Positive Change: investor letter Q2 2025

Your capital is at risk. 

The stories behind the numbers

Numbers have long been used to tell stories: from early tally marks on cave walls to sophisticated data visualisation today. Numerical systems, whether complex or simple, are not just about counting: they can reveal patterns and create narratives. Looking at Positive Change today: what numbers matter and what are they telling us?

Positive Change has a long time horizon, and performance since inception in January 2017 has been strong, with the portfolio delivering roughly 1.8 times net total return to the index. However, beneath this headline statistic, we appreciate that there have been some twists and turns to this tale with weaker performance, particularly post-pandemic. The Positive Change Team has worked hard to learn and adapt, but not overcorrect. Our aim has been to stay absolutely true to the core philosophy and essence of Positive Change, but sharpen our execution.

It is therefore pleasing that recent performance numbers are providing a positive message. Positive Change is ahead of benchmark over the recent quarter, YTD and over 12 months. In USD, Positive Change returned 19.1 per cent over the quarter compared to 11.7 per cent from the MSCI ACWI. 

So, what is the story behind this recent outperformance? The performance is more a reflection of stock selection than our overweight or underweight in any specific country or region. For example, in the US, where we hold 45.5 per cent of assets against 64 per cent in the index, the allocation effect is only +0.1 per cent, whereas the selection effect is +2.6 per cent. In other words, picking the right companies was far more important than our underweight position. In line with our underlying long-term growth philosophy, it is companies which are demonstrating compelling operational progress which are seeing superior share price performance. 

MercadoLibre, the Latin American e-commerce and fintech platform, was the top contributing company over the quarter, demonstrating continued strong performance. Their most recent results reported revenue growth of 37 per cent year on year and net income growth of 44 per cent year on year. Importantly, this performance is underpinned by strength across both MercadoLibre’s Commerce and Fintech divisions. The company now boasts 67 million unique active buyers and 64 million fintech monthly active users. Its services are supporting the growth of small and medium enterprises (SMEs) across Latin America and widening access to payment, deposit and credit products.   

Similarly, Duolingo, the educational app, is a clear example of the transformative power of artificial intelligence (AI) in democratising education, delivering exceptional returns as the company evolved into an "AI-first" organisation. The learning platform's revenue growth continues to beat expectations. Most remarkably, Duolingo leveraged generative AI to launch 148 new language courses in under one year, a stark contrast to the 12 years required for its first 100 courses. Behind the numbers, this technological breakthrough has enabled the company to help address the global language barrier that affects billions, with AI-powered Max subscriptions driving both user engagement and revenue growth.  

Fundamental progress from individual companies is especially welcome to see, given the uncertainties in the macro environment. Big numbers have dominated the headlines related to US tariffs, and geopolitical tensions continue to deliver a tragic toll across multiple conflicts.

Against this rapidly moving backdrop of heightened uncertainty, our philosophy and dual objectives remain steadfast. Our role is to assess the implications of the backdrop for portfolio companies and to focus on company resilience and adaptability. We are focused on investing in high-quality companies that are in charge of their own destiny. We will be patient during periods of operational or share price weakness, provided our long-term growth and impact hypothesis remains intact. 

The top detractor over the quarter, Remitly, is a good illustration. Remitly provides mobile-based remittance services for migrants. Despite strong operational progress– active customers and revenue grew by 29 per cent and 34 per cent, respectively, in the most recent quarter– its share price has been weak due to concerns about President Trump’s anti-immigration stance and a proposal to tax remittances from non-US citizens. While those developments might lead to near-term headwinds, we believe the long-term growth runway is very attractive. With a customer-centric approach and user-friendly offering, Remitly is rapidly taking share away from incumbents such as Western Union and MoneyGram. The company is also expanding its total addressable market by moving into new customer cohorts (such as micro-businesses), which should sustain higher revenue growth for longer. 

In June, we published our Annual Impact Report, and it contains a comprehensive range of data points as we evidence the impact of portfolio companies’ products and services. Quantification of impact is important. For example, we are able to report that portfolio companies provided education to 268 million registered learners, enabled the saving of 1,856 billion litres of water and provided access to financial services to over 450 million people. However, it is the real-world impact, the stories behind the statistics, that is of most importance. 

Take the pharmaceutical company Vertex. It treats 68,000 patients per year. This may seem a relatively low number, but it belies the life-changing nature of their treatments. For example, their Cystic Fibrosis (CF) treatment can result in a 45-year increase in life expectancy– a figure that you simply can’t put a value on. In the years ahead, Vertex plans to expand the number of patients with access to CF treatments and they also have nine drugs in pre-commercial clinical trials. Our excitement doesn’t rest on the number of trials but the nature of many of these innovative treatments, which are aimed at treating diseases such as kidney disease, type 1 diabetes, chronic pain and Duchenne muscular dystrophy. 

Other areas of healthcare continue to provide attractive opportunities. During the quarter, we took new positions in Sandoz, a generic pharmaceutical company, and Procept BioRobotics, a robotic healthcare company. 

Generic medicine is an area that has long attracted our interest from an impact perspective, given its role in facilitating affordable access to essential medicine across a range of therapeutic areas. Generics account for 80 per cent of medication administered globally but just 25 per cent of the spend. Our challenge has centred around finding a generics company that will also provide attractive long-term financial returns. 

