Where’s the best place to invest? Global fund managers their picks

The new year has started well for investors, with stock markets in the UK, US and Europe shrugging off yet more worries to post strong returns.

The FTSE 100 is up 2 per cent since the start of 2026, while the US S&P 500 has climbed 1.7 per cent and Germany’s Dax has risen 1.2 per cent.

That follows a big year for stock market investors in 2025, including impressive performances from investments ranging from European defence stocks to AI hopefuls and big tech.

The S&P 500 returned 18 per cent in 2025, but for once the US stock market wasn’t at the head of the pack.

The UK’s FTSE 100 returned 26 per cent, while Japan’s Nikkei climbed 28 per cent. European and emerging markets also saw bumper performance.

The US is likely to remain dominant, making up more than 70 per cent of the global stock market, but active fund managers are pivoting away from America’s mega-cap stocks, as they seek out value and potential growth in other regions.

But where are they choosing to invest instead? This is Money spoke to four global fund managers about what they are backing this year.

Betting on the UK

The UK surpassed the expectations of many investors with its strong performance in 2025. 

Chris Elliott, portfolio manager of the Evenlode Global Equity Fund, said: ‘This rally was led by cyclical sectors, such as defence and banking, which benefitted from increased geopolitical volatility and higher interest rates, respectively.’

‘After years of underperformance, the UK market finally had a year to remember in 2025.’

Elliott points to opportunity still remaining in UK equities, due to the market trading at a discount compared with counterparts elsewhere.

‘There are many interesting opportunities remain for the discerning investor,’ he said.

His fund is focused on targeting high quality businesses, that benefit from strong fundamentals and currently have low valuations.

He says: ‘The UK has a cadre of high quality, information services businesses that provide critical data to their clients, typically grow profits at a high-single digit rate, and are available at attractive valuations.’

Elliott points to Relx, which he says benefits from its data being deeply embedded in its clients’ operations, with a high cost to switch providers.

Worries over AI eating its lunch have seen Relx shares lose 26 per cent in the past twelve months.

But the firm provides difficult to replicate and trustworthy high quality information-based analytics globally, as well as legal research through LexisNexis and medical publishing through Elsevier.

Elliott also likes credit reference agency Experian, which provides banks with consumer credit data. Experian shares have lost almost 20 per cent over the past year.

He said: ‘Errors in credit assessment turns into losses for the banks, so it is vital that they use the best data available. Speculation over AI alternatives has led share prices to fall, but the new technology cannot replicate the depth or quality of data provided by these businesses.’

Elliott said: ‘We see a rare opportunity to increase exposure to some incredibly high-quality UK businesses.’

Cashing in on Japan’s corporate reform

Japan is facing a very different economic environment to much of the world, emerging from long running deflation worries. It combines earnings growth with improved pricing power, rising wages and higher demand at home.

Nikki Martin, senior portfolio manager of global equities at Sarasin & Partners, told This is Money: ‘Japan was once close to the US in terms of global market size; however, Japan has spent the last few decades being shunned by global equity investors.

‘This could now be [Japan’s] greatest advantage.’

Martin says there is opportunity within automation, industrial technology, precision manufacturing and services, as well as a more competitive environment due to a weaker Yen.

Martin added: ‘At the same time, corporate behaviour is changing in meaningful ways. Governance reforms, balance-sheet optimisation, and a growing focus on shareholder returns are translating into higher dividends, increased buybacks, and more disciplined capital allocation.’

Reform in Japan began in 2014 with extensive measures designed to turn the tide of economic stagnation.

Board independence was promoted, while transparency and greater inclusion of shareholders were also introduced.

The dividend payout ratio in Japan, that is, the percentage of earnings paid as dividends, has increased by 36 per cent over the last decade, compared to 34 per cent in the S&P 500.

Martin said: ‘Japan also offers breadth, something that is fast becoming scarce in global equity markets. Beneath the headline indices lies a deep pool of mid-cap companies with strong niche positions, global relevance and improving governance standards.

‘As investors look to diversify away from highly concentrated US markets, Japan’s quietly evolving equity story could prove to be one of the most compelling, under-appreciated opportunities in 2026.’

Hidden value in South Korea

Just across the Korea Strait, South Korea is beginning to see a market re-rating on the back of extremely low valuations and its own governance reforms, according to Joe Bauernfreund, portfolio manager of AVI Global Trust.

Bauernfreund told This is Money: ‘South Korea remains one of the most undiscovered opportunities for global investors, comprising less than 1 per cent of the MSCI ACWI despite housing numerous world-leading businesses across semiconductors, advanced manufacturing, and biotechnology.’

For example, Samsung Electronics, while producing consumer goods, is also the world’s largest manufacturer of semiconductors.

Samsung shares grew 178 per cent over the past year. Yet the firm is often viewed as undervalued, with multiple analysts rating the stock as a buy or strong buy, according to the Stockopedia platform.

Bauernfreund says the Korean Government is focusing on its stock market as a way to create wealth due to a worsening demographic and real estate affordability crisis.

The Government is ‘seeking to close the longstanding ‘Korea discount’ through ‘Corporate Value-up’ initiatives,’ he said.

Last year, the newly elected Government enacted two amendments to its Commercial Act, giving further rights to shareholders, while dividend tax reform was passed in December.

Further commercial reform is expected in the coming months.

Bauernfreund said: ‘The valuation dislocation of the South Korean market remains extreme, with 68 per cent of all companies trading below book. The environment remains ripe for stock picking, with 60 per cent of all companies receiving zero coverage from brokers, 50 per cent of all volumes being driven by retail investors, and low foreign institutional ownership.

‘We believe the combination of structural reform, demographic necessity, and wide valuation discounts will prove difficult to ignore in the years ahead.’

Reasonable value

While emerging markets delivered in 2025, India was not so successful. The MSCI India Index rose just 9.5 per cent, compared with over 26 per cent for the MSCI AC Asia Pacific ex Japan Index.

‘India underperformed wider emerging markets in 2025 for a number of reasons not least minimal exposure to the tech/AI trade that ran hard, outcome from liberation day was worse than expected,’ said Rob Secker, portfolio specialist at T. Rowe Price.

The firm’s Emerging Markets Equity Fund will up its allocation towards India on the back of lower valuations seen more recently.

‘Overall, after being underweight for several years, we are now becoming more interested in India as the backdrop improves,’ Secker said.

Secker added that India’s weaker performance largely comes from high expectations going into 2025.

Foreign investors took $16billion out of the Indian market in 2025, instead piling into other markets like China and South Korea.

He said: ‘it becomes much harder for companies to surprise on the upside, investors had effectively priced in the perfect scenario. India which has always been expensive stood out even more than normal. Earnings have still been reasonably solid, and as profits have come through, valuations have gradually come down over the year.

Secker said: ‘Looking forward we are more excited about India. While valuations are not low in absolute terms, they are more attractive than before.

‘Interest rates are falling, banks have significant liquidity, and this should support stronger credit growth, creating the conditions for a cyclical recovery. The IPO market remains active, which is another positive sign for confidence.’