Overview
The International All Cap Team shares insights on Q4 2025, covering the strategy’s recent performance, portfolio adjustments, and market influences.
As with any investment, your capital is at risk.
International equity markets made further progress during the fourth quarter, supported by easing inflationary pressures and growing confidence that monetary policy is approaching a turning point. Market leadership remained relatively narrow, with investors continuing to favour certain types of high-quality businesses able to deliver resilient earnings in an uneven growth environment. More cyclically exposed areas of the market were volatile, as evidence of softer activity persisted across housing, consumer services and selected industrial segments.
Within this context, your portfolio underperformed its benchmark over the final quarter of 2025.
Performance
The lion’s share of underperformance this quarter has come from style headwinds. Both the quality and growth indices within international markets underperformed the core index by a margin rarely seen in recent years. Quality in particular – where your portfolio has a pronounced bias – experienced one of its more significant relative drawdowns versus the broader market.
Turning to stock specifics, this quarter’s contributors and detractors reflect the contrasting fortunes of companies exposed to structural growth opportunities versus those more sensitive to near-term cyclical pressures. While a number of holdings made encouraging progress, several consumer-facing and platform businesses detracted as sentiment weakened.
UK-based online platforms Rightmove, which focuses on property sales, and Auto Trader, which provides a marketplace for cars, motorcycles, vans and most other types of transportation, were among the greatest detractors to relative performance this quarter.
Rightmove felt the pressure of a subdued UK housing market. Lower transaction volumes and heightened sensitivity around pricing weighed on investor sentiment, despite the company’s dominant market position and highly cash-generative model.
Auto Trader also suffered over this short time period. While the long-term shift towards digital automotive marketplaces remains intact, softer dealer demand and cautious advertising spend led to near-term earnings concerns. The shares weakened as the market reassessed growth expectations in a market where willing buyers are in shorter supply and where, therefore, the process becomes more protracted.
EXOR detracted from performance primarily due to weakness in several of its largest underlying holdings, most notably Stellantis, the global automotive manufacturer, and CNH Industrial, a leading producer of agricultural and construction equipment. Stellantis shares came under pressure as softer global auto demand, elevated inventories in North America and concerns around pricing and margins weighed on the sector. CNH Industrial also detracted amid subdued agricultural equipment demand, as farmers delayed capital expenditure in response to lower crop prices and tighter financing conditions.
These cyclical pressures were compounded by more muted performance from Iveco Group, which manufactures commercial vehicles and trucks, where end-market uncertainty and normalising truck demand weighed on sentiment. Collectively, these factors led to a widening of EXOR’s discount to net asset value over the period, despite the long-term value of the underlying portfolio remaining intact.
Finally, Sysmex weighed on relative returns. The diagnostics specialist continued to face slower growth in its core haematology business, alongside competitive pressures in key markets. Although we remain confident in its technological leadership and long-term prospects, near-term earnings uncertainty has tempered market enthusiasm.
Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics were among the greatest contributors to performance over the quarter.
TSMC is the world’s leading contract manufacturer of advanced semiconductors. The company continued its upward trajectory as robust demand for leading-edge logic chips, particularly those used in artificial intelligence and high-performance computing, drove revenue growth and improved utilisation. Ongoing progress at its most advanced process nodes reinforced TSMC’s technological leadership and strategic importance within the global semiconductor supply chain.
Despite ongoing capital intensity and geopolitical considerations, the company’s scale, execution capability and close relationships with key customers support attractive long-term returns. We remain confident in the durability of TSMC’s competitive advantages and its ability to benefit from secular growth in compute intensity over time.
Samsung Electronics was aided by improving conditions in the memory market that supported a recovery in profitability, as industry supply discipline and rising demand for high-bandwidth memory used in AI applications helped stabilise pricing. Alongside this cyclical recovery, Samsung continues to invest heavily across its semiconductor and consumer electronics franchises, underpinned by its scale, balance sheet strength and vertical integration. While earnings remain sensitive to industry cycles, the company’s technological breadth and manufacturing expertise provide a strong foundation for longer-term growth.
Games Workshop, best known for the Warhammer franchise, continued its upward trajectory as robust demand for the franchise drove growth in both core product sales and licensing income. Ongoing progress within its expanding media partnerships segment provided further evidence of Games Workshop’s growing commercial opportunity.
Despite a backdrop of cost inflation, the company’s high-margin, vertically integrated model supports attractive profitability and steady reinvestment into its global community of hobbyists. We remain enthusiastic on the long term durability of the Warhammer ecosystem and the company’s ability to monetise its intellectual property more broadly.
