be a need for actual scientists, rather than AI alone, to be involved?

Douglas Williams: Without question. If you ask ChatGPT or Claude a question, how the question is worded matters a lot, and that's where the role of the scientist really shows itself – the better the question, the better the answer. So, there will always be a place for the human element in terms of driving science.

Matthew Partridge: Have investors in the sector learnt to tune out political noise and focus on the long-term growth story?

Douglas Williams: I think so. Stock market valuations have risen while mergers and acquisitions have proliferated, which is always healthy because it gives investors capital to put back to work. So a virtuous circle has developed. There's never been a more amazing time in terms of the tools that we now have for drug development, while our understanding of biology continues to expand.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

UK small and mid-cap stocks have been in the shadow of their larger peers, but are beginning to reassert themselves. Since the start of April, the FTSE 250 has outperformed the FTSE 100 by around 6% – a notable development given ongoing macroeconomic and political uncertainty. Investors are increasingly recognising the opportunity, particularly as valuations for UK small and mid-cap stocks remain well below historical levels. At the end of the first quarter, the FTSE 250 was around 21% below its long-term average compared with a more modest 4% discount for the FTSE 100.

The FTSE 100 is often favoured for its global diversification and income profile, but small and mid-cap stocks offer many of the same characteristics. More than half of revenues are generated overseas and dividend yields of around 3% are broadly competitive with large caps. Some domestically focused UK businesses face headwinds from softer demand, cost inflation and the wider economic backdrop, but others continue to deliver strong growth and resilient earnings. The breadth of international exposure is also important, spanning sectors from mining to US infrastructure, defence and global industrial production – providing access to a wide range of end markets.

Three UK small and mid-cap stocks to invest in

AJ Bell (LSE: AJB) is well positioned within UK asset management, benefiting from long-term structural growth, supported by favourable demographics and a gradual decline in state provision for retirement. The platform market has expanded at an annual rate of around 11% since 2018 and AJ Bell continues to gain market share, with roughly two-thirds of the addressable market still yet to move onto platforms. Its diversified model spans both adviser and direct-to-consumer channels, supported by strong client retention. Around 81% of revenues are recurring, complemented by excellent Trustpilot ratings.

Ongoing investment in the brand, technology and pricing is driving growth in customer numbers and earnings, underpinned by a strong record of execution from the management team.

Helios Towers (LSE: HTWS), an Africa-focused telecoms tower operator, is supported by sustained investment from mobile-network operators looking to expand coverage and improve the quality of service. Key growth drivers include increasing mobile penetration, rising data usage and the rollout of 4G and 5G networks. Mobile connectivity plays a central role in everyday life across the region, reflecting its importance not just for communication but also as critical payments infrastructure. Helios benefits from a scalable, largely contracted revenue model that provides good earnings visibility. The company is also building long-duration infrastructure assets, designed to generate cash flow and returns while supporting the continued rollout of its tower network.

Paragon Banking (LSE: PAG) focuses on specialist lending across the buy-to-let and commercial sectors. Sentiment remains cautious, but the stock trades on seven times earnings and a yield of 6% and there is an ongoing £100 million share buyback programme. It continues to deliver attractive returns of around 17% while maintaining strong credit quality, having successfully lent through multiple cycles. Its focus on professional landlords – typically less affected by government intervention – alongside a well-structured funding base, supports the case to buy for long-term investors.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

In a major speech on Monday, Andy Burnham, our prime-minister-in-waiting, at last deigned to give us some clues about his plans for the country, including a massive transfer of power to the cities and regions. Apparently, the key to unlocking growth is to devolve power to city mayors and local councils and a proposed “No. 10 in the North”. Burnham promises a programme of council-house building, to bring the utilities under tighter public control and to restore the high street to its former glories.

There was a lot of waffle and not much in the way of concrete proposals, but he was at least trying to seriously address some of the structural flaws in the British economy.

And he is not just trying to chuck money at the issue, as most of his predecessors have done, even if the main reason is that the money has unfortunately run out. The problem, however, is that the country does not actually need more devolution. What it needs is more wealth creation.

Andy Burnham is repeating a failed experiment

There are three major problems with a focus on the regions. First, Britain has already had a 25-year experiment in devolution, with both Scotland and Wales having their own governments and assemblies and, in the case of Scotland, even limited powers over taxation. And the results? Unfortunately, dismal.

Scotland's growth has started to lag the rest of the UK, while spending has grown so fast that were it an independent country, its deficit would be running at an alarming 9% of GDP. As for devolved tax powers, it turns out they are only ever used to make taxes go up, not down.

As for Wales, it has been even worse, with close on 20% of the working-age population now living on benefits, traditional industries wiped out, and with living standards that are now among the lowest in Europe. If devolving power was so great for the local economy, there is not much sign of it so far.

Next, devolution will just create yet more government and more spending. Devolution in Scotland and Wales has mainly created just an extra layer of politicians, all of whom have to justify their existence by spending more money and passing yet more regulations. That is how Wales ended up with a 20mph speed limit in urban areas right across the principality, even if it slows down commerce by adding to the cost of every delivery. Or how Scotland ended up with rent controls even though they never work. It seems extraordinary that anyone could look at Britain in 2026 and decide that what it really needed was yet more government and higher levels of spending. Yet that is Andy Burnham’s only prescription.

Andy Burnham is micro-managing decline

What the British economy needs is not more power for the regions, but more power for businesses and consumers. With all his talk of “ending 40 years of neoliberalism”, it seems to have escaped Andy Burnham's notice that the government has never been more powerful than it is now. It accounts for 45% of GDP directly and micro-manages trade and business in a way that it never used to.

Take the living wage. According to a recent report from the Centre for Cities, in 42 of Britain's 63 largest cities the living wage is now above two-thirds of median earnings. In effect, what everyone earns is now decided by the government.

Or take energy prices. What you pay as a consumer is determined by the price cap from Ofgem, and the amount factories pay is decided by a complex series of green levies, and the wholesale price for wind and solar is set by a range of long-term, state-controlled agreements.

In Scotland, the government is planning price caps for basic foods and it probably won't be long before that is introduced nationwide (the chancellor has already publicly criticised the supermarkets for raising prices too quickly). The number of prices that are set in a free negotiation between the buyer and seller, which is the way it is meant to work, is getting smaller all the time.

It is hard to see how yet more state intervention is going to help anyone. If this is the best that Andy Burnham has to offer, it is going to be a long, hard slog until the next election.

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Healthcare is particularly well placed to benefit from artificial intelligence (AI), which is revolutionising data-heavy industries. If there's one thing AI can do better than anything else, it is to sort, analyse and draw patterns from data. And if there is one sector with more data than anywhere else, it's healthcare.

AI tools and increased computing power give us the ability to interpret CT scans in milliseconds; comb through drug-trial data in minutes rather than months; and discover new treatments by analysing hundreds of historical studies. This is unlocking results that researchers could only have dreamed of five years ago.

Moreover, demand for healthcare is unlikely to be hurt by AI. Humans won't stop getting ill as tech gets better. They may even require more healthcare as AI unveils more solutions to previously incurable diseases and extends lifespans.

Yet the market does not seem to care about this healthcare revolution. Investors are going all-in on the market's leading AI companies, but they are ignoring this thematic play.

AI can help healthcare profit margins recover

The valuation of the global healthcare sector is trading broadly in line with its own long-term history, according to broker Panmure Liberum. However, when adjusted for normalised profit margins, it's trading at levels not seen since the 2009-2012 period. That is because margins have fallen from 10% to 6%-7% over the past five years as costs have risen – a trend that AI should help to reverse.

Healthcare sector is trading at a discount

The overall healthcare sector is trading at a discount of roughly 50% to the MSCI All Countries World Index (ACWI) on a normalised earnings basis. That said, in the pharma sub-sector, the opposite is true. It looks cheap on a price-to-earnings basis, but verges on the expensive when margins are adjusted back to historical levels (14% vs 18% today).

Still, both sectors deserve a premium valuation. Over the past ten years, the MSCI ACWI Healthcare and MSCI ACWI Pharmaceuticals sectors have booked revenue growth of 7.6% and 5.9% per annum, respectively, compared with 2.5% for the wider MSCI ACWI. Earnings have grown at 5.9% and 7.1% respectively, against 4.5% for the ACWI.

The best ways to invest in healthcare

One way to play this theme is Worldwide Healthcare Trust (LSE: WWH), managed by specialist investment advisor OrbiMed (over $20 billion in assets under management with a focus on healthcare). The trust has been hurt by its overweight exposure to China and biotech over the past five years, but this paid off in 2025 when it outperformed its peer group by seven percentage points. Over the long term, it has beaten the MSCI World Health Care by 2.3% per year since 2010. The shares are at a 7% discount to net asset value (NAV).

Polar Capital Global Healthcare (LSE: PCGH) is more exposed to the undervalued healthcare sector than to biotech. The trust traded at a discount of about 12% four years ago, but is now trading at a premium and has been issuing shares this year. It has outperformed its benchmark by 39.2% over the past five years. After a restructuring last year, it has leaned into low valuations by adding gearing of £40 million (9.7% of NAV).

RTW Biotech Opportunities (LSE: RTW), the Biotech Growth Trust (LSE: BIOG) and International Biotechnology (LSE: IBT) all sit at the more speculative side of biotech. While they are trading at near double-digit discounts, their positioning means investors should be more cautious.

BioPharma Credit (LSE: BPCR), managed by specialist investor Pharmakon, takes a different approach by making loans secured against companies' drugs and products. It has a great record – just one loan since 2009 hasn't performed as expected. The trust is trading at a 5% discount to NAV and yields 10.9%.

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Some analysts have proclaimed that AI is more important and will be more transformative for human development than the creation of the railways. With the world's largest technology companies now spending more than $1 trillion a year expanding their presence in the market, there's no doubt this theme will dominate for the foreseeable future.

However, as investors focus on the so-called hyperscalers – Alphabet, Microsoft and Amazon – which are building their AI infrastructure at an alarming rate, as well as chip manufacturers such as Nvidia and Micron, which are supplying the industry, not much attention is being directed to the infrastructure that will power this revolution. This is where bottlenecks are now starting to throttle growth.

