SMF - November 2025 Update

Top 3 investment themes – November 2025                

1. Tech Wobble and Recovery

Following a remarkable, tech-led recovery in the wake of the ‘Liberation Day’ sell-off, the narrative of a potential ‘tech bubble’ persisted through November. High valuations, market concentration, and the strong performance of unprofitable businesses linked to the AI theme continued to fuel debate. Although the Magnificent 7 and NASDAQ (the primary US technology index) both ended their seven-month winning streaks, slipping slightly from all-time highs, concerns about a bubble were eased by robust earnings, most notably from Nvidia, and other AI-related firms.

2. UK Budget and Gilts

After months of anticipation, the UK’s annual budget statement was delivered on 26th November. Key measures included a freeze on income tax thresholds and significant changes to salary-sacrifice pension contributions, collectively raising taxes by £26bn and pushing the tax burden to 38% of GDP by the end of the parliament. Fixed income investors, previously wary of the UK’s fiscal outlook, responded positively: gilt yields remained steady and Sterling held firm.

3. Cryptocurrency Collapse

Despite the continued growth of Bitcoin ETFs and ongoing retail and institutional demand, cryptocurrencies suffered a sharp downturn in November. Bitcoin fell 16.7%, its worst monthly performance since 2022, reflecting a broader global de-risking and far outpacing the decline in the S&P 500. This volatility underscores the inherent volatility within the asset class, with the sell-off occurring despite resilient economic data and strong corporate earnings.

Net performance (GBP Terms)                                                                                                         

Past performance is not a reliable indicator for future performance.

_{Source: Morningstar as at 30 November 2025. All returns are in GBP and fixed income is GBP hedged.}

How did SMF perform?

Growth assets

It was a mixed month for equity markets, with European and UK equities being the standout performers in GBP terms. European equities benefited from increasing likelihood of a ceasefire in Ukraine, which was boosted by President Trump himself saying that "we're very close to a deal". In the UK, the Budget provided clarity after months of uncertainty, which was welcomed by businesses, particularly in the banking sector. Across the Atlantic, US markets saw contrasting dynamics. Despite Nvidia reporting stronger-than-expected earnings, its share price fell by -13% as investors questioned whether Google’s Gemini model could challenge Nvidia’s dominance in artificial intelligence. Alphabet, by contrast, gained +14% over the month. While volatility spiked to its highest level since April in the first half of the month, sentiment improved as the probability of a December interest rate cut by the Federal Reserve increased. This shift helped the S&P 500 finish the month in positive territory in dollar terms although US tech posted a loss for the month. From an active positioning perspective, our tactical overweight positions to European equities, including our overweight to European banks and recent addition to European basic resources, added to performance. In contrast, our overweight positions to Emerging Markets and US equities detracted. 

Defensive assets

Fixed income markets had a broadly positive month, with major regions posting small gains. US Treasuries rallied as the probability of a December rate cut jumped from 25% mid-month to 83% by month-end - a supportive backdrop for duration exposure. This drove the 10-year yield lower for the fourth consecutive month, and prices higher. Both UK Gilts and Sterling had a muted response to the Budget, which was perceived positively due to greater-than-expected fiscal headroom for the Chancellor. This stability was a welcome change compared to the turmoil following the 2022 mini-budget, when yields spiked by 1%. In contrast, Japanese government bonds came under pressure after a $135 billion fiscal stimulus package. The 10-year JGB yield climbed to 1.81%, its highest level since 2008, and the 30-year had its largest monthly increase since 2004, reaching all-time highs. In terms of our active positioning, our overweight to Australian government bonds and underweight to the Dollar detracted from performance, whilst our US Treasury position added to performance.

Alternative assets

Performance for the SMF alternatives allocation was positive over the month. The UK Property fund performed particularly well given the end-of-year rush to finalise deals. The AIMS fund this year has delivered over 8%, providing an uncorrelated and diversified source of return.