Roche also contributed positively, with growing evidence of stabilisation in its pharmaceuticals division, alongside encouraging developments within its oncology and immunology pipelines. While the diagnostics business continues to face post-pandemic normalisation (a known headwind prior to initial purchase), the group’s depth of scientific capability, scale and robust balance sheet provide a strong foundation for future growth.
Trading
Trading activity during the quarter reflected our ongoing focus on portfolio quality, discipline and long-term return potential.
We took a new position in Diageo, the global spirits company, funding the purchase through the sale of Rémy Cointreau. Diageo owns a portfolio of leading premium brands across spirits, including Johnnie Walker, Guinness, Smirnoff and Don Julio, with strong market positions across both developed and emerging markets.
While near-term demand has softened in parts of the spirits category, we believe Diageo’s scale, brand strength and global distribution network position it well to navigate cyclical pressures. The company has a long track record of disciplined capital allocation, consistent cash generation and reinvestment behind its brands, supporting durable returns on capital over time.
Relative to Rémy Cointreau, Diageo offers broader category and geographic diversification, alongside a more resilient earnings profile. We believe the current valuation provides an attractive entry point into a high-quality consumer franchise with the ability to compound value over the long term.
We made a number of sales of smaller positions in the portfolio. These included Trainline, a UK-listed ticketing service where the core UK market is under pressure, Soitec, a semiconductor materials company where the expected demand has failed to materialise, and Intertek, a high quality testing and certification business which we believe will experience more sluggish growth from here.
Outlook
We recognise that investment performance, both over the quarter and over longer periods, has been disappointing relative to the benchmark, and we do not seek to minimise the challenges this presents. That said, our conviction in the long-term prospects of the businesses we own remains intact. Many operate in markets shaped by powerful structural forces, possess durable competitive advantages and are led by management teams with a clear focus on long-term value creation and disciplined capital allocation.
The global economic environment remains finely balanced. While inflation has eased, growth remains uneven and geopolitical tensions continue to shape supply chains, investment decisions and corporate behaviour. Against this backdrop, short-term market leadership has been narrow, and investor sentiment has at times been dominated by a small number of themes. We believe this creates opportunities for active, patient investors willing to look beyond near-term uncertainty.
International equity markets continue to offer compelling value relative to history and to the US, particularly among high-quality businesses with strong balance sheets and attractive long-term growth prospects. As conditions normalise and the breadth of market returns widens, we believe these attributes will be increasingly rewarded.
Thank you, as always, for your continued trust and support.
International All Cap
Annual past performance to 31 December each year (gross %)
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| ACWI ex US All Cap Composite (gross) | 3.8 | -31.6 | 11.0 | 3.6 | 19.0 |
| ACWI ex US All Cap Composite (net) | 3.2 | -32.0 | 10.4 | 2.9 | 18.3 |
| MSCI ACWI ex US Index | 8.3 | -15.6 | 16.2 | 6.1 | 33.1 |
| EAFE Plus All Cap Composite (gross) | 4.4 | -30.5 | 10.5 | 1.8 | 16.7 |
| EAFE Plus All Cap Composite (net) | 3.8 | -30.9 | 9.8 | 1.2 | 16.0 |
| Developed EAFE All Cap Composite (gross) | 8.1 | -31.8 | 10.8 | 0.0 | 12.5 |
| Developed EAFE All Cap Composite (net) | 7.4 | -32.2 | 10.1 | -0.6 | 11.8 |
| MSCI EAFE Index | 11.8 | -14.0 | 18.9 | 4.3 | 31.9 |
Annualised returns to 31 December 2025 (%)
| 1 year | 5 years | 10 years | |
| ACWI ex US All Cap Composite (gross) | 19.0 | -0.6 | 6.9 |
| ACWI ex US All Cap Composite (net) | 18.3 | -1.2 | 6.3 |
| MSCI ACWI ex US Index | 33.1 | 8.5 | 8.9 |
| EAFE Plus All Cap Composite (gross) | 16.7 | -1.0 | 6.2 |
| EAFE Plus All Cap Composite (net) | 16.0 | -1.6 | 5.6 |
| Developed EAFE All Cap Composite (gross) | 12.5 | -1.7 | 5.5 |
| Developed EAFE All Cap Composite (net) | 11.8 | -2.3 | 4.9 |
| MSCI EAFE Index | 31.9 | 9.5 | 8.7 |
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.
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.
Risk factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in January 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
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