The energy grid needs an upgrade to power AI

The critical one is the power grid. In the US, for example, the grid is around 50 years old and was not designed to handle the current level of rapid growth in demand. The graphics processing units, or GPUs, that underpin AI data centres today are vastly more energy-intensive than their previous counterparts.

Research compiled by Goldman Sachs and JPMorgan estimates that by 2027, AI server racks will require 50 times more power than the equivalents that formed the backbone of cloud infrastructure five years ago.

The computing power of any facility consumes only around 60% of the total energy requirement. The rest is taken up by cooling systems and other infrastructure.

As the hyperscalers expand, they are learning that Silicon Valley moves much faster than the rest of the world. GPUs have become 50 times more energy-intensive over the past five years, but global energy output has risen by just 1%-3% per year. In the real world, it can take five to seven years just to secure permits and sign initial contracts to build the power infrastructure. This has started to change in the past two years, but there's still a long way to go. According to the International Energy Agency (IEA), global electricity consumption by data centres will double to 945 terawatt-hours (TWh) by 2030, representing roughly 3% of global demand for electricity. That's roughly the same as adding 34 Hinkley Point C-scale nuclear-power plants to the global grid. Between 2025 and 2030, data-centre electricity consumption is expected to grow by 15% per year, four times the growth rate of total electricity consumption across all other sectors.

Electricity consumption from accelerated AI data centres, the most intensive units that train AI models, will rise by 30% annually. In the worst-case scenario, the IEA estimates that global data-centre demand for electricity could exceed 1,700 TWh by 2035, nearly 5% of global demand for electricity. If the industry becomes more efficient at utilising power, that figure could fall to 970 TWh. If the electricity industry fails to rise to the challenge, demand could be limited to 700 TWh by 2030, nearly 25% below the base-case scenario.

This bottleneck is most apparent in the US and China, where the most time and energy are being spent on AI development. China and the US will account for nearly 80% of global data-centre electricity consumption growth to 2030, according to the IEA. The US, in particular, is facing a projected power access shortfall ranging from 10.4 gigawatts (GW) up to 49GW by 2028, even though projections from the US Energy Information Administration (EIA) show the grid adding 86GW of new utility-scale electricity-generation capacity in 2026, the largest single-year rise since 2002.

Rise of the ‘Bring Your Own Power’ model for data centres

To get around some of these issues, data-centre providers are increasingly seeking to innovate. The “Bring Your Own Power” (B-Y-O-P) movement, for example, is bypassing grid-connection bottlenecks by building on-site microgrids, utilising utility-scale batteries, solar panels, fuel cells and wind and gas turbines. Elsewhere, data-centre operators and hyperscalers are working with utility providers to purchase and install natural-gas power stations.

Data-centre providers are also shifting their attention to gas-rich zones such as the Permian Basin in Texas and New Mexico, where natural-gas pipeline capacity is severely constrained (gas prices recently dropped below zero despite the war in the Middle East). Companies are building off-grid data centres directly at these extraction sites, monetising otherwise stranded gas that would have zero economic value.

For example, Microsoft (Nasdaq: MSFT) and Chevron (NYSE: CVX) are partnering to build a $7bn, 2.5GW off-grid natural-gas power complex in Pecos, Texas, specifically to supply Microsoft's AI data centres under a 20-year agreement. Williams (NYSE: WMB), a pipeline company transporting a third of the natural gas moving across the US, is developing “Neo”, a $2.3 billion project utilising gas turbines paired with battery energy storage systems (BESS) for a major hyperscaler. This is the company's fifth BYOP agreement.

Some providers are also turning to AI to help mitigate AI's impact on power grids. A recent report from the World Economic Forum notes that “power-flexible” AI factories can dynamically modulate their electricity use, throttling energy-intensive tasks such as model training during periods of stress for the grid and routing more mundane tasks (such as answering simple questions on ChatGPT) to other locations. This flexibility enables data centres to capitalise on the volatile nature of renewable-energy generation.

Energy prices take the strain

As the utility market has struggled to adapt to the surge in demand for electricity, prices have responded. Wholesale electricity prices have jumped across all global markets, and the impact is particularly acute in the US. In some eastern US states, prices have risen 76%. According to the Bureau of Labour Statistics, across the country, electricity prices are rising nearly 61% faster than general inflation. The entire supply chain is feeling the pain. Lead times for the production and delivery of grid equipment have skyrocketed. Standard electricity transformers now take 128 weeks to deliver, compared with just 16 weeks in 2019. In some cases, specialist transformers are being delayed for nearly three years.

The production of highly efficient combined-cycle gas turbines can take up to four years, more than double the length recorded in 2022, and across the entire supply chain analysts put the average price rise at 30% across all grid equipment. There's also been a dramatic shortfall in the number of construction engineers and electricians, with the figure put at nearly 300,000 construction engineers and electricians in the US over the next decade. There are no quick solutions to any of these problems. While producers try to scale up output to meet rising demand, it looks as if they will continue to hold all the cards for the next five years at least.

There are three ways for investors to play this trend. There are the companies that generate power, those that make equipment for power stations, such as gas turbines, and those that manufacture cables and equipment to transmit electricity from A to B.

Tap into the AI energy boom with power players

One of the hottest plays is GE Vernova (NYSE: GEV). Created as part of General Electric's break-up, GE Vernova specialises in designing, manufacturing and maintaining equipment for the power-generation industry. Its technology provides roughly 25% of the world's electricity and the group has an order backlog of $163 billion, or 3.5 times sales. Its order backlog for gas turbines sits at around 100GW – around 2.5 times the UK's total daily electricity consumption. UBS has modelled 14% annual organic sales growth for the group through 2028 based on its current order backlog, with a 22.7% Ebitda margin by 2028, up from 8.4% in 2025.

Unlike the GPUs that power data centres, which have an estimated average life of around five to eight years, gas turbines can last up to three decades, locking in a multi-decade service contract for Vernova. The firms also offers kit for firms running older units (20 years and upwards) to help improve reliability and efficiency. Despite this growth and its key market position, there's a lot priced into the stock at a mid-30s price-earnings (p/e) ratio, but UBS argues that the valuation is worth it given the revenues and potential for margin growth.

Rolls-Royce (LSE: RR), which came close to a government bailout in the pandemic, is now one of the world's most sought-after power engineers. For the year to the end of 2025, the company reported a 12% jump in underlying revenue to £20 billion and underlying operating profit rose by 41% to £3,462 million, equating to a margin of 17.3%. Profit growth was driven primarily by the power-systems arm (25% of revenue), where the divisional margin expanded by 430 basis points to 17.4%. The firm put this down to “growth driven by data centres” and it's hoping its “power-dense” next-generation diesel and gas engines will continue to drive growth. Its technology is in demand as data-centre providers seek alternatives to bypass ever increasing queues for power-grid connections. The FTSE 100 company recently noted that orders across gas and diesel engines in the first quarter was around 50% higher than last year and March was a record month. Power Systems' order backlog was £7.3 billion at 31 March.

But Power Systems isn't just about data centres. The business also produces battery energy-storage systems and engines for Leopard tanks. What's more, last year Rolls-Royce conducted the world's first successful test of a high-speed marine engine running on pure methanol. There's also the company's nuclear business. A long-time supplier of nuclear reactors to the Royal Navy, Rolls-Royce has begun moving into the civil market with its small modular reactors (SMRs). In June last year, Rolls-Royce's SMR was chosen as the sole provider in the Great British Energy – Nuclear competition to build three SMR units in the UK.

Rolls-Royce SMR also received a strategic investment from CEZ Group, alongside a commitment for up to six units in the Czech Republic. In mid-June, the division was selected to deliver three SMRs on Sweden's west coast in partnership with Videberg Kraft. Based on current estimates, Rolls-Royce is trading at a forward p/e of 38.2, falling to 32.7 in 2027, according to average analysts' estimates. Those have ticked higher after the company's latest upbeat trading update and Berenberg has pencilled in a forecast of £8 billion of share buybacks over 2026-2028, split by £2.5 billion in 2026, £2.7 billion in 2027 and £2.8 billion in 2028, with scope for more cash returns if cash flow beats projections over the coming months.

A US peer of Rolls-Royce is BWX Technologies (NYSE: BWXT). Like its UK counterpart, BWX has the backstop of a US Navy contract in its back pocket to support its general operations – it has been the sole nuclear-fuel provider to the US Navy for more than 70 years. It's now seeking to grow in the civil market, where it provides specialised, complex, high-precision equipment used in nuclear reactors, including steam generators, reactor-pressure vessels and piping. It has an order backlog of $8.7 billion (around 2.2 years of revenue) bolstered by the recent $1.4 billion set of contracts through the US Naval Nuclear Propulsion Programme. However, at nearly 50 times forward earnings, there's a lot baked into the current share price.

How to invest in the undersea cable kings

The energy-transfer market is more concentrated than the other two potential investment segments. The renewable-energy transition has triggered an unprecedented global demand for ultra-high-voltage subsea cables to transport power from offshore wind and solar sites to urban centres, a market that did not exist 15 years ago. It's currently dominated by a European oligopoly consisting of Prysmian (Milan: PRY), Nexans (Paris: NEX), and NKT (Copenhagen: NKT). These companies emerged as the winners in what was an incredibly competitive market, with lots of smaller players that couldn't keep up with the capital-spending commitments required to manufacture vast undersea sea cables.

High-voltage direct-current (HVDC) cables can be thick, and they must be kept completely straight during manufacturing, which often requires companies to hang them inside skyscraper-high warehouses. The capital required to build this infrastructure runs into the billions. For example, the 500-kilometre Eastern Green Link 2 (EGL2) project in the UK, the single largest ever investment in electricity-transmission infrastructure in the country, has a price tag of £4.3 billion, with £2.7 billion of that for the cable itself.

The global high-voltage submarine cable market is expected to grow at a compound annual growth rate of 17.3% over the next decade. Production hit 7,000 kilometres in 2025, an all-time high, and the major players are rapidly ramping up production. Prysmian is drawing on its experience in this market to expand in the DC inside-building segment – essentially wiring up the power inside data centres. The company believes it will become a one-stop shop for data-centre construction contracts, building long-haul subsea connections and shore-based transmission infrastructure, and then for infrastructure throughout the building to power GPUs and air-conditioning units.