Key active management themes in November 2025

1. Increased sector-based equity positions

• Given the growing demand for basic materials in Europe, which as been driven by European defence pledges, easing trade tesnions and Chinese policies aiming at reducing excessive internal competiiton, we opened an overweight position to European basic resources.  
• Despite Nvidia's exceptional earnings result, the market remained unconvinced which led to global equities facing a volatile end to the month. As a result, we reduced our broad equity overweight's in US, Euroepan and Emerging Markets. 

2. Reduced our FX exposure 

• We reduced the size of our underweight to the US Dollar relative to Japanese Yen, given Japan's new fiscal stimulus package weighing on the currency alongside interest rate differentials.

November 2025 Performance

Past performance is not a reliable indicator of future performance

_{Source: Morningstar as at 30 November 2025. Performance is shown net of fees.} 

The launch date of SMF (pension) was 11/12/2017, SMF (bond) 18/02/2019, SMF II (pension) 30/06/2021 and SMF II (bond) 30/06/2021.

^{Source: Aviva Investors. This diagram is for illustrative purposes only, asset allocations are subject to change. The reference fund is SMF, based on its strategic asset allocation as at 31st August 2025.}

Market outlook and positioning: what do we believe happens next?

From an active asset allocation perspective, we maintain a constructive stance on equities as investor sentiment has improved, and corporate earnings continue to show resilience. In fixed income, we are slightly positive duration and do see value in selective parts of the yield curve such as the US 5-year treasury, and Australian 10-year government bonds. We also retain our underweight US Dollar position, which is relative to overweight positions in JPY, Euro & EMD Local Currency. We also remain underweight the Pound given the increased likelihood of interest rate cuts following the Budget.

In terms of equity regions, we have diversified our overweight exposure across US, European and Emerging Market equities. We maintain a moderate overweight to US equities, against the backdrop of strong corporate earnings - especially within US tech - and resilient macro data. Our overweight positions in European, including European banks and basic resources, and Emerging Market equities allow for diversification within our equity allocation; the outlook for both regions has also strengthened due to signs of improving trade relations with the US.

In fixed income, within the US, given salient fiscal concerns which impact longer-term bonds, we have structured our fixed income position to be overweight 5y US bonds vs an underweight to 30y US bonds. We also remain overweight Australian 10-year government bonds, to help maintain slight positive duration across the portfolio given the expectation of interest rates to fall in the short-medium term. 

Any companies, or markets, mentioned are for illustrative purposes only, not intended to be an investment recommendation.

Key risks

• Investment/Objective risk - The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.
• Currency risk - The fund is exposed to different currencies. Derivatives are used to minimise, but may not always eliminate, the impact of movements in currency exchange rates.
• Derivatives risk - Investments can be made in derivatives, which can be complex and highly volatile. Derivatives may not perform as expected, meaning significant losses may be incurred. Derivatives can have some degree of unpredictability (especially in unusual market conditions), and can create losses significantly greater than the cost of the derivative itself.
• Emerging market risk - Investments can be made in emerging markets. These markets may be volatile and carry higher risk than developed markets.
• Fixed Income risk - Investments in fixed interest securities are impacted by market and credit risk and are sensitive to changes in interest rates and market expectations of future inflation. Bonds that produce a higher level of income usually have a greater risk of default.
• Specialist Funds risk - Some funds invest only in a specific or limited range of sectors. This will be set out in the fund’s aim. These funds may be riskier than funds that invest across a broader range of sectors.
• Suspension of trading risk - Fund managers are often able to stop any trading in their funds in certain circumstances for as long as necessary. When this happens, cashing in or switching your investment in the fund will be delayed. You may not be able to access your money during this period.
• This is a summary of the key risks. For further information on the full risks and risk profiles of the fund, please refer to the relevant Fund Factsheet.

Important information

THIS IS A MARKETING COMMUNICATION

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but, has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment.

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