Investors who have profited from the AI rally should check how much of their portfolio now depends on it, according to Jonathan Moyes, head of managed portfolio service at Wealth Club.
This is on the back of rising concerns that the AI boom, which has “underpinned a powerful part of this multi-year surge in stock markets across the globe”, is at risk from calls to slow down the technology’s development, rising interest rates and lofty valuations.
"The tug of war between AI acceleration and safety is underway, and the forces are showing up in financial markets,” Moyes said.
"Chip stocks have come under pressure as investors question whether the blistering pace of spending on ever more sophisticated AI architecture can continue indefinitely in the face of potentially imminent regulations."
As expectations grow that Amazon and Microsoft, which have already spent heavily on data centres, might slow the growth of that spending, experts are divided between those who see another boom and bust coming and others who see a technology where demand will outstrip supply.
In the meantime, Moyes said now is a good time to take stock of investment portfolios, as stock markets around the world – “even UK equities” – have delivered remarkable returns over recent years.
“If you haven't been regularly pruning your holdings, parts of your portfolio may be looking a bit overgrown,” he said.
Moyes’ fund picks for a slowing AI scenario included two bond funds and a private equity trust, as outlined below. All three are meant to sit alongside core equity holdings in a well-diversified portfolio.
Bond funds
Yields have “unusually” risen as equity markets have boomed, Wealth Club’s head of managed portfolio service said, which provides investors with the opportunity to use gains made in equity markets to lock in levels of income that “would have seemed unlikely just a few years ago”.
His pick to take advantage of this was Royal London Diversified Asset-Backed Credit, a £476m fund rated with a maximum of five FE fundinfo Crowns and run by FE fundinfo Alpha Manager Shalin Shah, whose aim is a positive absolute return in excess of the Bank of England Sterling Overnight Interbank Average (SONIA) by a yearly 2% over rolling three-year periods.
With a yield of 5.8%, it buys asset-backed and secured bonds instead of relying only on government or company debt.
Moyes praised its emphasis on security, diversification and its “relatively low” interest rate sensitivity, which has “historically helped deliver strong risk-adjusted returns with lower volatility than many traditional bond funds”.
While it is inappropriate to quartile funds within the IA Targeted Absolute Return sector, Royal London Diversified Asset-Backed Credit has beaten the average peer over one, three, five and 10 years.
Performance of fund against index and sector over 1yr
Source: FE Analytics
For investors who “don't want to take their foot completely off the gas”, Moyes picked the £1.1bn Man High Yield Opportunities fund, which offers access to a portfolio of higher-yielding corporate bonds from around the world.
Alpha Manager Michael Scott is prepared to take on extra risk by backing companies regarded as distressed but which could deliver if their operational and financial position improves. He limits the downside through positions that are designed to make money when the value of selected bonds falls.
Moyes said: “The team has built an enviable track record within the sector and thanks to rising interest rates, the fund offers an enticing yield of 10.2% [as of August 2026].”
Performance of fund against index and sector over 1yr
Source: FE Analytics
Private equity
As private equity has lagged public markets in recent years, it could present "an opportunity to gain exposure to a historically strong-performing asset class at a time when listed equities appear more fully valued,” Moyes said, and his choice of vehicle was Oakley Capital Investments.
The £856m investment company buys into privately owned businesses in technology, consumer and education among other sectors; its largest holding is global sailmaker and marine brand North Sails.
“That may seem fitting. After several years of unfavourable conditions for private equity, investors could be looking for a change in the wind,” Moyes said.
“While there are no guarantees, Oakley combines an experienced management team, a strong long-term track record and exposure to high-quality private businesses at a time when sentiment towards the asset class remains subdued”.
Performance of fund against index and sector over 1yr
Source: FE Analytics
Other analysts have backed the trust too. Jefferies has reaffirmed its “buy” rating on Oakley two weeks ago with a price target of 725p, well above where the shares have been trading in the low 500s.
The trust currently trades at a 33% discount to net asset value, which “may prove enticing for patient long-term investors,” Moyes finished.