Fourth Quarter 2025 Review.
October to December 2025
- UK Consumer Price Inflation (CPI) declined over the fourth quarter to 3.2%, the last reported data in this period being for November 2025.
- The Bank of England cut base rates once in Q4 by 0.25%, reducing the rate from 4% to 3.75% in December.
- Official US Interest Rates were cut by 0.25% by the US Federal Reserve in December to a target range of 3.50% – 3.75% to counter rising unemployment.
- Third quarter US economic output/gross domestic product (GDP) was announced in December and surprised to the upside by being stronger than expected at a 4.3% annualised rate.
- Gold rose on raised geopolitical concerns and fears of US political interference in US interest rate setting – the remit of the Federal Reserve (independent since 1913). Gold has been steadily acquired by central banks in 2025, keen to diversify their reserves away from US Dollars. Later in the fourth quarter, gold rose on US/Venezuela tensions.
- Global equity markets looked beyond geopolitical issues to post positive returns, aided by better than forecast earnings and lower short term interest rates. The global equity rally broadened to include those sectors that had lagged previously, smaller and mid-sized businesses across most geographies.
- Disquiet over the size of capital expenditure by the very large artificial intelligence (AI) and tech companies and their investments in each other led to a decline in many of their share prices in the final few weeks of the quarter. For example, Oracle’s share price fell 35% in Q4.
- Despite the Bank of Japan raising official short term interest rates by 0.25% to 0.75%, Japanese equities were significant winners in Q4 following the election of Prime Minister Sanae Takaichi and in anticipation of her agenda of economic stimulus.
- Major developed bond markets were initially buffeted by concerns over budget deficit financing – especially in the US and UK. While US government bond yields were relatively stable over the quarter, UK gilt yields fell (prices rose) helped by the Chancellor of the Exchequer’s adherence to budgetary discipline in her budget in November. Japanese bond yields rose sharply (prices fell) to reflect the Bank of Japan’s change in monetary policy through higher interest rates.
Portfolio Activity
The fourth quarter activity for Pier portfolios continued the trend established at the start of 2025. This centred around continuing to mitigate risk ensuring portfolios are not susceptible to specific risk from:
- Equity concentration in a few very large US companies
- Non-GBP currencies
- Duration or interest rate risk in longer-dated bonds.
In general, the portfolios remain broadly diversified across bonds and equities. Bond exposure is focused on short to medium maturities to provide better price stability, rather than longer maturities where budget deficit funding delivers a risk of price depreciation. Equity exposure is focused on global, not regional, equities of all sizes where valuations are not stretched and profitable companies proliferate .
Currency risk is centred on having a low non-GBP exposure with particular reference to US Dollars. In general, UK retail investors invested in cheaper unhedged global equity trackers have been hit by the US currency’s weakness in 2025. Pier manages foreign currency risk in order to deliver inflation* plus returns.
* Inflation as measured by the UK Consumer Price Index, aka CPI.
Portfolio Performance
The following table shows the performance of Pier’s portfolios for the fourth quarter of 2025.
| 01/10/2025 | |
| 31/12/2025 | |
| Last Quarter | |
| Plus Four | 3.65% |
| Plus Three | 3.28% |
| Plus Two | 2.92% |
| Plus One | 2.49% |
| Pier Income | 3.72% |
| Prosper Four | 4.27% |
| Prosper Three | 3.76% |
| Prosper Two | 3.20% |
| Prosper One | 3.55% |
| Purpose Four | 2.23% |
| Purpose Three | 2.03% |
| Purpose Two | 1.79% |
| Purpose One | 1.70% |
Please remember that past performance does not predict future performance and it should not be the main reason for making an investment decision. The value of investments and income from them can fall as well as rise.
Pier Performance – Key Portfolio Influences
Prosper
What Worked
iShares Physical Gold ETC: +12.12%
Only held in Prosper One, gold has enjoyed a phenomenal year buoyed by central bank buying and in Q4, investors seeking a safe haven given the oscillating geopolitical risks which manifested towards the end of 2025.
Dimensional UK Core Equity: +6.36%
This fund benefited from a buoyant UK market that broadened beyond the FTSE 100 to the wider market where attractively priced equities attracted both domestic and overseas buyers.
What Didn’t
Dimensional £ Short Duration Real Return: +0.19%
All of Prosper’s holdings performed positively in the fourth quarter of 2025. Although this fund was the lowest returning asset in the Prosper range, it was nonetheless a positive outcome.
Plus
What Worked
Polar Capital Artificial Intelligence: +7.41%
While this fund can be viewed as a themed holding, it is a global equity portfolio giving exposure to both the enablers of artificial intelligence and its beneficiaries. The AI boom ensured this fund delivered another excellent quarter.
Dimensional UK Core Equity: +6.36%
This fund benefited from a buoyant UK market that broadened beyond the FTSE 100 to the wider market where attractively priced equities attracted domestic and overseas buyers.
What Didn’t
First Trust Nasdaq Cybersecurity ETF: -5.08%
This ETF suffered a negative quarter as some of its holdings’ valuations fell In turn leading to falling share prices.
Income
What Worked
Schroder Asian Income: +7.98%
The global equity recovery spread to Asia focusing on income generating equities. This was beneficial to this fund’s excellent return in Q4.
FTSE UK All Share Index: +6.38%
This tracker benefited from a buoyant UK market that broadened beyond the FTSE 100 to the wider market where attractively priced equities attracted domestic and overseas buyers.
What Didn’t
Dimensional £ Short Duration Real Ret Inc: +0.10%
All of Income’s holdings performed positively in the fourth quarter of 2025. Although this fund was the lowest returning asset in the Income range, it was nonetheless a positive outcome.
Purpose
What Worked
EdenTree European Equity: +6.16%
A recent addition to the Purpose portfolios, this fund has managed to buck the underperformance of sustainable and responsible equity strategies versus their non-‘ESG’ counterparts through excellent stock/equity selection. As this fund was added during the quarter, Purpose portfolios will not have received the full benefit of this fund’s performance over the quarter.
Schroder Global Sustainable Value Equity: +5.86%
This holding was a beneficiary of a general appreciation in global equities and one where more attractively priced (value) companies did well, as investors became wary of lofty valuations in US mega tech/AI related companies.
What Didn’t
Brown Advisory US Sustainable Growth: -2.75%
The relative underperformance of US equities in Q4 and poor stock selection in a style of investing out of favour within the United States led to a negative outcome over the final quarter of 2025. The funds delivered a positive 2.81% over the calendar year.
Please remember that past performance does not predict future performance and it should not be the main reason for making an investment decision. The value of investments and income from them can fall as well as rise.