We believe Sandoz has the potential to meet that objective. Spun out of Novartis in 2023, Sandoz is one of the largest generics and biosimilar companies globally. What attracted our attention is the company’s leading position in Europe, where the fragmented regulatory and procurement landscape presents a significant barrier to entry. Leveraging its scale advantage and legal and distribution infrastructure, Sandoz should have a cost advantage, which will enable the company to profitably capitalise on the growing demand for generics and biosimilars. 

In contrast to the very broad range of conditions treated by Sandoz, Procept BioRobotics is laser-focused on just one– benign prostatic hyperplasia (BPH). Also known as enlarged prostate, BPH is an incredibly common condition, notably in ageing populations, and affects 40 million men globally. Procept’s aquablation therapy uses cutting-edge robotics to treat the condition with high safety and efficacy. Its treatment has fewer side effects (such as incontinence and erectile dysfunction) compared to other options. As well as being transformative for patients, the financial characteristics are attractive too. They operate a razor-razor blade type model with 85 per cent of revenues being generated from consumables, which helps to provide a strong foundation for growth. 

Of course, innovation is not just the preserve of healthcare in the 21st century. In 1882, Thomas Edison established the world’s first electricity grids in both London and Manhattan, with his Pearl Street Station in New York becoming the world's first commercially successful electricity grid. It was small (covering only one square mile) but it heralded the start of a revolution that would see more than 20 million km of transmission and distribution lines constructed in the US alone. That seems remarkable, but it is dwarfed by the challenge ahead: we now require electrical investment on an unprecedented scale. We need to build more infrastructure in the next 30 years than in the previous 140 years. We also need to reconfigure grids to handle an entirely different pattern of energy generation as renewable energy becomes an increasing part of the energy mix. This challenge provides investment opportunities. During the quarter, we took a new position in Prysmian, the global leader in manufacturing and installing cables used in high-voltage transmission lines. We believe that Prysmian is poised to play a critical role in facilitating electrification and the energy transition and will benefit from significantly rising demand.

Our new buys were funded by reducing our exposure to companies which have enjoyed strong share price performance and where we wished to moderate our position size (such as Duolingo and MercadoLibre) and by the complete sale of Xylem, Sartorius, and Moderna. 

US water infrastructure company Xylem has been in the portfolio since its inception in 2017 and the numbers have told a pleasing story. Its share price has increased by approximately 157 per cent, operational execution has been strong, and it has allowed its customers to save and treat billions of litres of water. Looking forward, we think that Xylem will continue to deliver real-world impact, but that its growth will moderate and that, given its relatively rich valuation, it is less likely to meet our investment return expectations in the years ahead. Similarly, we believe that Sartorius, which supplies single-use equipment to the pharmaceutical industry, faces a tougher environment for growth. Execution in recent years has been underwhelming but the shares continue to trade on fairly high multiples. Given the competition for capital in the portfolio, it was time to move on and we sold Sartorius in April. 

Finally, we have completely sold Moderna. The story behind our Moderna investment has a few chapters. The first chapter saw us participate in Moderna’s IPO in 2018, at which time it was a very early-stage biotech with no commercially available products but a novel mRNA platform, which we felt had high potential. The second chapter began in 2020, when against the backdrop of the global pandemic, Moderna was one of the first to develop an effective Covid-19 vaccine. This incredible achievement saw Moderna enjoying soaring revenues and share price. However, the post-pandemic years have been a difficult adjustment for Moderna. The third chapter has seen Covid-19 vaccine revenue decline, underwhelming demand for Moderna’s new RSV vaccine and a delicate balance for management to strike between maintaining the pace of investment in research and development (R&D) and managing the rate of cash burn. We have been monitoring operational milestones for Moderna for some time and disappointing progress against these combined with an unhelpful backdrop in the US (rising vaccine scepticism and healthcare spending cuts) has meant that it is time for us to close the book on Moderna for now.

Overall, we believe that our trading activity leaves us with a high-quality portfolio with strong fundamentals. Three-year forecast earnings growth remains ahead of the benchmark by approximately 60 per cent, yet valuation looks reasonable: the portfolio’s PEG ratio (price to earnings growth ratio) is below that of the benchmark. Whilst these numbers are reassuring, we are not complacent.

As we look ahead to the remainder of the year, we continue to have an unrelenting search for exceptional companies that will meet our dual objectives. Data and numbers continue to be important: whether we are thinking about the financial characteristics of businesses, valuation metrics or quantifying impact. However, it is the stories behind the numbers that continue to matter. Plato stated that “a good decision is based on knowledge, not numbers”, and we continue to seek the knowledge and insight that will enable the Positive Change portfolio companies to continue to contribute towards solving some of the world’s biggest and most enduring challenges whilst making attractive long-term financial returns.  

Positive Change

Annual past performance to 30 June each year (%)

Annualised returns to 30 June 2025 (%)

* Inception date: 31 January 2017

Source: Revolution, MSCI. US dollars. Net returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised.

Past performance is not a guide to future returns.

Legal notice: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

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