International Concentrated Growth: investor letter Q2 2025

Your capital is at risk.

Which is harder: admitting defeat or celebrating a win? The disposition effect draws us in the opposite direction, for each, admitting defeat too late and celebrating a win too soon. Lately, we’ve been revisiting this behavioural bias, still as relevant today as when Hersh Shefrin and Meir Statman first identified it 40 years ago. It describes the tendency for investors to sell winning assets too soon while holding on to losing ones for too long.

The psychology behind this behaviour is deeply human. We’re naturally drawn to lock in gains and cling to losses, hoping for redemption. But as growth investors, we must resist these impulses. Investing, at its core, is as much about psychology as it is about analysis.

Conventional wisdom might suggest taking profits when a stock doubles. But if that’s only the start of a long compounding journey, selling too early can be costly, sacrificing not just years but decades of future growth. Many of the most significant contributors to the strategy's performance over the past two decades are companies we held through turbulence and uncertainty – proof that time, more than timing, is often the key differentiator.

Performance: staying the course

Performance over the quarter and year to date has been positive, and our long-term returns remain strong.

Holding MercadoLibre through its more challenging periods has been crucial to returns, and this quarter it was again among the top contributors to the portfolio's performance. The company continues to innovate at an extraordinary pace. In ecommerce, its fulfilment capabilities now rival the world’s best. Meanwhile, its fintech arm, Mercado Pago, has become a financial lifeline across Latin America, offering credit, savings and payment tools to millions who were previously excluded from traditional banking.

We recently hosted MercadoLibre’s founder and CEO, Marcos Galperin, in our Edinburgh office. What impressed us most was his clarity of vision for the business and the opportunities that lie ahead. It is a superbly run business that retains the hunger of a startup.

After 26 years at the helm, Galperin will transition to executive chair next year. His successor, Ariel Szarfsztejn, is a leader we know well. He has already achieved great things at the company, particularly by leading the logistics infrastructure buildout, which has become MercadoLibre’s most significant competitive advantage.

Spotify, too, has evolved far beyond its origins. What was once seen as a simple music streaming platform is now a dynamic creator ecosystem. Advertising and podcast revenues are rising, but more importantly, the company is building scalable monetisation tools. Operating leverage is emerging, margins are improving, and the tools developed for creators are more compelling and stickier than many expected.

During a recent visit with CEO Daniel Ek in Stockholm, we gained additional conviction in Spotify's potential to expand in emerging markets and for profitability to rise further due to the continued adoption of artificial intelligence. The opportunity set is vast. With a proven ability to scale, Spotify is only beginning to realise its full potential.

For Adyen, the past few years have been challenging. Slowing growth brought a sharp market reaction. But behind the noise lies a story of principled execution. The Dutch payments company continues to prioritise sustainability over speed, refusing to compromise its culture or customer experience. There are no acquisitions for growth’s sake – just steady, thoughtful development. This year’s recovery isn’t a turnaround; it’s the result of staying true to a resilient business model. In a short-term world, Adyen stands out for its long-term mindset.

Both TSMC and Nvidia delivered strong rebounds this quarter. They form the physical infrastructure of the modern digital economy. TSMC’s strategic moves to diversify manufacturing beyond Taiwan reflect prudence, not panic. Its ability to maintain technological leadership under geopolitical pressure is nothing short of exceptional. Nvidia, meanwhile, continues to ride the AI wave – but it’s far more than a chip designer. With CUDA, its proprietary programming model, Nvidia has built the core of modern machine learning research. Its ecosystem approach is what truly sets it apart. These are positions we’ve held through volatility, and the long-term results speak for themselves.

The Chinese holdings detracted from performance this quarter. Meituan, PDD and BYD all faced pressure amid heightened geopolitical tensions, particularly with the US.

Meituan exemplifies the depth of China’s domestic innovation. As a local services leader, it is building a real-time commerce ecosystem that has become deeply embedded in the daily lives of hundreds of millions. Competitive pressure, including from JD.com, is real. But the scale, reach, and network effects Meituan has built are difficult to replicate. This is a business executing a high-frequency, logistics-heavy model in one of the world’s most complex markets - an advantage that only strengthens over time.