Management has estimated that overall global demand for DC power will expand at a compound annual growth rate of 33% over the next five years, with the bulk of this coming from AI-related data-centre growth. Analysts have pencilled in earnings growth of 25% for 2026, followed by 23% for 2027, with a net profit of €1.7 billion projected for 2027, up nearly ten times from 2020. Based on these projections, the shares are trading at a 2027 p/e of 24.9, which doesn't seem too demanding for a high-growth business operating in an oligopoly.

Prysmian is around three times the size of its smaller peers, both of which are using their growing profitability and cash flow to expand into newmarkets. Of the two, Paris-listed Nexans is the cheapest, trading at a 2028 p/e of around 13 based on management's growth targets. The group has laid out a road map to achieve an adjusted Ebitda of €1.2 billion by 2028 (up from about €750m) through growth in its three main businesses: PWR-Transmission, PWR-Grid and PWR-Connect. Sales are already locked in with a backlog of €7.9 billion by early 2026, enough to cover sales through to 2028.

Deals will also be a major part of the future growth plan. It recently added US-based Republic Wire to the stable to bulk out its US arm (about 15% of revenue). Republic reported sales of €52millionmn in its latest fiscal year and will be a key conduit for Nexans to enter the US data-centre market. Nexans plans to use Republic Wire's established channels to sell its own comprehensive offering of medium-voltage and grid technology into premium US end markets. The acquired business is currently finalising a significant expansion programme, which will increase its production capacity by about 30% by the end of 2026.

How to play coal

Another FTSE 100 company that's strategically well placed is National Grid (LSE: NG). Although still small compared with the US and Chinese markets, the UK data-centre market is the largest in Europe. National Grid believes demand for electricity in the UK will increase by 30% by 2035 to 290GW with a 90% increase in installed generation capacity to 370 TWh. To meet this demand, the company is investing £41 billion by 2031 to expand its regulated asset value by 60% to £60 billion. It is also going to invest £29 billion to expand its US business to a regulated asset value of £45 billion, with a focus on its key markets of New York and Massachusetts. The shares currently look cheap, selling at a forward p/e of 13.9.

One sector investors could also consider is coal. According to Global Energy Monitor, more than 2,200GW of coal-powered generation still operates worldwide, with another 710GW under development. China is scaling up its coal-output market to meet increased demand for energy and a total of 32 countries are proposing, or building, new coal plants to meet the growing need for power. At the beginning of June, Donald Trump announced plans to build two new coal plants in Alaska and West Virginia under the Defence Production Act, adding to the US coal fleet, which supplies 15% of the country's demand for power. Alliance Resource Partners (Nasdaq: ARLP), Peabody Energy Corp (NYSE: BTU) and Warrior Met Coal Inc (NYSE: HCC) are three left-of-field plays worth considering here.

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What exactly is an emerging market? You can debate all sorts of measures of economic development and levels of income as the cut-off point, but as far as the financial world is concerned, what matters most is whether the stock market is part of the MSCI Emerging Markets (EM) index or not.

The AI boom is starting to stretch this line of reasoning, as we have noted a few times in recent weeks. The performance of a handful of stocks that are integral to the semiconductor sector means the index is increasingly heavy in tech (now 43% of the total). It has almost 50% in two economies – Korea and Taiwan – that are clearly advanced, wealthy countries. Yet while AI has made this very obvious because of its impact on the index, the underlying point has been true for much longer. Korea and Taiwan are “emerging” under MSCI's market-access criteria, but they fully emerged in an economic sense a while ago.

Is China an emerging market?

You can go further. The third largest weight is China, at about 20%. China's GDP per capita in purchasing power parity (PPP) terms is still firmly in emerging market territory – it's about half of the UK's, for example – but this disguises enormous variation between the wealthier coastal provinces and those further inland. It is also by far the world's second-largest economy in nominal terms. To what extent can we view it as a traditional emerging market?

Note, too, that all these three countries – almost 70% of the index – are in East Asia. At this point, is the MSCI EM vastly different to the little-quoted MSCI AC Asia, which adds nearby Japan into the mix? The chart above suggests not.

A “true” emerging market ETF

The practical investor may be happy enough. After all, if returns are good, why split hairs about definitions? Yet it's important to understand where returns are coming from, how an end to the AI boom might change this, and what the options are if you want more traditional emerging market exposure.

I have previously mentioned Barings EMEA Opportunities (LSE: BEMO) and BlackRock Frontiers (LSE: BRFI). Both are interesting, but neither is broad (BEMO is Eastern Europe, Middle East and Africa, while BRFI excludes the eight largest emerging markets).

Instead, we could look at a relatively new exchange traded fund (ETF): WisdomTree True Emerging Markets (LSE: WEMP). This drops China, Korea and Taiwan, with India and Brazil as the largest positions. There is very little tech; you get a classic emerging-markets portfolio with more than 35% in financials.

To my mind, this goes too far for most investors as a standalone holding. It might be preferable to just cap exposure to the big three. Still, owning this alongside a conventional EM fund would be one way to get more balance in a portfolio.

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The Magnificent 7 stocks (Mag 7) are starting to look mediocre. The group, which is made up of Nvidia, Alphabet, Apple, Microsoft, Amazon, Tesla and Meta, has been in the vanguard of the AI boom. Between the beginning of 2023 and the start of this year, the seven US technology mega-caps added $15 trillion in value between them and grew to account for a third of the entire S&P 500 by market capitalisation, say Emily Herbert and Tim Bradshaw in the Financial Times. Yet over the past month, they have collectively lost $2.2 trillion in value. Many of these firms are “hyperscalers”, with plans to lavish about $1 trillion on AI data centres. Investors are increasingly sceptical about whether such huge sums will ever generate a meaningful return.

Microsoft's and Meta's shares are in a “bear market”, having fallen more than a fifth from their peak, says David Goldman on CNN. The others are down at least 10%. There are growing signs of nervousness about technology valuations. The Nasdaq index fell every day last week. Korea's Kospi, which plays host to some major AI plays, has been on a wild ride this year, including another 10% plunge on 23 June.

Magnificent 7 stocks decline, but semiconductors soar

Yet while the Magnificent 7 stocks are falling out of favour, a boom in the firms selling computer chips to them at eye-watering prices has “more than made up the difference”. Micron's shares have gained 265% this year, Samsung is up 144%, and Intel has surged 254%. The semiconductor industry alone now accounts for 19% of the S&P 500's market value. The iShares Semiconductor exchange-traded fund (ETF) rocketed a staggering 110% in the first half of the year, says Ines Ferre for Yahoo Finance.

That pushed the US technology sector to its best first-half performance in three years, the slump in the Magnificent 7 stocks notwithstanding. AI data centres require specialised computer kit, but there is now an acute shortage and “it takes years to build new production facilities” for chips, says James Mackintosh in The Wall Street Journal. The result has been soaring prices: Micron's have “quadrupled” in the past year. Consumers have been caught in the crossfire, with Apple hiking prices for its computers. The net effect is “an enormous transfer of cash” from the AI hyperscalers to memory-chip makers. The problem for the AI industry is that firms such as ChatGPT-maker OpenAI were already loss-making (venture capital has been subsidising an expensive grab for market share). Now the maths looks even more challenging for the businesses that started the AI boom.

In retrospect, the best thing to do over the past six months would have been to go long chip stocks while shorting software firms, says John Authers on Bloomberg. Korea's chip-dominated Kospi stock market index has almost doubled since 1 January, while the S&P 1500 software index is down 17.5%. US technology-related capital expenditure is now slightly above the 5% of GDP peak it reached in 2000 during the dotcom bubble. By attracting “more capital than they can productively use”, investment bubbles ultimately “sow the seeds of their own destruction”.

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The energy transition – a global process of shifting from fossil fuel-based power production to renewable energy – is coming along apace, and the commodities underpinning it offer enticing opportunities for investors.

Even in the US under president Donald Trump and his ‘drill baby drill’ agenda, renewables usage is on the rise. Renewable energy generation in the US increased 10% in the first four months of 2026 compared to the same period a year before, according to data from the US Energy Information Administration, driven by a 21% increase in utility-scale (above one megawatt) solar power. Renewable sources generated more than half the country’s energy during that period, and the proportion increased from the previous year.

The International Energy Agency (IEA) expects more than double the amount of renewable power capacity will be added globally between 2025 and 2030 than in the previous five years.

But it’s an often overlooked theme that has become less fashionable for investors in recent years.

“The sentiment around renewables, decarbonisation and ESG… has been a bit less strong over the past few years, but the reality of it is none of this investment has stopped,” Rosa Leo, equity investment specialist at Aberdeen Investments, told MoneyWeek.

“When we talk about investment in renewables and the green energy transition, it’s not just a decarbonisation story, it’s also an energy security story,” Leo added.

Why energy transition materials can offer diversification

Compared to other commodities, many energy transition materials have distinct structural supply and demand imbalances that could push up prices over the long term.

“Many metals face a supply deficit in the years ahead, due to a lack of investment in exploration and discovery, as well as long lead times for new mines,” Mark Burridge, manager of the SVS Baker Steel Electrum Fund, told MoneyWeek.

Unlike gold, the price of which is largely dictated by interest rates, long-term decarbonisation policies and new growth industries underpin demand for energy transition materials.

“As a result, they offer lower correlation to traditional equities and bonds while adding structural portfolio growth,” explained Asad Farid, portfolio manager of the JSS Sustainable Equity – Strategic Materials fund.

“Supply cannot respond quickly to demand spikes,” said Farid. “Because new projects require four to seven years of lead time, producers retain pricing power.”

Some of the most critical energy transition materials occupy strategic supply chain bottlenecks, meaning national governments often guarantee to buy output in advance at locked-in prices.

“Consequently, these producers see more resilient and predictable earnings growth than traditional commodities,” said Farid.

What are some of the most important energy transition metals?

Copper

Front and centre in the energy transition is copper, because almost every new aspect of the energy transition involves some form of electrification – and copper is the most efficient conductor of electricity available.

