The best ISA funds in 2025

As we approach the midpoint of 2025, UK investors are witnessing a notable shift in global market dynamics. After years of US market dominance, the pendulum has swung, rewarding those who maintained a geographically diversified portfolio.

Two standout performers this year have been European equity funds and specialist gold equity funds, both of which have delivered impressive returns amid a backdrop of geopolitical and economic uncertainty.

Please note: the value of investments can fall as well as rise and strong short-term performance can quickly reverse. Investors may get back less than invested. Past performance is not a reliable indicator of future returns.

European shares – a resurgence driven by strategic shifts

European equity funds have surged in popularity and performance in 2025, buoyed by a confluence of macroeconomic and geopolitical factors. The region, long overshadowed by the tech-fuelled growth of US stock markets, is now benefiting from:

• Increased defence spending: In response to rising geopolitical tensions, many European nations have ramped up military budgets, creating tailwinds for domestic defence and industrial firms.
• Reshoring and regionalisation: As global supply chains fragment, European companies are seeing renewed demand for localised production and services.
• Valuation appeal: European stocks, particularly in the industrial and financial sectors, have been trading at a discount relative to their US counterparts, attracting value-oriented investors.

Funds focused on continental Europe have capitalised on these trends, especially those that have embraced strong-performing sectors such as defence and financials.

Gold equities - riding the bullion boom

Gold has reclaimed its status as a safe-haven asset in 2025, with prices hitting an all-time high of $3,500/oz in April. This surge has been driven by demand from Asia and the Middle East, where central banks have been quietly accumulating gold as a non-politicised reserve asset and diversification from US dollars.

Retail buyers have also emerged amid a ballooning US fiscal deficit, igniting fears of inflation and currency weakness, as well as the geopolitical risks of sanctions. With persistent inflationary pressures around the world, gold remains a trusted hedge for many investors, especially as currencies face devaluation.

While physical gold has soared, gold mining equities – which had lagged bullion prices for several years – have finally been catching up. The BlackRock Gold & General Fund, part of the Charles Stanley Direct Preferred List of ideas for new investment across the major fund sectors, is among the best-performing investment funds in 2025. The fund invests in this highly specialist area, which can offer leveraged exposure to gold prices and potentially outperform the metal itself during bull runs.

Here are the best performing Stocks & Shares ISA and SIPP funds in the first half of 2025, as well as for discrete years for context:

Figures are shown in pounds on a percentage total return basis, bid to bid price with net income reinvested. Source: FE Analytics, data to 30/06/2025. Onshore and retail open-ended funds only.

What are Investment Association (IA) funds?

There are several thousand funds on sale in the UK. The Investment Association divides these into about 45 sectors, broad groupings that help investors and advisers compare funds of similar types before looking in detail at individual funds.

Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus.

Find out more: Why funds can be a great investment shortcut

How to choose funds for an ISA

Your annual ISA allowance is a valuable shelter from capital gains tax and income tax on your investments. But with thousands of funds available, where do you start when trying to pick a fund for your tax-free allowance?

• Decide on your risk approach – Higher risk can mean higher returns but also bigger losses. Your goals and time frame will help shape the risk you are willing and able to take.
• Understand asset classes – There are various asset types including equities (shares), bonds and property. Diversifying across them can reduce risk.
• Choose how hands-on you want to be – Building a balanced portfolio is complex. Multi-asset funds can offer a shortcut for beginners or a core holding for experienced investors.
• Choose income or growth (or a combination) – income funds pay out regularly, which is great for retirees, whereas growth fund are focused on long-term wealth building.
• Look beyond past performance – past returns ≠ future results. Always understand a fund’s strategy, risk level, and when it can likely perform best through the fund factsheet and Key Investor Information Document.

Find out more: Eight tips on how to choose an investment fund