Asset management is crowded with noise, and never more so than in 2025. Everyone is chasing the next big thing.
There’s been a shift away from fundamental investing principles towards thematics. If you look at it in certain ways, it makes some sense and grabs attention. Not in terms of outcomes for investors, but the opportunities this style of investing offers by way of marketing opportunities.
It’s easy to tell and sell thematic stories. It’s easy to drum up hype and sell investors ‘the next big thing’.
But this flies in the face of traditional, proven investment management. The rules of the game should be to focus on consistency, diversification and risk discipline – not the latest themes and fads.
The truly forecastable measurements in investment are the relative risk & return dynamics of different asset classes. It’s not whether China will finally realise its potential, or whether Europe will lag behind over the next decade.
When thematics and binary bets fail
The problem with chasing ‘the next big thing’ is it entails making binary bets. And when you bet on certain investment outcomes you have to be right multiple times to be successful. Not only do you need to time the market right getting in and out of the investment, but you also need your thematic prediction to come true in the first place.
Let’s take clean energy as an example. It’s a very marketable theme; there’s a nice story to tell. Despite the policy tailwinds from the Biden administration, the sector actually suffered in terms of performance.
Between 2021 and 2024, in Biden’s years, clean energy indices lost more than 20%, compared to gains of around 40% during the Trump years. The narrative that was told was compelling, but the numbers after the fact tell a very different story.
Tactical asset allocation often follows a similar pattern. It may seem logical to start shifting client money based on predictions of what the future might look like, but it’s harder to be successful in practice.
For example, at the start of this year, many predicted 2025 as the end of US exceptionalism. The discussions were widespread and the commentators loud.
However, since Liberation Day, the cause of much market volatility, the S&P 500 gained around 9% in US dollar terms to the end of August 2025. It continued to outperform despite the consensus at the beginning of the calendar year.
I emphasise these returns are in US dollar terms. Sterling-based returns will look different, underscoring the point that forecasting is theatre. It isn’t a real and reliable investment strategy.
Market timing rarely succeeds, and gambling on it exposes clients to unnecessary volatility and behavioural risks.
Conventional is the new contrarian
Investments are fundamentally built for end clients. And clients don’t judge success by quartile rankings. What they care about it is whether their retirement goals will be met, whether their financial plans are on track, and whether they can stay composed during market shocks.
It’s imperative financial advisers use an investment partner that can help them answer those questions, one that builds portfolios aligned to helping clients realise those fundamental aims. Making binary bets with market timing on forecasts and chasing the latest themes won’t cut it.
Sticking to the fundamentals means: managing risk, not chasing big returns or quick wins; diversifying intelligently across asset classes, geographies, currencies and strategies; and creating portfolios that behave consistently and as expected.
Consistency matters
Returns don’t matter if you’re not in the market to make them and it’s easier to encourage good behaviour from clients when they know to expect consistency. Relieving stress and encouraging discipline is an essential part of investing.
Morningstar’s Mind the Gap 2025 study shows the cost of poor investor actions clearly. Over the 10 years to the end of 2024, the average annual investor’s returns lagged fund returns by around 1.2 percentage points (7.0% vs 8.2%). That’s 15% of potential gains lost through people exiting markets and not staying invested; it’s poor market timing. That’s an enormous difference in returns and, most importantly, outcomes.
It shouldn’t be a huge surprise that volatile, fad‑driven funds created the widest gaps between gains and real outcomes. By contrast, multi‑asset funds delivered some of the narrowest gaps, demonstrating the support diversification gives to investor discipline.
In a market environment dominated by hype, whether it’s AI bubbles, thematic fashions or tactical bravado, the most unconventional move in 2025 is to stick with what works.
To ignore the hype and put risk management and client outcomes at the heart of the investment strategy.
The purpose of a portfolio is not to entertain but to deliver. Consistently.
