Markets have shown resilience over the past year, but uncertainty remains high as investors look ahead to 2026. With inflation pressures lingering, interest rates still adjusting and global risks firmly in focus, diversification has never been more important. Hargreaves Lansdown reveals three of its five funds to watch for investors seeking balance, resilience and opportunity in the year ahead.
Kate Marshall, lead investment analyst, Hargreaves Lansdown:
“As we head into 2026, investors once again face a world full of moving parts. Inflation remains elevated in some countries, interest rates are still settling and expected to fall further, and geopolitical tensions continue to cast a long shadow. Meanwhile, elections across several major economies could bring additional volatility.
That might sound daunting, but uncertain periods often create some of the best opportunities for long-term investors. Trying to second-guess short-term market moves rarely pays off. Instead, making sure your portfolio is well balanced, across regions, sectors and asset types, can help smooth the journey through whatever comes next.
Market concentration has remained a growing theme too. A small number of large US companies have driven much of the market’s recent gains. While they’ve delivered impressive results, diversification remains key. A broader approach helps reduce risk and opens opportunities that might otherwise be overlooked.
For investors looking to diversify and strengthen their portfolios for the years ahead, we’ve shared three of our five funds to watch for 2026 and beyond covering different areas of the market. For the full selection, investors should head to hl.co.uk. Each offers something distinct and could play a valuable role as part of a long-term investment approach.
Schroder Managed Balanced
With so many unknowns on the horizon, balance feels more important than ever. Investors have had to contend with fluctuating inflation, shifting interest rate expectations and sharp swings in stock markets, and that’s before considering the impact of politics, elections and global events. In this kind of environment, it can make sense to have an investment that’s spread across a range of assets. Multi-asset funds that blend shares, bonds and other investments aim to capture growth when markets rise while offering some shelter when they fall. They can also help reduce concentration risk, and the benefit of professional management means the portfolio can be rebalanced on your behalf.
The Schroder Managed Balanced fund is a ‘fund of funds’. The managers mainly invest in other Schroders funds, run by specialist teams investing in hundreds of different companies and bonds worldwide. This creates plenty of diversification across geographies, sectors and asset types. The team tends to favour shares when the economic environment looks positive. But in times of stress, they shift towards more diversified assets, including bonds, cash and alternatives, with the aim of minimising losses. They also have the flexibility to invest in thematic areas, such as gold, which can provide additional resilience.
JPMorgan Emerging Markets
Emerging markets have played second fiddle to the US in recent years, but that hasn’t always been the case and at some point, the balance could shift. Valuations in developing markets look appealing relative to their developed peers, and the long-term growth story remains intact. Many of these economies are supported by powerful structural trends, such as rising wealth and expanding consumer demand. A key factor to watch in 2026 is the US dollar. If it continues to weaken, as some expect, that could be good news for emerging markets. A softer dollar typically reduces borrowing costs for these economies and can encourage investment flows.
The JPM Emerging Markets fund is managed by experienced investor Leon Eidelman, supported by a network of more than 100 investment professionals across nine countries. This gives the team eyes on the ground in many corners of the market. The fund invests in major countries like India and China, as well as smaller regions offering unique opportunities, including the Middle East, Turkey and Mexico.
Invesco Tactical Bond
Bonds have endured a volatile period, but they remain an important part of diversified portfolios as they can offer income, defensive qualities and potential stability when equities struggle. Inflation has come down from its peaks, and many central banks are expected to continue cutting interest rates throughout 2026 – though a cautious approach is signalled. This broadly creates a more supportive environment for bond investors because, as yields fall, prices typically rise.
Still, the path ahead is unlikely to be smooth. Economic conditions are uneven across regions, and political developments could introduce more twists. In this setting, flexibility is key. Funds that can adjust their exposure to different types of bonds have the potential to make the most of opportunities while managing risk.
The Invesco Tactical Bond fund aims to do exactly that. The managers have freedom to invest across government, corporate, high-yield and emerging market bonds. Their approach is built on interpreting the wider economic picture and adjusting the portfolio accordingly. They aim to shelter the fund when they see tougher times ahead and seek stronger returns when opportunities arise. This flexibility removes the burden on investors to pick which areas of the bond market to focus on and when.”
Annual percentage growth
30/11/2020 to 30/11/202130/11/2021 to 30/11/202230/11/2022 to 30/11/202330/11/2023 to 30/11/202430/11/2024 to 30/11/2025Schroder Managed Balanced13.00-8.512.6112.5712.58 IA Mixed Investment 40-85% Shares12.22-7.332.2314.8110.00 JPM Emerging Markets-1.80-18.04-2.346.2830.02 IA Global Emerging Markets5.87-9.930.2410.5021.62 Invesco Tactical Bond1.76-4.022.586.665.97 IA Sterling Strategic Bond1.78-11.293.328.97