That makes it one of the most appealing long-term opportunities available, according to Leo, from Aberdeen. It goes beyond the energy transition: “the tech industry, data centres, they all require copper.”

This is driving demand higher while supply is suffering due to under-investment over the past decade or so: according to Leo, copper’s supply shortfall could reach 30% in the next 10 years.

Major copper producers include Southern Copper Corporation (NYSE:SCCO), Anglo American (LON:AAL) and Antofagasta (LON:ANTO).

Rare earths

Rare earth minerals comprise a range of heavy metals which, contrary to what their collective name implies, are not especially rare – but are very difficult to extract from their naturally-occurring compounds.

They have distinct magnetic properties that make them essential for various applications in clean energy and modern technology – meaning that like copper they have an overlap with the cyclical economy.

Like copper, rare earths have an overlap with the cyclical economy because they are key components in the majority of tech hardware.

“The only country that has really invested in [rare earth extraction] is China,” said Leo. “It’s quite emblematic of the geopolitical aspect and relevance of the minerals: developed countries outside of China really are reliant on China for their supply of these minerals.

“So we expect huge investments from countries worldwide, especially in extraction and especially in miners outside China,” she added. “The price of rare earths is going up, and their geopolitical significance is increasing.”

Uranium

Nuclear power is one of the most reliable forms of renewable energy, and has come back into favour following decades of neglect.

There are currently around 80 nuclear reactors under construction globally, with another 120 planned, according to the World Nuclear Association.

“This is going to have an impact on uranium demand,” said Leo. “This is another area in which we see huge opportunities, especially when it comes to the uranium extraction market.”

Lithium

Most energy storage and electric vehicle (EV) batteries are based on lithium, making it a crucial commodity for the energy transition.

According to the IEA, the global lithium-ion battery market grew by more than 20% in 2025 and now exceeds $150 billion.

And as with many energy transition materials, demand is growing faster than supply.

“Lithium [supply] is tightening as stationary storage demand accelerates alongside strengthening EV sales in Europe and China,” said Farid. “The supply response is likely to lag for some time.”

Aluminium

“Aluminium is critical for grid infrastructure and lightweighting,” said Farid.

It is a key component of solar panels, as well as electric vehicles (its light weight allows some of the additional weight of heavy batteries to be offset).

Aluminium supply is tight: around half of Middle Eastern production of the metal has been lost as a result of the conflict.

“This deficit is exacerbated by rising power costs from AI driven data centre demand, and Western protectionist measures limiting scrap outflows to Asia,” Farid added.

How to invest in energy transition commodities

If you want to invest in the energy transition, one way to do so would be to buy contracts on the commodities themselves – but this isn’t the recommended approach, largely because many of the materials involved have fairly shallow markets.

Instead, Leo recommends buying the companies that produce the commodities or put them to use.

Aberdeen’s Future Raw Materials ETF (LON:ARAW) takes this approach and holds energy transition material producers: top holdings currently include the likes of uranium producer Cameco (TORONTO:CCO) and Southern Copper.

The Baker Steel Electrum Fund also holds Cameco alongside a portfolio of speciality and precious metal producers, including aluminium producer Norsk Hydro (OSLO:NHY). Norsk Hydro is the top holding in the JSS Sustainable Equity – Strategic Materials fund as of 31 May.

Assuming no Labour MP throws their hat into the ring to challenge him, Andy Burnham looks set to be the UK’s next prime minister – and he could assume the office as soon as 17 July.

You might be wondering what a Burnham administration could mean for your money, in particular your investments. After all, the UK’s stock market has had an eventful year so far: the FTSE 100 reached its all-time high of 10,935 on 27 February, just before the Iran war broke out. It fell off sharply over the following weeks, and while much of the lost ground was recovered by the end of March, it still has not regained its late February highs.

UK stocks have been undervalued compared to international counterparts for some time, and while that’s a positive for value-focused investors, the hope is that something will, at some point, catalyse a revaluation so their prospects rise.

Could the UK’s seventh prime minister in 10 years be that catalyst, or is it more unwelcome news as far as the UK’s stock market is concerned?

“If Andy Burnham does get the keys to Number 10, he'll face a supremely tricky balancing act,” said Susannah Streeter, chief investment strategist at wealth manager Wealth Club.

The apparent prime-minister-in-waiting outlined his vision for the country on 29 June in a speech that majored on strengthening regional autonomy, but was otherwise light on detail.

“Investors will be looking for a clearer roadmap showing how growth can be boosted sustainably without unsettling bond markets or putting further strain on already stretched public finances,” said Streeter.

How UK stocks have reacted to the prospect of prime minister Burnham

There is widespread skepticism about how effectively Burnham can meet these challenges. Equally, it is yet one more source of turbulence for a market that could probably do without it.

“I think what the markets would like to see is some stability,” Jo Rands, portfolio manager on UK equity income at asset manager ClearBridge Investments, told MoneyWeek.

It is notable, though, that UK stocks have not reacted strongly (in either direction) since Keir Starmer announced he would step down, and Burnham emerged as his almost nailed-on replacement.

While some sectors have experienced jitters – Rands highlighted potential nationalisation concerns impacting the utilities sector – on aggregate there has been little reaction. The FTSE 100 gained 0.7% on 22 June, the day Starmer announced his resignation, and rose a further 0.6% between then and 30 June.

“The markets have been thinking about this potential change for a while,” said Rands. “Last year we were talking about the risk for UK equities thinking about the local elections, and the implications that could have on the market. So it’s been rumbling away in the background.”

Uncertainty itself, in other words, was already priced in. What is still not certain – and will likely have the greatest impact both on the UK economy and UK stocks – is who Burnham chooses to replace Rachel Reeves as chancellor.

“A week ago, when you looked at the prediction markets, Wes Streeting was the favourite,” said Rands. “Markets quite liked that.” But Ed Miliband appears to have become the more likely candidate in the meantime, and the markets are less keen on the prospect of him in number 11, according to Rands.

Whoever takes the role will be the primary person responsible for executing the precarious economic balancing act that Burnham will face – an unenviable task.

Why UK stocks offer diversification

The good news is that the UK stock market is not the same thing as the UK economy. The large cap stocks of the FTSE 100 are predominantly global companies who derive their revenue from all over the world – so they can perform strongly even if UK growth slows.

“A lot of people conflate UK equities with the UK economy,” said Rands, adding that it’s often more the mid- and small-cap end of the UK market (accounting for around 12% of its total value) that are heavily exposed to the domestic economy.

UK stocks also offer rich sources of diversification. Compare the top ten holdings of the S&P 500 and the FTSE 100:

*Based on weightings in the Vanguard S&P 500 UCITS ETF (LON:VUAG) and the Vanguard FTSE 100 UCITS ETF (LON:VUKG), which track the respective indices, as of 31 May.

Five of the S&P 500’s top ten holdings are designated as Information technology companies – with two of the other five being represented by Alphabet’s two different share classes. But given that all of the exceptions are members of the ‘Magnificent 7’ group of AI-relevant stocks, it’s fair to say that all of them are tech companies in a fundamental sense, if not according to their official designations.

The FTSE 100, meanwhile, has six different sectors included in its top ten companies, none of which include more than two companies.

“Global indices are predominantly US, which are predominantly tech,” said Rands. “In the UK, it’s spread across a number of different sectors.”

This month saw the Bank of Japan (BoJ) raise its main interest rate from 0.75% to 1% – the highest rate since 1995, in response to surging global energy prices due to the Iran war.

While Japan’s inflation rate has sat below its 2% target all year – it was 1.5% in May – a BoJ policy statement suggested a risk of it accelerating above that target, forcing businesses to pass on higher costs. This could lead to “an increase in consumer prices across a wide range of items”.

Widely expected by the market, the rate hike – decided by a vote of seven to one board members – was seen as a landmark step on Japan’s continued path towards ‘normal’ monetary policy, breaking out of a three-decade-long deflationary period.

Just one dissenter, dovish new recruit Toichiro Asada, voted to hold rates.

Economists and policymakers are described as ‘hawks’ or ‘doves’ depending on their approach to achieving economic stability. Hawks favour price stability and curbing inflation through tighter policy (rate hikes), while doves prefer economic growth and maximising employment through looser policy (rate cuts).

A summary of opinions from the bank’s two-day Monetary Policy Meeting (MPM) on 15-16 June was published by the BoJ last Wednesday (24 June). It doesn’t attribute quotes but cited one member as saying: “Raising the policy interest rate could suppress aggregate demand by curbing firms' business fixed investment, potentially inducing simultaneous declines in inflation and in production and employment. The Bank should therefore hold the rate steady at this point.”

Most of the opinions warned of mounting price pressures as businesses passed on the rising costs resulting from the weak yen and Middle East conflict.

What does the BoJ’s rate hike mean for Japan’s economy?

As Japan is an importer of natural resources, a weak yen pushes up the cost of imports for its domestic consumers and businesses, in turn fuelling higher inflation.

The yen is currently its weakest against the US dollar since 1986. Macrotrends data shows it was trading around 161.70 on 27 June, with traders braced for the possibility of further government intervention to prop up the currency.

Normally, if the BoJ hikes rates, the yen should get stronger. But according to Alex Hart, investment specialist at fund manager Sumitomo Mitsui DS Asset Management, that’s not happening right now because of the influence of the US.

He explains how people expected the US economy and job market to slow down, which would have led the Federal Reserve to cut rates. But economic revisions have held up – employment data was positive and inflation remains sticky – so a US rate hike may be expected instead.

Hart says this is weighing on the yen in terms of the attractiveness of the ‘carry trade’ (when investors borrow yen cheaply to invest in higher-yielding assets elsewhere).

“At the moment it’s probably more the US and global economy that are the determinants of the yen [as well as] real money demand,” he adds. Higher inflation is also encouraging Japanese consumers to buy more equities – selling yen and buying global assets. That creates additional downward price pressure on the yen.

That said, he doesn’t expect further yen depreciation because the government will likely intervene, which even if it doesn’t work it sends a message to hedge funds that might be looking to short the yen, for example.

