Best performing ready-made solutions of January – March 2025

Ready-made solutions, much like the rest of the market, had a tough start to the year, with the average portfolio in this content series returning negative growth over Q1 2025. A sign of poor market performance is that higher risk categories typically do worse than their lower risk counterparts, which is something we definitely saw this quarter. This is because higher risk portfolios usually have a higher exposure to shares, which are seen as more volatile than lower risk assets like bonds. In essence, this means they yield fruit in good times, but generally are more vulnerable to damage in choppier waters.

The average high risk portfolio returned -3.0%, whilst the average medium risk portfolio returned -1.2%. Low risk portfolios did comparatively well, however the average was still just about negative, with a return of -0.1%. Overall, only 5 of the 31 portfolios we track returned positive growth in the quarter, with the best performing of these growing by a meagre 0.6%. But to put that in perspective, the worst performing portfolio over the period sank as much as -5.5%.

Whilst President Trump's tariffs and the ensuing madness of the past couple of weeks has dominated headlines and affected portfolios globally, the looming threat had already started to make an impact earlier in Q1. The S&P 500 had negative returns over the quarter for the first time since Q3 2023 - although the FTSE 100 had a much better start to the year, growing by roughly 6%. 

The average high risk portfolio in this content series returned -3.1% over Q1, with all providers showing negative performance over the period. AJ Bell did the best, with a loss of -0.3%, whilst Aviva and Moneybox had the weakest quarterly performance in this category with returns below -5%. One reason for AJ Bell's relative success this quarter is the regional allocation of the fund, with 23% invested in the UK, 23% in the US, and 12% in the Eurozone. The UK proportion is higher than we see in other funds, whilst the US allocation is lower. This has served AJ Bell well so far in 2025, particularly in light of the struggles and uncertainty around the US economy since Trump returned to office. 

Looking over a longer period, Vanguard have been the standout performers, topping the list across 1-year, 2-year, and 5-year timeframes. 1-year returns have been modest, with the average portfolio growing by 3.7%, although this jumps to 20.3% when looking over two years, and 72% when covering a 5-year period. Vanguard's LifeStrategy 100 boasts 89% growth in the last five years, meaning a £10,000 investment made on 1 April 2020 would have been worth £18,900 as of the end of March 2025.

This is a welcome reminder of the adage, "time in the market is better than timing the market"; Investing with a long-term focus tends to pay off. It also helps psychologically to deal with market volatility when you've seen some growth in your initial investment. For first-time investors, don't panic! History has shown that the stock market trends upward in the long run, even if there are bumps along the way.

The average medium risk portfolio returned -1.2% in Q1, with Bestinvest being the standout performer over this period and the only provider to not register negative growth after fees. Bestinvest are also the best performer over the last year, returning 4.7%, in comparison to the average of 3.4%. Over longer timeframes, the story changes, with HSBC coming to the fore as the top performer over two years and a close second over the 5-year period. HSBC's 2-year performance of 17.2% is over 3% higher than the rest of market's 14% average, and the portfolio has grown by 45.2% in the last 5 years, only slightly trailing AJ Bell's Balanced fund which tops the list with 45.6%.

A key driver behind Bestinvest's relative success this quarter has been its choice to opt for an equal-weighted exposure to the S&P 500, instead of opting for a standard S&P 500 ETF which is split by market capitalisation.

To explain this idea, imagine 3 companies: Company A is worth £70m, Company B is £20m, and Company C is worth £10m. An ETF made up of the 3 companies which is split by market capitalisation would be made up of 70% of Company A, 20% of Company B, and 10% of Company C. That means that any change in the value of Company A would have a bigger impact on the ETF than the same change in the value of Company B or C. An equal-weighted ETF of the 3 companies would have a fair split of 33.33% in A, B, and C.

The reason this is important is because there have been growing concerns at the concentration of the “Magnificent 7" in the S&P 500, with the fortunes of the index increasingly impacted by the performance of these 7 stocks. After bumper years in 2023 and 2024 for tech firms, and more modest returns across the rest of the sectors, Trump's tariffs have since hit US tech firms like Apple, Amazon, and Nvidia the hardest - leading to large falls across the sector and the S&P 500 in turn. The impact of large declines in the share price of these companies is partially mitigated by an equal-weighted ETF, as the companies make up a smaller proportion of the overall portfolio.

In contrast, Nutmeg's Fully-Managed Portfolio 6 has close to 30% in the S&P 500, split between different ETFs. None of these are equally weighted, meaning there is a significant exposure to leading tech companies, which has had a negative impact on its performance in recent months. There is additional nuance to Nutmeg's S&P 500 exposure, with Nutmeg allocating a significant proportion into GBP hedged ETFs. This reduces the impact of weakness in the foreign currency and has helped protect Nutmeg investors from some of the falls in the US dollar's strength over the second half of Q1.

The average low risk portfolio returned -0.1% in Q1, which is 2.9% more than the average high risk portfolio over the period. There was a range of 1.5% between the top and bottom in the low risk category, with Aviva (0.6%) and Halifax (0.4%) performing the best, whilst AJ Bell (-0.7%) and Moneybox (-0.9%) were at the bottom. There was a 50/50 split between providers that generated positive and negative returns in the quarter, however all 10 portfolios had positive growth across the longer 1-year, 2-year, and 5-year timeframes.

Average returns across the last 12 months were 2.9%, jumping up to 9.2% across a 2-year period and a more modest 14.5% across the full five years. Aviva and Halifax take pole positions across the shorter timeframes, whilst Hargreaves Lansdown are a clearer winner over five years, returning 28% over the period - over 9% higher than Charles Stanley in second place.

Halifax's fund has had positive performance in 4 of the last 5 calendar years, although 2022 hit the bond market badly, with rising interest rates and Liz Truss' mini-budget causing a poor year for gilts. As of the end of 2024, Halifax hold roughly 35% of their fund in UK fixed-income, larger than the 32% allocated to bonds from the rest of the world. Aviva, on the other hand, favour US bonds, with 45% of fixed-income assets allocated to the region, followed by 15% in the UK and 8% in Japan.

Hargreaves Lansdown have roughly 40% allocated to North America, 20% in Developed Europe, and 10% in the UK. The largest holding in the portfolio is a HL Global Corporate Bond fund, closely followed by a Global Government Bond index, with the two accounting for 50% of the fund's assets.