By Philip van Doorn
Matt McLennan of First Eagle discusses the current set of risks that have led to soaring gold prices - even as stock markets keep rising
At a time of high stock prices at home, U.S. investors might be well-served with a global value strategy.
Time and again, investors are reminded about the importance of diversification. The daily news, even in the financial media, is dominated by coverage of short-term trends that cause investors to make quick moves. But adding exposure within your portfolio to a strategy that encompasses longer economic trends with a global focus can lower your overall risk while also giving you new opportunities to make money.
The First Eagle Global Fund had $70.6 billion in assets under management as of Dec. 31. The fund's history goes all the way back to 1970. It is benchmarked to the MSCI World Index, which is made up of large-cap and midcap stocks across 23 developed markets, including the U.S. In 2025, this index returned 21.1%, ahead of the 17.9% return for the S&amp;P 500 SPX. Meanwhile, the First Eagle Global Fund's Class A shares SGENX returned 31.6% (excluding sales charges) and its Class I SGIIX shares returned 31.9%. All investment returns in this article include reinvested dividends and exclude any sales charges.
First Eagle also has an exchange-traded fund that follows a strategy similar to that of the First Eagle Global Fund, but with important differences described below. The First Eagle Global Equity ETF FEGE has lower expenses than the firm's flagship Global Fund. It was established in December 2024, returned 33.6% in 2025 and has already grown to $1.2 billion in assets under management.
Gold is a hedge not only against risk assets but the quality of risk-free assets.Matthew McLennan, head of the Global Value team at First Eagle Investments
Last year was a good one for stocks, especially in developed markets outside the U.S. Investors may need to be reminded of two factors pointing to the need for diversification. First, the S&amp;P 500 SPX is about 40% concentrated in the largest 10 companies in the index, according to Ned Davis Research. This means three companies - Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT) - make up 20.1% of the portfolio of the SPDR S&amp;P 500 ETF Trust SPY, which tracks the S&amp;P 500 by holding all of its stocks.
Another reason to diversify is highlighted by this chart, provided by First Eagle Investments, which shows the price of the S&amp;P 500 relative to the MSCI World ex USA Index, going back to 1970:
The S&amp;P 500's price relative to the MSCI World ex USA Index is near its maximum level, which it hit late in 2024.
The strategy of the First Eagle Global Fund is to select investments that trade at prices below their intrinsic value, based on First Eagle's analysis, while taking a global approach across asset classes and adding various hedges to aim for positive returns across economic cycles. Along with the value focus, the fund has tended to have significant positions in gold bullion and stocks of gold-related companies. This served the strategy well in 2025 when the price of continuous front-month gold contracts on the New York Mercantile Exchange (GC00) increased 64% to settle at $4,341.10 an ounce on Dec. 31. Gold was trading for $5,075.90 an ounce early on Tuesday - up another 17% so far in 2026.
Matt McLennan discusses strategy
Matthew McLennan is the head of the Global Value team at First Eagle Investments, which is based in New York and had $181 billion in assets under management as of Dec. 31. During an interview with MarketWatch, he discussed &#34;geopolitical crosscurrents&#34; that had been instrumental in pushing up gold prices and pressuring &#34;the long end of sovereign bond markets.&#34;
&#34;To frame the discussion, 25 to 30 years ago, the key emergent risk was corporate credit risk,&#34; he said, noting out that the U.S. federal government &#34;actually ran some surpluses then.&#34;
&#34;But it was symmetrical to a deficit in the corporate sector, leading to Enrons and Worldcoms of the world,&#34; he said. Enron went bankrupt in 2001 and WorldCom went bankrupt in 2002.
McLennan said that the global financial crisis in 2008 reflected a savings shortage, when &#34;the problem was with the household sector.&#34;
That brings us to the current scenario, in which &#34;we suspect the next crisis can center around sovereigns,&#34; McLennan said. &#34;Coming out of COVID, we had very wide fiscal deficits,&#34; but now, even after unemployment has been reduced, &#34;budget deficits remain wide across the developed world.&#34;
And that helps explain why prices for gold and silver have soared.
When asked about how the First Eagle Global Equity ETF's strategy differs from that of the venerable First Eagle Global Fund, McLennan said that the ETF &#34;is really the stock picking component of what we do in the Global Fund. It does not contain the cash, bullion or fixed-income or currency hedges.&#34;
As of Dec. 31, the First Eagle Global Equity ETF had 8.2% in &#34;gold-related investments,&#34; which means stocks of gold producers. The First Eagle Global Fund had a total of 15.4% in gold-related investments, with gold bullion making up 10.9% of the fund's portfolio.
