Under-the-radar stocks and funds for Q1 2025: AI, financial credit, and multi-asset strategies

The first quarter of 2025 presents both challenges and opportunities for financial professionals. As market conditions evolve, staying ahead of key investment trends can help advisors guide clients with confidence.

In Morningstar’s Ideas on Our Radar Asia Edition: Q1 2025, our researchers highlight seven Asia-domiciled mutual funds that may offer attractive APAC investment opportunities—each providing a unique lens on growth, income, and diversification. Download the full report to stay informed on the latest investment insights shaping 2025.

The rapid expansion of artificial intelligence is fueling investment enthusiasm, with companies leveraging AI to drive efficiency and innovation. From automation in financial services to breakthroughs in healthcare and logistics, AI-driven companies are increasingly seen as a growth engine.

Polar Capital Artificial Intelligence invests in companies worldwide that are poised to benefit from the expanding adoption of AI technology. Lead manager Xuesong Zhao seeks businesses that either drive AI innovation or stand to gain from its implementation, aiming to capture long-term growth in this evolving space.

Unlike many AI-focused strategies, this fund casts a broader net. Along with investing in “AI enablers” like chip designers and semiconductor equipment makers, it also holds “AI beneficiaries” in sectors not typically linked to AI, such as retail, healthcare, and financials.

Zhao, who has led the fund since its 2017 launch, brings nearly two decades of investment experience and is backed by an 11-member technology team—one of the most well-resourced in the industry.

While Zhao’s stock-picking and the team’s tech expertise are strengths, the strategy’s broad scope means venturing beyond technology, where results have been mixed. Collaboration with other Polar Capital teams is limited, as they primarily operate independently.

Algebris Financial Credit aims for an annualized return of 7% to 9% over a market cycle by investing in senior and subordinated debt within the global financial credit sector. Its portfolio includes preferred stocks and hybrid capital instruments like additional Tier 1 (AT1) securities. Sebastiano Pirro has led the fund since its launch in September 2012.

This strategy stands out for its experienced and stable leadership, backed by a close-knit team of analysts averaging 15 years of expertise in financials. Their deep focus on bank hybrid capital gives the fund an edge over competitors in the space.

The team employs a bottom-up selection process, targeting systemically important financial institutions in Europe and the U.S. while integrating credit and equity analysis. A disciplined, long-term investment approach and emphasis on higher-quality issuers have helped the fund navigate market volatility. However, maintaining liquidity and flexibility will be crucial to sustaining its edge in this specialized asset class as assets grow.

Multi-asset strategies incorporating infrastructure investments can enhance portfolio diversification, reduce volatility, and provide inflation protection. Advisors should explore options such as infrastructure ETFs, REITs, and private equity funds focused on essential services and sustainable development projects.

Pimco GIS Balanced Income and Growth is a global 60/40 equity-bond portfolio designed to provide both growth and income. It takes a quantitative approach to equity investing while maintaining a flexible, multisector fixed-income strategy. Security selection drives performance, with tactical asset allocation playing a minor role. The portfolio has no set yield target.

The strategy benefits from Pimco’s renowned fixed-income expertise. Group Chief Investment Officer Dan Ivascyn oversees the bond sleeve, applying the same approach he uses in his highly regarded Pimco Income strategy, which holds a Morningstar Medalist Rating of Silver. With nearly 30 years of experience and a deep research bench—including more than 85 global credit analysts—Ivascyn is a key strength.

On the equity side, lead portfolio manager Emmanuel Sharef employs a systematic, factor-based approach, scoring global stocks on quality, momentum, value, and growth. Backed by a smaller, less established team of six researchers, this equity strategy only launched in November 2023, making it too early to gauge its long-term effectiveness.

Keep an eye on Securities and Exchange Commission filings. Registration statements and prospectuses can help investors find new funds that have launched in the past year. Regulatory filings can also help investors find funds with strategy changes.

Our analysts review the forms for promising information about the portfolio managers, and their objectives and strategies.

Investors often screen for more tenured managers to find stable, experienced investment teams. However, this approach can overlook firms with category expertise and portfolio managers with impressive track records on other investment vehicles.

Search for fund managers with established records at other open-end mutual funds or separate accounts. Do they have many years of industry experience, even though they’re new to a fund? What other investments do they manage, and how have those performed?

Small funds with distinctive processes might fall through the cracks of screens based on size.

Funds with over $500 million in assets are less likely to close or merge with another fund. But smaller funds can come with their own advantages.

Small funds can be nimbler, investing higher percentages in individual securities or small-cap companies without affecting stock prices. Portfolio managers can take a stock-picking approach that wouldn’t scale across more assets under management. Because of their short track records, funds younger than three years require extra scrutiny.

Past performance data can conceal information about a fund’s long-term potential. Changes to an investment team or strategy can transform a previously unappealing fund into an opportunity worth considering. These funds might fall through the cracks of initial screeners because of their long-term 3-year and 5-year returns.

After a change, investors should continue to monitor a fund to ensure it meets the style profile they’re seeking. 

When compiling the final list, importance is given to funds with smaller asset bases, long track records, and youthful funds under three years are given a closer look. 

Sometimes, opportunities among existing funds haven’t yet attracted assets or attention. Screening by performance metrics or expense ratios can surface fund managers that flew beneath your radar.

As the number of funds grows, the screens above can help investors tune out the noise and discover new opportunities. After the initial search, investors should dig into their next phase of due diligence. Nontraditional strategies may come with significant risks and may not be appropriate for many investors.

Cut through the noise of investment data with the help of Morningstar research. Our independent data, analysis, and ratings grow your capabilities, not your headcount.

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Adapted from a 2022 article by Nicholas Goralka.