Currency intervention is when a country’s authorities – in this case, the BoJ and Ministry of Finance – tap their huge reserves to sell US dollars and buy their domestic currency (yen), strengthening the local currency to help stabilise rising prices.

Many investors are waiting to see how all this affects liquidity, says Scott Gardner, investment strategist at investment platform J.P. Morgan Personal Investing.

A more ‘liquid’ market means consumers and businesses can spend, borrow and invest more easily, fuelling economic activity.

Where are the bright spots for investors in Japan?

Although the BoJ is slowly reducing its quantitative easing (QE) and bond-buying programme, Japanese banks are increasing lending and, in turn, their balance sheets.

“The commercial banks have been producing loads of liquidity, even more yen that has got to find its way into the market,” Gardner adds.

His team at the platform has been overweight Japan since the start of the year in its Fully Managed range, which is constructed using exchange-traded funds (ETFs).

“We like the Japanese economy and see overall economic activity improving, you’ve got the [aforementioned] liquidity picture and also a very pro-growth agenda coming from the Takaichi government,” he says.

Elsewhere, Hart says energy infrastructure-related stocks have performed well, while banks, consumer names and defence look promising.

“Some defence-related names have sold off quite considerably amid global expectations the war is ending. Also heavy aerospace, ships and tanks are being replaced by cheaper drones,” he says.

“But defence spending in Japan has increased to 2% of GDP – potentially moving higher than that. We’re seeing increased spending in other countries as well, also some of those names are now moving into drone technology, so that’s an area I think remains quite a bright spot in terms of its potential.”

Two of Japan’s biggest listed defence contractors are Mitsubishi Heavy Industries (TSE:7011) and Kawasaki Heavy Industries (TSE:7012). Both are listed on the TSE and investing in drone and unmanned aerial vehicle (UAV) technology.

Why invest in Japan?

The other exciting shift in Japan’s investment case, is its move away from a “sleepy giant of mainly industrials and financials” to a technology leader that’s holding its own alongside the rest of Asia.

“Semiconductors are the big thing at the moment, which plays into the index concentration dynamic you also see in the US. Around 21% of the Nikkei 225’s top 10 holdings are in semiconductors,” Gardner adds.

“The AI trade is in full swing across Asia; be it Taiwan, Japan, Korea… that's one of the reasons why the Nikkei has held up quite well relative to global market conditions.”

While most of the big tech beneficiaries are US-based, he sees the AI trade broadening because those further back in the supply chain who are actually responsible – “the picks and shovels”, as he describes them – are predominantly in Asia.

Hart also points to the tech theme; he says earnings growth is coming largely from data centres, with high levels of capex in electronic components.

Auto giant Toyota (TSE:7203) was Japan’s most valuable listed company by market capitalisation (market cap) for 20 years, holding the top position on the Tokyo Stock Exchange (TSE) before it was displaced by communications company SoftBank (TSE:9984) at the beginning of June.

Now in pole position on the TSE is computer memory manufacturer Kioxia Holdings (TSE:285A).

There is currently a ‘bottleneck’ in NAND flash memory (the type used in memory cards, USB sticks and SSD drives) and Hart says Kioxia (which spun out of Toshiba in 2018) is a pure play on that market.

How should you invest in Japan?

Investing passively in Japan right now is a big play on technology. For investors in index funds understanding the construction of the underlying index is crucial, especially if you’re looking at Japan to add diversification – you might end up doubling down on technology exposure.

The iShares Nikkei 225 UCITS ETF (LON:CNKY), which tracks its namesake index, has an approximately 40% weighting towards tech as of 26 June.

“The Nikkei 225 is share price constructed, which is one of the reasons why Advantest and Tokyo Electron are dominating the Nikkei. In the MSCI, they each make up less than 3%, so it’s a huge discrepancy,” Gardner points out.

It’s possible to invest directly in Japanese shares on some platforms, but this typically comes with restrictions, such as higher minimum investment amounts (Saxo) or having to give instructions over the phone (AJ Bell).

For more diversified exposure to the broader Japanese equity market, actively managed funds can cast their net wider.

Japan has around 4,000 listed companies, while even the TOPIX only has 1,500 names.

“Most of the inefficiency in terms of market pricing – given poor sell-side analyst coverage and so on – is potentially more exploitable with smaller and less-known companies, which active management can find,” says Hart.

Baillie Gifford Japanese is a growth-focused fund that invests in large and medium-sized companies with high and sustainable growth potential, while Man Japan CoreAlpha is another popular choice.

If you prefer closed-ended funds, some specialist investment trusts include J.P. Morgan Japanese Investment Trust (LSE:JFJ), Schroder Japan Trust (LSE:SJG) or AVI Japan Opportunity Trust (LSE:AJOT).

For broad Japanese index exposure, any of the major index fund providers likely have a Japanese equity offering at relatively lower cost, such as iShares Japan Equity Index or Vanguard Japan Stock Index.

Japan makes up around 5-6% of the global stock market (the second-largest regional exposure after the US), so indirect access via any number of global model portfolios or tracker funds will provide some exposure to the region.

It’s the British dream to become a homeowner, but for many young people it’s just that – a dream.

The average house price in the UK now sits at around £300,000, but if you have your heart set on the capital then it’s more like £550,000.

So, if you’re fledging, you will need to cough up a deposit of around £30,000 to £55,000 as a 10% deposit. You may be able to get a lower loan to value, with some lenders going as low as 5%, but you will need a polished credit score.

And remember, what you do not fulfil with a deposit ends up going to mortgage debt, the cost of which will vary throughout your mortgage term, which is typically 25 years.

For most first time buyers, this deposit is out of reach; after all, the average salary for 22 to 29-year-olds is £33,000. This would generate an income of £2,273 take home pay a month, and that is not taking into account pension contributions. It’s around £2,163 with a 5% pension contribution.

Now the average rent in the UK is £1,374, according to the Office for National Statistics, but it largely depends on where you live. London rent prices can exceed £2,000 a month on average.

So, there’s little left to save after living expenses, household bills and hopefully some fun.

But could moving back home for at least three years be worth it? And if you are a parent, would you let your adult child return rent free?

How long would you have to live with parents to save for a deposit?

Based on the median salary and a gross income pay of £2,163, which includes pension contributions, if you could put away £1,200 a month (just below the average rent) strictly and use the remaining for living expenses and to help support household expenses, then you could accumulate over £43,000 over three years.

Saving or investing the deposit over time means your final cash pot could be bigger, though if you want to use that deposit in fewer than five years, investing it may not be the best option as your cash won't be as liquid.

Of course, your savings habit would have to be strict – but staying with your parents and removing the rent pressure for at least three years could finally help you get onto the property ladder.

Rent is one of the biggest expenses young people face and even if they earn more, their ability to save is stumped by high renting costs.

Would you live with your parents for three years?

I asked a few ‘young’ people if they would live with their parents for three years. Some said they would take the hit whereas others said it would not work because their parents lived too far from where they worked. One person said it was simply not worth it as it could damage their mental health.

Checking in: the hotel of mum and dad

Recent research from think tank Resolution Foundation shows two in three young adults are now residing with their parents to save money.

Gen Z have become the stay at home generation, with 63% of young adults aged 20 to 24 living in their family home, and those aged 25 - 29 are also heading back to their childhood bedroom.

While the hotel of mum and dad is helping to make it easier for young people to save for a house deposit, the report found that the bank of mum and dad is still pivotal in helping them get a foot onto the property ladder.

But whether it’s the hotel or the bank of mum and dad, or even grandparents in some cases, for most adults born in the mid-1990s onwards, buying a house is simply out of reach without additional support.

These prolonged stays at the ‘Hotel Mum and Dad’ should theoretically also make it easier for young people to save for a deposit for their first home. However, the separate, but related, ‘Bank of Mum and Dad’ is still pivotal to getting people onto the housing ladder. Around one-third of first-time buyers last year had parental help, around 20 percentage points more than twenty years ago.

Oil giant Chevron (NYSE: CVX) has underperformed the broader energy sector by a significant margin, with a return of just 16% for the year. The company has greater exposure to oil prices than some peers – a $1-per-barrel drop in the price of Brent, for example, costs the company $600 million in cash flow.

Continued progress in the Middle East peace talks has had a positive impact on oil prices, however. Since the beginning of the month, the price of Brent crude has fallen by around $15 per barrel to $80, down from $95. This is good news for consumers and economies around the world, but it is bad news for oil producers. The S&P Commodity Producers Oil & Gas Exploration & Production index has fallen around 13% over the same period. The index, which was up 40% at one point this year, is now up just 19% year-to-date.

But now seems like an interesting time to buy into a business that's no longer just about oil. Indeed, Chevron is increasingly becoming a major player in the power business.

Chevron is branching out

Chevron is best known as an oil producer, but its most exciting business is the production of liquefied natural gas (LNG). The company does not break down exactly how much it earns from each facility and production line, but it does break down upstream (oil and gas production) and downstream (refining and trading) earnings. For 2026, UBS has pencilled in $20.4 billion of upstream and $4.3 billion of downstream earnings. Of this, analysts estimate that around 60% of upstream is liquids production, with the remainder gas and LNG.

LNG markets tend to operate differently from global oil markets. Due to the huge sums of capital investment required to set up and maintain LNG facilities, producers have to agree multi-year contracts with customers to guarantee a return. Chevron's flagship Gorgon LNG facility in Australia, for example, cost the company and its partners $55 billion in total.

Of the roughly 4.1 million barrels of oil equivalent the company is expected to produce in 2026, 80% is tied to long-term fixed contracts, with the remaining 20% sold on the spot market. These contracts are fixed, but still influenced by market prices. LNG contracts linked to Brent prices, for example, adjust with a three- to four-month lag. Analysts at UBS reckon that for every $10 rise in the price of Brent, Chevron gets $450 million in after-tax earnings from production from its two major Australian LNG facilities.

Crunching the numbers for LNG cargoes isn't easy for those outside the business. Prices are heavily influenced by natural-gas prices and demand. For example, prior to March, the profit on a single LNG cargo moving to Europe from the US jumped from about $25 million to $50 million as the spread between natural-gas prices in the US and prices for gas in Europe rose due to the Middle East supply shock, according to Energy Flux, an industry news site. While the world has been focused on Brent prices, it's US natural gas that's the important metric for Chevron. It estimates that a $1 move in price will add or subtract $700 million from its bottom line and, due to higher demand, prices have risen nearly 30% to $3.2 MMbtu since the beginning of April.