Getting back to the current economic scene, McLennan said: &#34;Despite pressure on the Federal Reserve to lower interest rates and [for Fannie Mae and Freddie Mac] to buy mortgage debt to keep mortgage rates down, the U.S. 30-year yield is grinding higher.&#34;
First Eagle's research indicates that &#34;a fixed-positional asset like gold, while volatile in nominal terms, has kept pace with the growth of government debt outstanding, delivering a far stronger real return&#34; than that of U.S. Treasury securities. That comes from First Eagle's &#34;Reflections 2025-2026&#34; report from Jan. 5. Based on investment performance data compiled by First Eagle Investments going back to 1968, &#34;a portfolio that included exposure to both gold and equities would have been more stable than owning either in isolation,&#34; according to the same report.
McLennan pointed to two paths forward for governments in developed economies to address their deficit spending and high levels of debt.
&#34;If you do nothing, the level of government debt compounding will increase more quickly. You can end up with more inflation than you would otherwise hope for,&#34; he said. But if you increase taxes and/or cut spending, &#34;you raise recessionary risk,&#34; he said.
Summing up a component of First Eagle's hedging activity, McLennan said, &#34;Gold is a hedge not only against risk assets but the quality of risk-free assets.&#34;
Portfolio management and stock selection
When asked if the First Eagle Global Fund had been selling gold, or gold-related stocks in light of the commodity's price run-up, McLennan said, &#34;We have trimmed gold, here and there, to keep the allocation at midteens,&#34; over the past 18 months
McLennan explained that the fund will, at times, de-emphasize gold and load up more on stocks. It may do so &#34;when risk perception is high&#34; in the market. That really hasn't been the case, despite the increase in gold prices, since stock indexes in global markets have risen at the same time.
At the end of 2025, the First Eagle Global fund was about 38% in U.S. stocks, which meant that its non-gold equity portfolio was &#34;pretty equally balanced,&#34; McLennan said, while the MSCI World Index was about 72% in U.S. equities, according to the index provider. Within the First Eagle Global Equity ETF, U.S. stocks made up about 44% of the portfolio as of the end of 2025.
He named four examples of stocks held by the First Eagle Global Fund and the ETF that he and colleagues believe represent good value, based on their bottom-up analysis:
-- The largest healthcare sector investment is Becton Dickinson BDX, which has a leading market share for syringes and catheters. &#34;If you think about what is going on in world pharmaceutical research and development, there is a mix of medications that must be delivered via syringes. With healthcare out of favor, this stock had been derated over the past couple of years,&#34; McLennan said.
-- Weyerhaeuser WY owns or controls 10.4 million acres of timberland in the U.S. &#34;With rates where they were, the housing market has been soft and timber prices have been soft, so Wayerhauser was out of favor&#34; when First Eagle was buying last year, McLennan said.
-- According to McLennan, Hoshizaki JP:6465 of Japan is &#34;classified as an industrial company,&#34; but it is &#34;not as cyclical as others.&#34; The company has a leading international market share for ice machines. He said it was trading at a discount to similar European companies and that it had shown &#34;a high single-digit growth rate over the past couple of decades.&#34;
-- Another interesting metal play for investors is copper, which is critical for electrification. First Eagle holds shares of Grupo Mexico MX:GMEXICOB. That company's main asset is its stake in Southern Copper SCCO. &#34;By buying through an international holding company, we get Southern Copper at a meaningful discount,&#34; McLennan said.
Top 10 holdings of the ETF
Here are the largest 10 holdings of the First Eagle Global Equity ETF as of Tuesday:
Competing funds
The First Eagle Global Fund and the First Eagle Global ETF are both benchmarked to the MSCI World Index, in U.S. Dollars.
(MORE TO FOLLOW) Dow Jones Newswires
01-27-26 1039ET

<p>Matt McLennan of First Eagle discusses the importance of a global value strategy for U.S. investors amid high stock prices and rising gold prices. The First Eagle Global Fund, with $70.6 billion in assets, outperformed the S&P 500 in 2025. The fund focuses on investments below intrinsic value and includes significant gold holdings, which have benefited from geopolitical risks and fiscal deficits. The First Eagle Global Equity ETF, launched in December 2024, also follows a similar strategy with lower expenses and has quickly grown to $1.2 billion in assets.</p>

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