Funds investing in gold miners, financials stocks and European equities jumped to the top of the performance tables in the first quarter of 2025, FE fundinfo data shows, while those focused on the US and tech struggled.
The opening three months of the year were dominated by negative headlines around a potential trade war started by new US president Donald Trump and the risk of an economic slowdown.
US stocks – especially those in the tech space such as the so-called Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) – sold off but there were some areas where strong returns were made, as suggested by the chart of fund sector performance over the first quarter.
Performance of Investment Association sectors in Q1 2025
Source: FinXL
Latin American equities, particularly Brazilian stocks, rallied over the past three months, after investors looked for value opportunities when the expensive US market sold off. The average IA Latin America fund gained 8.5% over the period; this came after a drop of just over 25% in 2024.
These were followed by European equity funds, which also underperformed last year, and Chinese funds, which made 13% in 2024 but suffered double-digit losses in each of the prior three years.
At the bottom of the performance table for the first quarter are IA North American Smaller Companies, IA Technology & Technology Innovation, IA India/Indian Subcontinent and IA North America funds.
Dan Coatsworth, investment analyst at AJ Bell, said: “Investing in European defence, construction and banking firms and Chinese tech stocks were the winning trades in the first three months of the year. In contrast, US tech was a losing trade, ending a strong run for what’s been an easy place to get rich over the past few years.
“There is a simple explanation as to why the US is still nursing an almighty hangover from 2024’s party. Euphoria around Donald Trump returning to the White House has quickly turned into fear over how his policies could dent the US economy. His persistent, aggressive stance on tariffs threatens to drive up inflation and cause businesses and consumers to curtail spending.
“When any prevailing narrative changes, investors tend to look at their portfolios to see what’s done well in the past and will lock in some profits. US shares were trading at lofty valuations and investors are no longer prepared to pay high multiples, so we’ve seen a double hit of selling and a derating in equities. This has left the US as the worst performing part of the global equity market this year and driven a rotation into other locations which are cheaper and where the outlook is starting to improve.”
Source: FinXL
As the table above shows, gold funds dominate the list of the best-individual funds in the opening quarter, with 10 of the 12 highest returning strategies investing in gold equities. Ninety One Global Gold tops the quarter’s results with a total return of 31.3%, followed by iShares Gold Producers UCITS ETF, HAN AuAg ESG Gold Mining UCITS ETF and Jupiter Gold And Silver.
The yellow metal itself rallied 19% over the period, breaking through the symbolic $3,000 mark as investors sought out safe havens amid the uncertainty being created by looming tariffs from the US and concerns over the health of the global economy.
Fawad Razaqzada, market analyst at City Index, said: “This lingering uncertainty has kept the metal well supported, with prices charging into uncharted territory with barely a pause for breath.
“Once the dust settles, we could see gold take a breather – especially if Trump adopts a softer stance on [tariffs]. Much of the tariff-related fear is arguably priced in by now, but whether that translates into calmer markets remains to be seen.”
The strength of European banks is reflected in the presence of Amundi Euro Stoxx Banks, SPDR MSCI Europe Financials UCITS ETF and iShares MSCI Poland UCITS ETF (which has more than 50% in financials) among the quarter’s best funds.
Meanwhile, HAN Future of Defence UCITS ETF has benefited from promises by European countries to increase their military spending in light of uncertainty around the US’ commitment to Nato and the continent's defence.
Investors are becoming increasingly positive on European equities. Jacob Hvidberg Falkencrone, global head of investment strategy at Saxo, said: “Europe is undergoing a major shift toward independence and self-reliance, driven by weakening US security commitments, deglobalisation and a push for economic resilience.
“This has triggered unprecedented investment in defence, infrastructure, technology and renewable energy, supported by initiatives like Germany’s fiscal stimulus plan and the EU’s defence loan – specifically favouring European over US suppliers.”
Source: FinXL
The worst-performing funds of the quarter reflected the volatility in US, tech, growth and small-cap stocks.
WisdomTree Blockchain UCITS ETF was down 25.8% following a sell-off in cryptocurrencies, while ETFs focused on uranium miners dropped more than 20% because uranium prices tanked after US nuclear-power companies slowed purchases and delayed new contracts on tariff uncertainty.
The most notable move, however, was the fall in IA North America and IA North American Smaller Companies funds. Of the 289 funds in the sectors, 268 – or 93% – made a loss in the first quarter.
Nigel Green, chief executive of deVere Group, pointed out that US stocks have just closed their worst quarter since 2022 and cautioned investors to assess their assumption that exposure to the US tech-heavy market can power portfolios regardless.
“This is a moment to rethink assumptions,” he said. “We could still see sharp rallies in response to specific events, but the underlying trend has changed. The market is digesting a new political reality – and that digestion is going to be messy.”