Chevron also has a smaller facility in Angola, which UBS estimates could generate a $180 million boost in Ebitda for every $2 increase in the price of the European gas benchmark, which is up around $5 per MMbtu in the past six months.

Ultimately, prices are linked to demand, and the LNG market cannot quickly adjust to demand as it can take decades to build an LNG facility. According to Shell, the world's largest LNG trader, demand is expected to rise by 68% by 2040 in the best-case scenario and by 85% by 2050, driven by stronger requirements for electricity. The IEA believes higher demand from electric vehicles and data centres and the like will add the equivalent of two European Unions to the global need for power by 2030 – only half of which will be met by increased renewable-energy and nuclear-power generation.

Chevron's new venture with Microsoft

Chevron has also launched a joint venture with Microsoft called Power Solutions, which will, for the first time, take it into the business of selling power. The first major deal was announced at the end of March and will see the partners develop a $7 billion, 2.5-gigawatt, natural-gas-fired power plant to support Microsoft's data centres. It will be powered by gas from Chevron's assets and will be built with room to double in size to meet demand.

Production should begin in 2027 and Chevron's bottom line is set to see the benefit from 2028 onwards. The business could become a significant contributor to profits over the coming decade, but this is not reflected in the share price. Chevron wants to build power plants producing seven gigawatts over the coming years. Selling power on long-term fixed contracts to the technology “hyperscalers” will add another predictable stream to Chevron's top and bottom lines, reducing the earnings volatility that's dogged the firm in the past.

That should justify a higher multiple and stronger cash returns. Based on current projections, UBS's analysts believe the shares are trading at a forward price/earnings (p/e) ratio of 16.6 for 2027, falling to 15.8 for 2028, assuming a 4% increase in production. The dividend yield is expected to come in at 4% this year and 4.2% next year. Recent declines in the share price could present a good opportunity for long-term investors.

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Investing in the shipping industry may seem like the ultimate contrarian trade. After all, the ink on the deal between the US and Iran to reopen the Strait of Hormuz is barely dry, and volumes are sharply down in the Suez Canal. Throw in the disruption caused by the Russian invasion of Ukraine and the perceived threat to global trade from US president Donald Trump's tariffs, and it does seem like a sector under threat. But if you look beyond the headlines, far from diminishing, the amount of goods shipping around the world “is only going to increase”, says Daniel Cunningham, founder and CEO of logistics firm Shiplo. At the same time, digitalisation and sustainability are creating new opportunities.

The bull case for the shipping industry

Perhaps the best reason to be bullish about shipping is that for many goods and commodities, it has few competitors. “From the days of horse and cart to the present day, sea travel still provides the most direct and efficient mechanism for moving large quantities of freight,” says Nick Bartlett, co-founder and director of Wayfindr, a Hong Kong-based 4PL logistics provider. Air travel has chipped away at this a bit, especially for immediate deliveries of individual packages, but shipping remains – and will continue to be – the “most cost-effective mechanism for moving large amounts of freight”.

Indeed, it is “one of the most economically efficient mechanisms for moving large volumes of goods across borders”, says Nadiya Albishchenko, founder and managing director of international trading company Inas Exim. This economic advantage means that the industry's long-term future should remain “fundamentally strong”, enabling it to overcome any short-term disruptions caused by geopolitics and continue to be the “backbone of international trade and global supply chains”.

At the same time, despite Trump's protectionist rhetoric, global trade “has never had it so good”, says Simon MacAdam, deputy chief global economist at Capital Economics. His tariffs have “not damaged bilateral trade between the US and other countries to the extent that most people were predicting” and the US “only makes up around 15% of world trade”. Meanwhile, the rest of the world “remains committed to free trade and is resisting the temptation to get stuck in a beggar-thy-neighbour spiral”. The AI boom is also a tailwind “as it is not only very goods-intensive, but also import-intensive”.

Similarly, while the shutdown of the Strait of Hormuz created a lot of short-term disruption for specific markets, that will be less of an issue in the longer term, says MacAdam. Proposed alternatives, such as new oil pipelines, “will be expensive and subject to many of the same risks as shipping” and, with Iran and the US committed to reopening trade routes, the Strait of Hormuz should be able to return to normal levels of traffic volumes by 2028. In any case, although the Middle East clearly remains a big shipping hub for oil, it doesn't play as large a role in global trade as people tend to assume, accounting for around 10% of overall global shipping volumes.

Geopolitical turmoil could even provide a silver lining for the industry, as it is forcing firms to move away from the idea of “very lean supply chains” in favour of having locations in several countries, with “more duplication and regionalisation, leading to more trade, not less”, says MacAdam. Albishchenko has already found that her customers have moved away from choosing the cheapest shipping option towards arrangements “that emphasise continuity of supply, reliability and availability of alternatives”.

New shipping routes and ports are being built

One of the best indicators that transporting goods by sea has a rosy future is the amount of money that has been going into upgrading port infrastructure around the world. A case in point is the Middle East. Current tensions haven't dissuaded governments in the region from investing in some major projects, as Bartlett points out. These include Saudi Arabia's Neom city; the aggressive capital-spending programme of AD Ports, the developer and regulator of ports and related infrastructure in Abu Dhabi; and Iraq's Grand Faw port. Taken together, these projects represent the biggest concentration of new capital invested largely in ports anywhere in the world.

Governments and industry are also increasing their port capacity elsewhere around the world. There has also been a lot of investment in the Indian Ocean, for example. India is opening its first deep-water port at Vizhinjam and DP World is pouring billions into a programme stretching from India through Senegal and the DRC to London, says Bartlett. But the region that will see the most explosive growth over the next decade is Africa, especially on the western side.

When Bartlett co-founded Wayfindr around ten years ago there was virtually no trade between Asia and Africa. But the development of online marketplaces such as Jumia means that Africa is beginning to import huge volumes of Chinese products. At the same time there has been an increase in industrial production within Africa, “which means that it is now starting to become a significant exporter of goods in its own right”. The continent is therefore going to need big investments in transport over the next decade or two. Ports such as Senegal's Ndayane and Bakassi Deep Seaport in Nigeria are positioning themselves as the “next generation of Atlantic gateways”.

There has also been awakened interest in developing new trade routes. The need for additional capacity and developments in technology have led to an explosion of interest in the trans-Arctic shipping route (or “northeastern passage”) connecting the Atlantic and the Pacific via the Arctic coasts of Norway and Russia, says Jonathan Colehower, a managing director at infrastructure services company UST. “We don't yet have the infrastructure or ships to make that viable, but these will be in place within the next five years, which is why there's already a fight to lay out landmarks and claim territory.”

Shipping is going digital

All parts of the industry are also investing in digital technology, notably in technology to achieve “end-to-end visibility”. Track-and-trace tools have come a long way in the last few years, allowing vessels to be tracked almost in real time, but there are challenges whenever goods change hands. The next five years are going to see a shift to more comprehensive and secure tracking, says Colehower.

Digitalisation will also reduce the time and money spent getting goods to and from ships, says Ben Slupecki, an equity analyst for Morningstar. Many of the big freight-forwarding companies, who deal with transporting goods to and from ships, “are seeing more and more opportunities to use AI in their work”, he says. The technology is helping them boost efficiency by cutting the cost of dealing with routine paperwork, such as processing invoices and getting goods through customs.

Digital technology and AI will also improve efficiency by enhancing the ability of shipping companies and the firms that they serve to anticipate demand, says Albishchenko. Traditionally, companies have based their forecasts on historical sales and then periodically adjusted them. Digital forecasting approaches allow firms “to consider broader variables, including seasonality, customers' behaviour, market trends and changing commercial conditions”. Better forecasts “can reduce shortages, excess inventories and the need for emergency logistics decisions”.

Progress will come when the industry finds a way to break down the “data silos” held by different firms to allow better co-ordination of shipments, says Cunningham. Many decisions in all parts of the shipping industry will eventually be carried out by AI agents, autonomous programs that can carry out tasks on their own without any human supervision, he believes. These will reduce waste by making sure that every bit of spare capacity on vessels is used, as well as tweaking routes in real time to ensure that they are optimised for speed and cost.

The shift to greener transport

Opposition from the Trump administration may temporarily have put a dampener on the costs of complying with stricter environmental regulations, and so shipping companies don't for the time being have to worry too much about ambitious schemes such as the proposed global carbon tax. But the expectation that shipping companies will try and work in a more environmentally friendly way remains, says Bartlett. Younger generations in particular care about the planet and the shipping industry cannot ignore changing social attitudes. Indeed, despite opposition from Saudi Arabia and the US, the EU has already taken matters into its own hands by adding shipping to its carbon-taxation framework, as Nikos Petrakakos, managing director at Tufton Investment Management, points out.

This will naturally cost money. Decarbonisation of the global shipping fleet alone may cost as much as $1.4 trillion, reckons Petrakakos. At least $500 billion of this will be spent on retrofitting existing ships to take greener fuels, or building new, more sustainable ships from scratch. That is at least good news for the shipbuilding industry. Indeed, shipyards are so busy that “if you order a new ship now you will have to wait until at least 2030 to get it”. Most major shipbuilders have a backlog of at least three years.

The changing face of insurance

The growth of volumes and the digital revolution that is taking place within shipping is also good news for those firms that offer services to the shipping industry. Albishchenko sees a greater role for those companies that can provide communications services and data, especially as all parts of the supply chain “increasingly depend on faster information exchange across procurement, suppliers, freight partners and customers”. Indeed, “delayed information can sometimes create as much disruption as delayed cargo”.

One major support industry that will benefit from the continued growth of shipping is insurance. The market for insurance “is becoming more dynamic”, says Albishchenko, and insurance companies are moving away from basing their pricing on “historical routes, standard risk assumptions and established coverage models” to a more bespoke approach that considers such things as changing geopolitical conditions and operational resilience. This approach will mean that there will be “greater interaction between insurance providers” and logistics planners, “rather than treating insurance as a separate administrative function”.

