Q4 2025

A quarter of broadening out and consolidation

Global markets delivered steady gains in the final quarter of 2025, albeit relatively moderate compared to the prior quarters. Many equity indices ended the year close to record or multi-year highs, rounding off a strong year for risk assets. For the first time in several years, equity markets outside the United States outperformed the US over the full year. This shift away from US market leadership was driven by a combination of a weaker dollar, more attractive valuations overseas, and a rotation by some investors away from US technology stocks. As a result, Europe, Asia and emerging markets recorded robust performance.

Equity markets were further supported by solid earnings growth, easing inflationary pressures and expectations that major central banks - led by the US Federal Reserve - would continue to reduce interest rates into 2026.

Government bond markets diverged in the final quarter of 2025, with UK gilts outperforming while US Treasury returns were more muted. Gilts benefited from a reassuring UK Budget, reduced issuance expectations and a December rate cut from the Bank of England. In contrast, US Treasuries saw limited gains as the yield curve steepened despite Federal Reserve rate cuts, with resilient labour market data tempering expectations for faster easing. Elsewhere in Europe, the ECB left rates on hold, while Japan saw a 25-basis-point rate rise, the highest since the mid-90s.

Against this backdrop, peer group returns behaved as expected, albeit with slightly more muted returns than we saw in Q3: the Cautious Peer Group delivered modest gains, the Balanced Peer Group produced slightly higher returns, and the Growth Peer Group generated the strongest returns, with all categories generating slightly higher returns than the Benchmark Portfolio*.

Cautious Peer Groups
Cautious Peer groups achieved steady gains in Q4, delivering roughly +1.6% to +2.4% across GBP, USD and EUR. These low-risk portfolios slightly outperformed their respective Benchmark Portfolios and continued to exhibit very low volatility, in line with expectations for the capital preservation-focused risk profile. Year-to-date performance shows wider dispersion, with returns of +4.5% (EUR), +8.4% (GBP), and +9.9% (USD).

The equity allocation is approximately 31%, while fixed income and cash are around 56%. The remaining approximately 13% is invested in hedge funds, commodities, and other alternatives.

Balanced Peer Groups
Balanced Peer Groups generated steady albeit muted gains compared with Q3, delivering returns of +2.2% to +2.7% across the three currencies. All three slightly outperformed their respective Benchmark Portfolios. Year-to-date performance shows greater dispersion, with returns of +5.4% (EUR), +9.2% (GBP), and +12.7% (USD).

Equity allocation is around 54%, with fixed income and cash approximately 33%, and hedge funds, commodities, and other alternatives around 13%.

Growth Peer Groups
As expected, growth peer groups delivered the highest returns, although like Balanced, slightly muted compared with Q3, with returns ranging from +2.4% to +2.9%. All three currencies slightly beat their respective benchmark. Year-to-date performance shows greater dispersion, with returns of +3.2% (EUR), +9.6% (GBP), and +13.8% (USD).

Equity allocation is around 72% with EUR about 5% lower than its USD and GBP counterparts. Fixed income and cash are around 18% (EUR is about 5% higher, leaving around 10% in hedge funds, commodities, and other alternatives.

Cross-Currency Comparison
This quarter, performance varied across the GBP, USD, and EUR Peer Groups, reflecting differing regional equity trends, bond market dynamics, and currency movements. GBP Peer Groups narrowly outperformed USD and EUR Peer Groups in base-currency terms, driven in part by a slightly weaker pound and large internationally focused companies, rather than domestically focused companies where the UK economy lagged.

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Lastly, we are proud to release this peer group data, which will be published quarterly. We will be sharing more insights in the coming quarters. All contributors to this data will remain anonymous, and this is designed as a market intelligence tool rather than a research platform for managers.   

*Benchmark portfolio - a simple composite of global bond (hedged) and global equity investable index returns that mirrors the headline equity allocation of each risk profile. The weights between the two indices are 30:70, 50:50, and 70:30, respectively. 

N.b. All content is based on data at the time of writing on 01/03/26.