Funds, how the dollar crisis halved returns in Europe in 2025

Stock exchanges marking repeated highs, even in a year punctuated by skyrocketing tensions on the political chessboard and beyond, but also a bond market able to hold its flag high, thanks above all to the historically high levels to which bond coupons have returned. Given the premises, investors reasonably expected to come out of 2025 with inflated portfolios, but in the end they had to be content, especially in Europe.

The investment products marketed in the Old Continent have in fact delivered an average return of 6 per cent over the twelve months just ended: a positive result and certainly not to be despised, but on balance more than halved compared to the previous year's +13.3 per cent and even lower than the double-digit rise of 2024. Confirmation of this comes from data contained in a report published by Tosetti Value, one of Europe's leading multi-family offices, which reviews the returns and costs of all Ucits products distributed in at least one European country, classified as long-term funds, active and passive (excluding ETFs) and managed by the top 250 companies in order of asset size.

Wall Street did not in truth guarantee this time the 'stratospheric' returns of the previous two years, but the balance of the S&P 500 and Nasdaq indices nevertheless remains to be framed, with gains of 16% and 20% respectively. Europe, on the other hand, returned to shine as it had not done for some time: +17% for the continental Stoxx 600 list; +23% for a Dax able to shrug off another year of stagnation for the German economy; +31% for Piazza Affari and even almost +50% for Queen Madrid.

With Asia and the emerging countries also on the shields, the global Msci World index in any case advanced 19.5 per cent, which is somewhere between 17 per cent in 2024 and 21.8 per cent in the immediately preceding year, while the global bond indices achieved a total return (including coupons) of 2.5 per cent. Yet such performance seems to have been only partially captured by managers: a glass half-filled in this case, that of European funds, indeed more half-empty than full.

The reason for this is essentially one and the same: the weakness of the dollar, which depreciated by 10% on a global scale throughout 2025 and even by 12% when compared to the euro, which also ended up affecting the investments of those who live beyond the borders of the United States and who evidently did not cover themselves sufficiently. For the pockets of a European investor, the advance of the two main US equity indices and their unbridled and seemingly unstoppable technology sector has in the end been reduced to little more than crumbs, and the balance of the bond market on a global scale is even in danger of turning negative.