Global funds like these should be the foundation of any portfolio, but which are the best?

The basic building block of a portfolio should be a global equity fund. You deposit a lump sum or contribute monthly and acquire your own piece of the most famous companies in the world.

But while this should be a long-term relationship, you should still question your commitment to a fund each new year.

Does it match your objectives and the level of risk you can afford? Does it promise diversification but actually offer the opposite?

In 2025, the need for this reassessment is highlighted by the fact that last year the old favourite, £23.3bn Fundsmith, failed to match the performance of the interloper, £63.8m Nutshell Growth Fund. Fundsmith, managed by industry veteran Terry Smith, returned 10.7 percent. Nutshell achieved 23.7 percent.

Lord Spencer, the chairman of Nutshell Asset Management, took a £20,000 bet on such an outcome and paid his winnings to The Mail on Sunday’s charity, the Royal Osteoporosis Society.

Since launching in 2010, Fundsmith has returned 619 percent. But its misstep in 2024 should be a warning even to loyal followers of this fund – and to other existing or potential investors in all global funds – that they need to examine their priorities.

These funds can be described as global, but your money is not spread evenly across the planet. British, European and Asian companies do appear in their portfolios, but the companies they support are largely American.

The US S&P 500 index represents approximately 63 percent of the value of the FTSE All-World index’s valuation. Furthermore, the S&P 500 itself is dominated by a few large companies.

About 35 percent of the index is made up of technology’s all-conquering ‘Magnificent Seven’ – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – whose shares have soared in 2024 thanks to generative artificial intelligence (AI). tension.

Alphabet is the parent company of Google. Meta owns Facebook, Instagram and WhatsApp. Generative AI is seen as crucial to their future expansion.

Some fear that a bubble could be forming in this technology sector. But elsewhere there is also the belief that these shares will remain popular in 2025.

If you’re bullish on this level of US exposure, here are your global fund options. It is possible that a mix of funds suits you.

In financial relationships, variety adds spice.

BLUE WHALE

This £120m fund is a ‘one-stop shop for navigating the markets’, as lead manager Stephen Yiu puts it. The goal is to take advantage of this

‘idiosyncratic megatrends’, such as the West’s quest to reduce its dependence on microchip manufacturers from the Far East.

Yiu and his team have lowered the stakes in the Magnificent Seven, arguing – controversially, some believe – that these titans may be spending too much on AI.

The fund’s other holdings include Sartorius, the German scientific equipment maker, and payments giant Visa. This is a fund to consider if Magnificent Seven shares already play a major role in your portfolio.

F&C

This £5.5 billion investment trust is a route to backing the Magnificent Seven, the biggest stake. iPhone maker Apple, the trust’s third-largest holding, is now valued at about $3.7 trillion.

The stock price rose 31 percent to $251 in 2024. In late December, broker Wedbush raised its price target on the stock to $350, based on the view that a golden age of growth is on the horizon for Apple in 2025.

Another top 10 holding is Eli Lilly, the pharmaceutical giant behind the obesity drugs Mounjaro and Zepbound. By the beginning of the next decade, global annual sales of these and other weight-loss drugs are expected to reach $150 billion.

F&C is one of the two most important global fund acquisitions of broker Interactive Investor. It’s also one of my picks for global funds.

FUND SENSE

One of the reasons Fundsmith’s stellar track record took a hit in 2024 is manager Terry Smith’s skepticism about the fortunes that could come from generative AI.

Fundsmith only owns Meta and Microsoft. Smith has turned away from semiconductor giant Nvidia, whose shares have risen nearly 27,000 percent in the past decade.

Others may consider this a mistake. But there are no signs of Smith (pictured) deviating from his normal course of buying ‘quality companies’ of various types. Current selections include L’Oréal, the beauty conglomerate, and the Marriott hotel group.

Alex Watt, fund analyst at Interactive Investor, argues that Smith’s stock-picking system could gain support this year as investors diversify globally away from the Magnificent Seven. For this reason, I remain loyal to Fundsmith, one of FundCalibre’s elite funds in this category.

NUTSHELL GROWTH

Terry Smith may like to buy and hold, but Nutshell’s manager Mark Ellis prefers ‘agile rebalancing’ – that is, making frequent trades for the maximum profit, and ensuring the fund is rebalanced regularly. Currently, 60 percent of the portfolio is invested in US stocks such as Meta, Microsoft, Arista Networks, a software group, and auto parts retailer AutoZone.

But Europe is represented through Novo Nordisk, the Ozempic weight loss drug company, and Hermes International, the maker of the Kelly and Birkin bags.

At the end of last year, Nutshell was added to FundCalibre’s list of funds that could qualify for full ‘elite’ status.

The FundCalibre team views Ellis’ strategy as ‘innovative and original’.

INDEX FUND

The simplest and cheapest option may be a ‘passive’ fund where the portfolio mimics the composition of an index.

Interactive Investor’s best buy in this category is the iShares Core World ETF (exchange traded fund), which tracks the MSCI World Index.

Some of the key voters are, unsurprisingly, the members of the Magnificent Seven, plus US banker JP Morgan Chase.

Whether you choose the passive or active approach, it’s worth checking whether your existing fund is on Bestinvest’s list of ‘dog’ or underperforming funds (bestinvest.co.uk). At last count there were around £26bn of savings in such funds, which was particularly disappointing as they eschew the Magnificent Seven.

It would be foolish to trust all your money to these companies, but ignoring them would also be a mistake – no matter what happens in 2025.