International All Cap: investor letter Q3 2025

As with any investment, your capital is at risk.

International equity markets were in positive territory during the third quarter, buoyed by expectations of further policy easing and continued strength in technology stocks. Market sentiment was weighed down somewhat by lumpy industrial activity and subdued consumer demand in emerging markets. While technology and platform businesses continued to capture investors’ imagination, cyclically exposed and consumer-facing companies found it a more challenging task to maintain their course in the choppy and difficult-to-navigate waters.

Within this context, the International All Cap portfolio underperformed its benchmark.

Performance Attribution

Taken together, this quarter’s relative detractors reflect a broader theme of consumer softness across several geographies. While we continue to believe in the fundamental strengths of these businesses, their recent contribution was unambiguously negative.

Among the most significant detractors was Shimano, the Japanese manufacturer of high-quality cycling components. After several years of pandemic-driven growth, the business is now grappling with oversupply in distribution channels and more hesitant consumer demand. The scale of the correction was sharper than anticipated, with the shares retreating meaningfully over the quarter.

Sysmex, another Japanese holding, also weighed on performance. The diagnostics company has faced slowing test volumes and heightened competitive intensity, particularly in its core haematology business. Although its long-term market position remains strong, the near-term earnings outlook has become more challenging, leading to investor caution.

In consumer staples, AB InBev detracted as global beer demand remained muted, especially in emerging markets. Pricing initiatives could not fully offset weaker volumes, and concerns around the group’s balance sheet and debt burden resurfaced, leaving the shares under pressure.

Adyen too was a detractor from relative performance. The shares weakened following results that showed continued margin pressure as the company invests heavily in growth initiatives and builds capacity to support rising transaction volumes. While revenue momentum remains healthy, investors were seemingly disappointed by the slower pace of operating leverage and the extended timeline to reach profitability targets.

Competition within the payments sector also remains intense, which has added to near-term uncertainty. We continue to believe Adyen’s global platform, strong client relationships and scalable technology provide a durable competitive advantage, but the market is likely to remain focused on the speed of margin recovery in the quarters ahead.

Partially offsetting these headwinds, a number of technology and platform businesses delivered strong results and contributed positively to relative performance.

CATL is the dominant leader of power battery systems in China, and was one of the greatest relative contributors to performance over the period. The company’s dominant position in the global electric vehicle battery market was reinforced by a series of new contract wins, while accelerating EV adoption in both China and overseas markets provided a powerful tailwind. As broader recognition of CATL’s strategic importance to global supply chains gathers momentum, this in turn is driving a sharp recovery in the share price.

Taiwan Semiconductor Manufacturing Company (TSMC) also added significantly to performance. Despite broader cyclical softness in some electronics markets, demand for its leading-edge nodes – essential for artificial intelligence applications – remained robust.

The market increasingly acknowledges TSMC’s pivotal role in enabling the next wave of technological progress, and it remains one of the highest conviction positions in your portfolio.

Elsewhere, Shopify continued its resurgence. The Canadian ecommerce platform reported strong uptake of its payments and logistics services, delivering impressive revenue growth and evidence of operating leverage. This helped restore confidence in the company’s ability to generate sustainable profitability at scale.

Finally, Tencent contributed positively. Improvements in advertising demand and the resilience of its gaming business reassured investors at a time when broader Chinese equity markets remained under pressure. The company’s combination of scale, profitability and innovation remains a valuable anchor within the portfolio.

Trading

Continuing with our commitment to look widely for exceptional growth companies, we made two new purchases this quarter.

CaixaBank is a leading Spanish retail bank, with over 25 per cent market share in loans and deposits, and 30-to-40 per cent in pensions, life insurance, and mutual funds. It is seeing healthy credit growth, while its strategic focus on fee income-generating businesses, like wealth management and insurance, boosts its already attractive return on equity (ROE).

It is conservatively managed, with the La Caixa Foundation providing an anchor shareholding, and its culture emphasises efficiency, something which is reflected in its elite cost-to-income ratio. With an return on equity above 15 per cent, macroeconomic tailwinds and rising fee income, we believe that the current valuation is attractive and therefore took a position for your portfolio.

bioMérieux specialises in developing and marketing in-vitro diagnostic (IVD) tests, mainly used in clinical environments to detect infectious diseases. Enhanced speed and accuracy in diagnostics enable earlier interventions, more effective treatments, and ultimately better patient outcomes.

The IVD sector is set for robust expansion, driven by demographic shifts, urbanisation, climate change, and increasing microbial resistance. bioMérieux is well-positioned to outpace this growth by focusing strategically on niche areas and innovative technologies.

The founding family's ongoing control and a track record of disciplined capital allocation inspire confidence in the company's leadership. With most sales being recurring and serving defensive markets, the company also shows notable resilience. We are confident that the structural drivers of the IVD industry and bioMérieux's place within it are robust, long-lasting, and largely insulated from geopolitical disruptions.

Conversely, we sold our clients’ position in Ashtead, the industrial equipment rental business. The sale follows the announcement of Ashtead’s intention to move its primary listing to the US, and a subsequent profit revision downward due to weaker US construction conditions. Given our inability to hold materially US businesses, we made an orderly exit on your behalf.

Outlook

This letter is not intended to minimise the reality of recent underperformance. We recognise the challenges that the portfolio has faced and accept our responsibility to learn from them.

At the same time, we remain convinced that the companies we own are fundamentally strong, with durable advantages and attractive valuations. The near-term environment is marked by cyclical weakness across freight, manufacturing, and consumer goods, but we also see encouraging signals: forward-looking indicators in construction, stabilisation in housing, and continued strength in technology and innovation-led sectors.

Importantly, international equities are as attractively positioned as they have been in many years. Valuations remain compelling relative to the US, and many international companies offer higher returns on capital, lower leverage and greater exposure to secular growth themes.

A patient, selective approach allows us to participate in these opportunities, avoiding the risks of short-term market timing. Our focus is on owning high-quality businesses with the ability to compound value over the long term, rather than reacting to the inevitable volatility of the cycle.

Our Portfolio Construction Group enters the next quarter clear-eyed about recent difficulties, but positive about the opportunities ahead. We believe that maintaining a disciplined, long-term perspective is the best way to translate today’s attractive entry points into tomorrow’s returns.

Thank you for your ongoing support and patience. 

International All Cap

Annual past performance to 30 September each year (%)

Annualised returns to 30 September 2025 (%)

The International All Cap Strategy comprises three distinct variants. Overall, the variants are broadly similar, with the key difference being the degree of exposure to emerging markets listed holdings.

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.

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