PDD continues to surprise global investors with its speed of execution and product innovation. Its success with Temu in overseas markets, particularly the US, introduces modest trade exposure. However, the core business remains overwhelmingly focused on Chinese consumers, where PDD’s gamified, cost-efficient marketplace model still has significant room to grow. Temu may amplify volatility, but the company’s domestic operational engine is what anchors its long-term potential.

BYD is a prime example of a globally competitive industrial champion. The company’s vertical integration, battery technology and scale afford it pricing flexibility and cost advantages that few can match. While US tariffs limit its market there, BYD is already making significant inroads in Southeast Asia, Latin America and Europe. We believe Chinese EV makers, with BYD at the forefront, are positioned to dominate EV adoption in the Global South – and possibly in developed markets outside the US – for years to come.

These are complex businesses, not macro abstractions. Their shared geography should not obscure their individual strengths. They happen to be based in China, but we own them because we believe they are among the world’s most compelling long-term growth companies. We acknowledge that we may be wrong in the short term. Geopolitical clouds can linger. But if the disposition effect teaches us anything, it’s that discomfort alone is not a sell signal. These companies continue to meet our tests of vision, scalability, and durability. Our job is to look through the noise and hold on when it matters most.

Transactions: knowing when to let go

In contrast, we exited two positions this quarter: SolarEdge and Ginkgo Bioworks. In both cases, we understood the broad range of potential outcomes and hoped they would skew positively. But reality intervened.

SolarEdge’s operational weaknesses and growing competition, especially from Enphase in key European markets, undermined its product edge. Its balance sheet and high fixed costs also left it exposed to cyclical pressures. Ginkgo struggled to turn the synthetic biology promise into commercial momentum. Its shift to a Lab-Data-as-a-Service model raised fundamental questions about scalability. These exits reinforce a hard truth: even the most imaginative theses require resilient fundamentals to succeed.

We strive to be patient and thoughtful stewards of growth businesses. Naturally, we reflect on these sales and ask ourselves whether we hesitated too long, reluctant to realise losses or acknowledge misjudgements. Striking the right balance is an ongoing discipline. There is wisdom in both perseverance and timely exit; the real challenge lies in recognising which is right, and when.

Outlook: against the grain, with conviction

Markets remain unsettled. Inflation, diverging monetary policy and geopolitical shifts have all returned to centre stage. But we don’t claim to forecast macro events. We focus on individual companies whose ambitions are undeterred by macro swings and whose leaders are focused on the long road ahead.

The portfolio companies are typically led by founders or founder-like leaders – people who can pivot, allocate capital effectively, and hire with purpose. These traits matter more than interest rate projections.

Of course, we are closely watching developments, such as US trade negotiations, Brazil’s digital reforms and evolving EU regulation. But these do not drive our process. We remain resolutely bottom-up and long-term. Every investment undergoes rigorous analysis across culture, incentives, capital discipline and competitive edge – none of which appear on central bank balance sheets.

To invest well is to swim against the tide. It means resisting emotion and rejecting popular narratives. It means holding on through discomfort, especially when our most promising companies look misunderstood. And it means learning – always – from our setbacks.

We believe the disposition effect can be transformed into an advantage – but only with a framework that prizes patience, discourages premature selling, and embraces the value of conviction. Our best investments were once unpopular, and our most rewarding holdings were doubted. But in each case, we stayed the course. That is the essence of our approach.

"Patience is bitter, but its fruit is sweet." - Aristotle.

We do not aim to deliver smooth quarterly results. Our goal is to identify exceptional businesses, own them on your behalf, and give them the one resource they cannot manufacture themselves: time.

Thank you, as always, for your continued trust. We are proud to partner with you in this long-term endeavour.

International Concentrated Growth 

Annual past performance to 30 June each year (%)

Annualised returns to 30 June 2025 (%)

Source: Revolution, MSCI. US dollars. 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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