Insurers are becoming much more selective about who they will insure and the prices that they are willing to offer, says Lale Akoner, eToro's global market strategist. The overall market is becoming “more data dependent”, with some insurers even requiring real-time updates about vessels' location, routes, history, cargo data and even exposure to sanctions. This is good news for the advisory firms, the data providers and the specialist brokers.

Compliance is also becoming a bigger issue, especially around sanctions, which is leading to increased demand for “sanction-screening tools, counterparty due diligence, legal advisory and general insurance compliance checks”. All this is good news for specialist insurers that will benefit from higher rates. But brokers and advisers may have the cleaner business model, “as they earn commissions from advising clients about the risk and providing data, without directly bearing any insurance risk themselves”.

We look at some of the best plays on all of these themes below.

The best shipping investments to buy now

One investment trust focused on shipping that's worth considering is Tufton Assets (LSE: SHIP), which invests in a diversified portfolio of second-hand commercial seagoing vessels. These range from dry bulk carriers that carry grains and cements to container ships and gas carriers that carry liquefied petroleum gas, with 21 ships in its portfolio as of April. Tufton has a strong record of increasing its dividend, which has more than doubled since 2020. The stock trades at around a 14% discount to its book value and has a yield of 7.75%.

One of the world's largest shipping companies is Matson (NYSE: MATX). It focuses on the Pacific Ocean, moving goods between Asia and Alaska, Hawaii and California. It also offers freight-forwarding, warehousing and supply-chain services and owns a stake in terminal-services company SSA Terminals. Matson has seen its revenue grow by around 40% between 2020 and 2025, and its stock trades at 12.6 times expected 2027 earnings.

Lale Akoner is keen on Clarkson (LSE: CKN), which operates a range of integrated shipping services, mainly broking and advisory services. Its asset-light business model is “supported by good market fundamentals” and will “experience rising demand” as the industry looks for the necessary expertise to navigate changing markets. The company has a very strong balance sheet and a long record of paying dividends. Clarkson's revenues nearly doubled between 2020 and 2025 and are expected to keep growing. The stock trades at a modest 16 times expected 2027 earnings.

A promising play on shipbuilding

One of the world's largest shipbuilding companies is Korean firm HD Hyundai (Seoul: 267250). HD Hyundai is a large conglomerate involved in everything from oil refining to robotics, but shipbuilding is currently its main segment, accounting for around 40% of sales and a similar share of operating profits. Recently, its shipbuilding arm has been performing strongly, boosted by both higher prices and improvements in productivity. HD Hyundai has seen its total revenue go up by around 275% between 2020 and 2025, but the stock only trades at 8.7 times expected 2027 earnings. The dividend yield is 2.2%.

A purer play on continued demand for new ships is Samsung Heavy Industries (Seoul: 010140), which makes the vast majority of its revenue from shipbuilding. The company is investing heavily in sustainability, with project ranging from producing more efficient designs to switching to alternative fuels, such as ammonia and even nuclear power. Other technologies in the pipeline include floating nuclear-power plants and autonomous ships. The company's revenue has grown by more than half between 2020 and 2025, and is forecast to grow strongly in the next few years. The stock is more expensive than HD Hyundai, but still trades at a modest 16.4 times expected 2027 earnings.

Morningstar's Ben Slupecki likes the Danish firm DSV (Copenhagen: DSV), which focuses on logistics and freight-forwarding services. It deals with road and rail transport as well, but much of its business involves transporting goods to and from ships. Slupecki considers DSV to be a strong business, and its integration of DB Schenker, which it bought in 2025 from German rail operator Deutsche Bahn, is also “going well” and has made it the largest freight-forwarder in the world. The stocks trade at 17.6 times expected 2027 earnings.

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Investment platform AJ Bell (LSE: AJB) will benefit from people investing more for their retirement. Good news, then, that politicians aim to persuade people in the UK to do just that, increasing the amount of money they put into shares and so helping make sure that they can accumulate enough savings to fund a comfortable retirement.

AJ Bell offers financial products to consumers who want to manage their own investments by putting money into ISAs and SIPPs, and to those who are investing via financial advisors. At present, AJ Bell's assets under management (AUM) are split evenly between the two segments, though its direct-to-consumer segment has been growing at a faster rate.

Should you invest in AJ Bell?

AJ Bell has a strong brand: it boasts high customer satisfaction scores in addition to customer retention rates of around 93.5% for advised customers and 95% for those who directly invest with the platform. The average customer sticks with AJ Bell for 17 years. This has helped it grow to the point where it is now the third-largest investment platform, with a market share of 8.3% in terms of assets under management. However, it is capturing around 16.1% of the inflows into investment platforms, which suggests that its overall market share will continue to increase.

Of course, as with any service business, there is always the risk of disruption, either by a new entrant or from AI. But its solid reputation and regulatory barriers both help fend off rivals, while the company is also using AI to reduce its administrative costs and make its platforms even more efficient. The long-term problems caused by ageing should also reduce any political risk.

Overall, AJ Bell has seen its AUM more than double between 2018 and 2026. Sales have increased even more quickly, soaring 150% between 2020 and 2025, and are expected to keep on growing at a double-digit pace. AJ Bell's asset-light business model gives it a very high return on capital employed, enabling it to increase its dividend consistently and return money to shareholders via buybacks even as it continues to expand. Despite this, the stock trades at a more than reasonable 19 times expected 2027 earnings, with a dividend yield of 2.8%.

These strong fundamentals, in addition to unexpectedly good recent quarterly results, have been received positively, with AJ Bell's share price beating the wider market by 25% over the past six months. The shares are also well ahead of both their 50-day and 200-day moving averages. I would therefore suggest that you go long at the current price of 597p at £5 per 1p. I would put the stop-loss at 400p, which gives you a total downside of £985.

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The invisible hand of the facilities management (FM) industry operates in almost every large commercial building. Someone is maintaining the chillers and the fire-suppression system. Someone is cleaning the floors. Someone, in theory, knows whether the heating, ventilation and air-conditioning (HVAC) unit on the fourth floor is three months from failure. This industry, sprawling, unglamorous and rarely covered by analysts, generates north of $4 trillion in annual global revenue. It is also in the early stages of a bifurcation that will create some genuinely interesting investment opportunities and destroy a remarkable amount of value for those who pick the wrong horse.

The core problem with facilities management is that it has spent decades solving the wrong problem. It has been focused on fixing things rather than understanding why things break in the first place. It has been reactive when its customers need it to be predictive. It has been operational when the most sophisticated clients are desperate for something more strategic. And it has been unable to provide evidence of the value it affords. Every contract renewal thus defaults to a conversation about cost that facilities management companies are badly placed to win.

Technology is now changing this, but not in the way most industry observers have assumed. The narrative for many years has been that some form of unified digital platform, a so-called single pane of glass, would allow facilities managers to own the data and therefore control the strategic conversation with their clients. That narrative is broadly correct. What it has missed is who actually ends up controlling that glass.

The problem with facilities management companies

The smart money is on the original equipment manufacturers (OEMs). Siemens, Schneider Electric, Johnson Controls and Trane Technologies have all made aggressive acquisitions of integrated workplace-management software businesses in the last three years. They control the mechanical and electrical systems that generate the core telemetry. They are now buying the platforms that interpret that data.

CBRE and JLL, two giant US commercial property services and investment groups, have responded with their own investments in technology, and CBRE in particular has built something genuinely differentiated. Its technology stack, running from raw asset data through AI-driven performance optimisation to a generative AI interface for facility managers, is meaningfully ahead of most traditional facilities management rivals.

More importantly, CBRE has made a strategic choice that I think is correct and underappreciated: it self-delivers the engineering and maintenance work where risk and complexity are high and it subcontracts almost everything else. This keeps the business focused on what it does best, avoids the diseconomies of running enormous low-margin cleaning and catering workforces, and keeps the conversation with customers at the level where CBRE's technology and insight capabilities actually add value.

The integrated model that FM firms ISS, Coor, Mitie and ABM Industries have pursued, employing vast workforces across subsectors from cleaning and engineering to food service, has struggled with low margins, volatile earnings and weak cash generation.

It is not that these companies are badly run. It is that the model is structurally disadvantaged. Every dollar of capital reinvested in innovation or process improvement flows through to a smaller share of the overall business when that business is simultaneously managing electricians, cleaners, security guards and caterers. The benefits of scale are harder to capture. Best practice is harder to standardise. The most talented engineers would often rather work for a pure-play technical services company than be one service line among eight.

Compass Group found the right path

There are exceptions and they are instructive. Compass Group has built one of the most impressive records in global services by staying almost entirely focused on food. Its management and performance framework is a masterclass in what happens when a large, decentralised services firm imposes a common operating language and a small number of clearly defined drivers of value across an entire organisation.

The framework ties every decision to one of five levers determining profit or loss – from client retention and consumer participation through to labour scheduling and overhead control. It sounds almost boring in its simplicity. It has produced two decades of best-in-class margin delivery at scale.

My preferred name among facilities management stocks is Bravida (Stockholm: BRAV), the technical services group that installs and maintains the electrical, HVAC and plumbing systems in buildings across Sweden, Denmark, Norway and Finland. It does not try to do everything.

Bravida focuses almost entirely on facilities management engineering delivered through a network of 330 branches providing the local density and proximity to customers that makes the economics work. When you build genuine scale in a single technical discipline, you can standardise ways of working, invest properly in training and certification, attract the best engineers, and compound efficiency gains year after year.

Bravida has been through a difficult patch, hit by a Swedish construction downturn, a governance failure in one branch that has since been closed and prosecuted, and some bad debts from a large customer. The share price has derated significantly. I think that creates an opportunity. The underlying business model is sound, the structural drivers for technical building services are strongly positive, and the company's internal focus on operational excellence is exactly the kind of self-improvement culture that separates durable compounders from cyclical operators.

