Keep in mind that our commentary on the fund, as well as its past performance, is not a guarantee of what will happen in the future. It is also not financial advice - you should consider talking to a professional adviser if you're not sure whether an investment is right for you.

These investments are designed to be held for the long term. Like all investments, your money is at risk - investments can go down as well as up, currency fluctuations can affect the value of your investment, and you may not get back what you put in.

How does the fund work?

The Triodos Future Generations Fund invests in companies that are considering the welfare of children and adding benefit for future generations through its products, services, and also the way in which it works. 

Triodos Future Generations Fund focuses on small and medium-sized (midcap) businesses that we have strong conviction in.

When looking for solutions to address the world’s most pressing challenges, especially in impact investing, it is easier to find companies focused on a single product or a single service, as is often the case with small and midcap companies. These small and midcaps are an attractive way to get exposure to a single investment theme or angle, such as child welfare.

Moreover, smaller companies with a strong and viable strategic proposition can have fantastic growth potential, giving them the opportunity to be the big players of tomorrow.

Remember with smaller, entrepreneurial businesses, there’s also more risk that the business might not perform as well as expected. If they decrease in value, investors could get back less than they put in.

Fourth quarter market overview and current economic outlook

Global equity markets showed modest growth in Q4 2024, as the MSCI World Index increased, driven mainly by the continued strength of the US dollar. Early in this quarter, investors were cautious due to uncertainties surrounding the US election and concerns over the extent of the Federal Reserve's rate cuts. However, the November election of Donald Trump boosted optimism, particularly in US markets, with expectations for tax cuts and deregulation. Outside the US, markets were less optimistic, especially with fears over potential US import tariffs. Business surveys revealed the US economy outperformed others, while the eurozone, UK, and Japan showed signs of stagnation. Manufacturing Product Manager’s Index (PMI) for major economies ended the year in decline, but the eurozone's services PMI improved.

Central banks and bond yields

The Federal Reserve, European Central Bank (ECB), and Bank of England (BoE) all cut rates in Q4, but their outlooks were varied. The Fed suggested fewer rate cuts in 2025, while the ECB lowered its growth forecast due to possible US tariffs. The BoE kept rates steady in Q4, concerned about inflation. Bond yields rose across major economies, especially in the US and UK, due to inflation fears and reduced recession fears.

Inflation outlook

Inflation in the eurozone, UK, and US has been falling for several months now, and we expect this will continue, but it will take time, and there may be months where it stays the same or goes up slightly. In the eurozone, inflation is getting close to the 2% target, and core inflation (which doesn’t include things like food and energy) is at 2.7% and still falling. In the US and UK, core inflation is higher, but it should slowly decrease. The biggest risks to inflation are global issues such as political instability and trade, which could lead to supply shortages. In the eurozone and UK, we expect people to spend less, which will keep inflation and overall economic growth low.

Economic growth to stay low

We expect some small improvement in the economy in the eurozone, but it will still be lower than historical standards. The rate cuts in Europe should help support growth. In the US, the economy is still strong, but growth is expected to slow in 2025, though the US will still grow faster than other regions. Although the UK has started to recover from low growth in 2023, growth will remain low in 2025. In Japan, we saw little growth in 2024, but a stronger rebound is expected in 2025.

Performance update

In the fourth quarter of 2024, the Triodos Future Generations Fund faced a challenging period, underperforming it's benchmark. In US dollar terms, large-cap stocks saw slight declines, and small and mid-cap (SMID) stocks faced more significant downturns. This trend was influenced by reduced monetary easing and the unexpected outcome of the US presidential election, which contributed to the underperformance of impact-focused portfolios. 

Within the Triodos Future Generations Fund, companies in both Consumer sectors delivered strong performances. This success was largely driven by Stride, which impressed investors with robust results and an optimistic outlook. Conversely, the Health Care and Industrials sectors didn’t perform as well in the fourth quarter. Many portfolio companies in the Health Care sector reported somewhat disappointing quarterly results. Additionally, the US election outcome introduced policy uncertainty, further impacting these sectors. 

Despite these challenges, the fund delivered positive performance in 2024, with an attractive valuation and positive prospects for 2025. The fund's largest sectors remain Industrials, Consumer Discretionary, and Information Technology, while it maintains no exposure to Banks, Insurers, Energy, or Real Estate. 

Return

Calendar year return

As of 31/01/2025

Investments which contributed to performance

Stride: The standout performer was Stride. A week before its earnings release, a short seller issued a negative report which stated a collapse of profitability. However, this turned out to be incorrect, and Stride reported another set of strong results which were well above expectations. 

Zurn Elkay:  The company modestly exceeded expectations and raised the low end of guidance. Estimates are tracking higher as end markets prove resilient in a choppy environment and margin performance is strong.

Mueller Water: Posted strong results again and provided guidance that was reassuring. The company also profited from positive post-election sentiment towards US SMID caps.

Investments which detracted from performance

Reliance Worldwide: At an investor event, it confirmed guidance but mentioned that EU markets would trend towards the lower end of the guided range.

Helios Towers: Helios Towers' updated financial forecast for 2024 didn’t change much because most of the industry already expected the new, higher targets.

DSM-Firmenich: Reported results that met expectations and upgraded guidance, but the market was already expecting this.