The privately owned CFS, or Churches Fire & Security, is another business worth watching. It operates in the UK fire safety and electronic-security market, an arena driven by tightening regulation, historic underinvestment and alarming fragmentation that sees roughly 2,000 small operators competing with essentially no scale advantages. CFS has now absorbed over 70 businesses, each integrated fully within three to six months. Revenue has jumped to £100 million at attractive margins. The model is replicable, the regulatory tailwinds are real and the market is large enough to sustain further consolidation.

Depth beats breadth in the facilities management industry

Focused, scalable business models with genuine density economics outperform diversified ones over time, by a wide margin. The temptation to add services and geographies is understandable in an industry where large contracts look attractive from the outside. But every incremental service line is also an incremental distraction. Peter Thiel has noted that you cannot run dozens of start-ups simultaneously and hope one works out. The same logic applies to a low-margin services business with finite capital and management bandwidth. Depth beats breadth, almost every time.

The FM industry is also at a genuine technology inflection. Advances in building sensors, AI-driven predictive maintenance and integrated data platforms are removing the ability of mediocre operators to hide. Buildings that were opaque are becoming transparent. Clients that once relied on SLA compliance reports are now demanding energy dashboards, asset-lifecycle forecasts and sustainability documentation.

Operators with weak processes and inconsistent data capture will be exposed. Operators with strong processes, standardised ways of working and an ability to translate data into value for customers will find themselves able to charge for something other than just labour. The buildings around us are getting smarter. The companies that service them need to be smarter too. The ones that are will be interesting to own.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Scaremongers claim that private credit is an impending financial disaster that will lead to a re-run of the 2008-2009 financial crisis. And in fairness, there is some justification for concern about the sector. “The credit loss cycle is upon us,” said asset manager Pimco earlier this month, warning that some riskier companies will struggle to service their debts.

There is significant exposure to software firms among leading investors in private credit and not all of it is disclosed, as The Wall Street Journal has found. The disruption of software by AI is putting many of their business models at risk. This sector accounted for $500 billion of loans at the end of 2025 (19% of the total), says the Bank of International Settlements.

Defaults are rising and nervous investors have switched to selling. Private credit funds have had to exercise redemption limits to prevent the forced liquidation of investments. Lending is slowing, terms have been tightened and credit spreads have widened.

Don't fear private credit defaults

Yet “it is hard to see how private credit could be a systemic issue for bond markets”, says Pieter Staelens of CVC Capital. After all, private credit accounts for just $3 trillion of the $140 trillion global fixed income market, he says. “The rate of defaults across credit markets has picked up a little recently but there is no red flag.” At close to 2%, it sits below the 20-year average. “The first quarter saw the best earnings on record; with strong earnings, defaults will stay low.”

Besides, defaults are part and parcel of credit investing; avoiding them is not always the answer. “I can run a portfolio with zero defaults if you are prepared to incur a loss in selling a position,” says Staelens. “Credit losses, not defaults, are the key. We are used to defaults, which average 1% each year, so they won't destroy our funds.”

What matters in defaults is what you get back. “We typically recover 80 cents in the dollar in an insolvency,” says Staelens, although this would probably be lower for an asset-light software company. Sometimes these situations can be very profitable. In 2020, CVC took part in the restructuring of Doncasters, a maker of precision parts for aerospace. The firm is set for an initial public offering (IPO) soon and will use the proceeds to repay debts. CVC “will receive way more than we invested”.

Get paid for the risks in the private credit market

“There is a lot of misperception about how risky the credit market is,” says Staelens. Of course, there are risks: default, foreign exchange, liquidity, inflation, early repayment, duration and interest rates. However, the aim is not to avoid risk, but “only take exposure when you are paid for the risk”.

Private credit has been one of the fastest-growing sub-sectors, so some fallout from that boom is likely. “Some people probably cut corners in assessing risk. Any asset class that grows quickly will see wobbles along the way but it won't disappear. Bad risk management rather than structural risk is the problem. You need to invest with people who know what they are doing.”

CVC is sceptical of credit-rating agencies, “which are too backward-looking to be helpful”, he says. “A large part of what we do is working out where credit ratings are wrong. Much of the market, especially passive funds, invest according to the agencies' ratings.” That means a debt downgraded to CCC and now trading at 50 cents in the dollar – as a result of forced selling by funds that are no longer allowed to own it – could be a great opportunity.

CVC Income & Growth (LSE: CVCG) trades at net asset value (NAV) and yields 8.5%. Rivals such as Invesco Bond Income Plus (LSE: BIPS), M&G Credit Income (LSE: MGCI), CQS New City High Yield (LSE: NCYF) and TwentyFour Select Monthly Income (LSE: SMIF) have similar 7% or 8% yields. CVC leads the pack with a return of 61% over five years, far above what government bonds have delivered. Don't be put off by the scaremongers.

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We will find out soon whether Andy Burnham will face a contest for the leadership of the Labour Party or take office unopposed. Either way, it makes little difference now. One way or another, he is likely to be our next prime minister before the end of the summer.

There are some ways in which Andy Burnham will be an improvement on the outgoing Keir Starmer. He is a better communicator and more personable. As mayor of Manchester, he is untainted by the failures of the last two years and can make a fresh start. Perhaps best of all, he can get rid of the hapless Rachel Reeves as chancellor and replace her with someone less obviously out of their depth and with at least some grasp on how businesses operate and the challenges they face. Temporarily at least, this may start to lift Labour's dismal poll ratings.

There's a problem, however. Prime minister Burnham will be heading straight into a financial crisis. Britain's economic outlook keeps on getting worse and worse. At the end of last week, we learned that government borrowing in May came in way above forecast, with a 30% year-on-year rise. For the month, government spending was up by 7% year on year, while tax receipts, even with record increases, were up by just 4% (it is hard to see much sign of the “neoliberalism” Burnham complains about in those figures). Growth stagnated last month, despite all the extra spending the government has thrown at the economy. Unemployment is rising relentlessly, especially for young people, and the welfare bills are running out of control, with the number of working-age people on benefits above four million. All the warning signs for a crash are already flashing red.

Andy Burnham is only going to make things worse. It is hard to detect much in the way of a serious economic programme in the collection of soft-left soundbites that make up his standard stump speech. But insofar as he has one, it involves yet more borrowing and spending. He has promised to bring the utilities under greater state control but said nothing about how that would be paid for. He has promised to cut business rates for small companies and launch a massive programme of council-house building, without attaching any kind of a budget. And if Burnham has ever said anything about controlling public spending, especially the soaring welfare bill, he has kept it very quiet. Even if he only keeps a fraction of his spending promises, and it will be very hard to break all of them, then the deficit will keep climbing higher and higher.

Can Andy Burnham succeed as prime minister?

Even as the deficit rises, Andy Burnham has said almost nothing about how he intends to boost growth to pay for it all, nor has he made any attempt to bring business on board. Celebrity chef Tom Kerridge has backed him, but only because of his promise to reduce the rate of VAT on hospitality businesses to 10% (yet another unfunded promise). Other than that, Britain's major corporate leaders have remained silent. There is not going to be any wave of investment to welcome the new regime, nor is there likely to be any dramatic measures to encourage investment into the UK. In the background, Britain's financial position is steadily deteriorating. Very quickly, the markets are going to test the new government. Is it willing to cut welfare, or will it raise taxes to keep paying the £125 billion a year in interest on the national debt the country now has to pay? Traders will want to find out, and find out very quickly, and if the answer is no, then gilts will be sold off.

The last PM to take over from one who had been elected with a big majority was Liz Truss in 2022. We all know how that worked out – her lifespan in office was famously shorter than that of a lettuce. Burnham won't face quite the same set of challenges, nor is he likely to attempt anything as risky as the mini-budget that led to her unravelling. Even so, the British economy is in far worse condition than it was then, our debts are far higher and the bond markets already view us with suspicion. Andy Burnham will soon face the heat – and may well wilt as quickly as a lettuce.

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The SVS Baker Steel Electrum Fund invests in mining stocks that produce the metals and materials needed to power the global economy. While technology and consumer stocks receive significant attention from investors, the mining sector is often overlooked yet offers exposure to commodities that are essential for everything from electricity generation to renewable-energy infrastructure.

Metals have become strategic again, with demand growth driven by electrification, rising energy consumption and increasing concerns about energy security. At the same time, years of underinvestment in mining and resource development have resulted in tight supply across many markets. This combination of rising demand and constrained supply is creating compelling opportunities for investors. Here are three stocks that currently stand out.

Three promising mining stocks for your portfolio

A play on geopolitics

Century Aluminium (Nasdaq: CENX) is a play on both geopolitics and industrial demand. It produces aluminium in the US, a metal that is vital for construction, transport and technology. Aluminium is also a beneficiary of structural tailwinds from electrification, being increasingly used in energy infrastructure. The investment case for aluminium producers has strengthened as governments place greater emphasis on domestic manufacturing and secure supply chains. Trade tariffs have highlighted the strategic importance of producing key industrial materials closer to home and reshoring supply chains. The war in the Middle East has also reminded investors how quickly global supply routes can be disrupted. Aluminium prices have risen during the crisis.

Strong demand boosts silver

Pan American Silver (NYSE: PAAS) is a mining stock that offers exposure to silver and gold at a time when interest from investors in precious metals is on the rise. The company operates a portfolio of high-quality mining assets across the Americas and is one of the world's leading silver producers. The importance of world-class silver assets is growing amid strong demand from investors and a tight supply side, with the silver market having faced a supply deficit for several years now.

A part of silver's appeal is that it is both a precious metal and has industrial uses. Investors often buy it as a store of value, much like gold, but it is also used extensively in certain fast-growing technologies, notably solar panels and more broadly across electronics. These dual sources of demand are supportive for silver prices and miners.

A mining stock with exposure to nuclear energy

Cameco (NYSE: CCJ) is one of the largest uranium producers globally, with exposure to the development of reactors, offering investors a way in to the growth of nuclear energy globally. As demand for electricity rises, governments and companies are increasingly seeking reliable sources of low-carbon energy. Nuclear power is becoming a more important element in the energy mix as a reliable source of baseload power, without the intermittency issues associated with wind and solar generation.

We consider that his trend could support demand for uranium or many years to come. Countries are extending the lives of existing reactors, while others are planning new nuclear projects as they seek to improve energy security and reduce carbon emissions.

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