International Growth: investor letter Q3 2025

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Innovation, sovereignty, and the long game

Political pieces are moving around the global tech chessboard. From Washington’s push to re-shore chipmaking to Beijing’s race for silicon sovereignty, the contest to build and control the compute stack continues to intensify. For long-term growth investors, this is fertile ground. Disruption on this scale doesn’t just reshape industries – it creates new ones. As author Chris Miller wrote in his book Chip War: “Semiconductors are the new oil – the foundation of the global economy”. With them, economies digitise and AI advances; without them, progress stalls.

For international investors, developments in US tech policy and capital allocation are increasingly relevant, given their influence on global supply chains and competitive positioning across markets. NVIDIA’s recent $5bn investment in Intel, alongside a multi-year product collaboration, is the latest public example of what is certainly fervent activity behind the scenes. The US needs domestically anchored, full-stack semiconductor manufacturing capability, and market leaders are being nudged by economics and policy to help build it. That policy context matters, and the objective is unambiguous: restore leading-edge logic manufacturing onshore and hard-wire national security interests into industry objectives. That combination of incentives and constraints is designed to create a durable domestic champion that can serve hyperscalers, defence and industry without relying on supply chains vulnerable to geopolitical shocks.

While NVIDIA and Intel grab headlines, other important collaborations are flying somewhat under the radar. Recent news of ASML’s work with Mistral, the French large language model developer, is just one example. Alliances are being forged across the semiconductor ecosystem, broadening beyond the obvious players, potentially shaping new technology standards and shifting competitive dynamics in subtle but meaningful ways.

The US is not alone in treating chips as strategic infrastructure. Export controls have tightened the flow of top-end graphics processing unit (GPUs) to China, increasing the incentive for domestic alternatives. During the quarter, we travelled to China, meeting with both public and private companies across their domestic semiconductor supply chain. From Jaguar Micro, developing data processing units for artificial intelligence workloads and next-generation datacentres, to general-purpose GPU developer Biren Technology, which may only be a few years behind NVIDIA. What we witnessed was rapid progress towards self-reliance. Factories, research parks and supply chains are all moving with a single-minded purpose: self-reliance. We do not take a view on precise timelines, but we do expect persistent, determined evolution.

Leadership in AI won’t be decided by algorithms alone. It will be defined by who can deliver compute at scale, reliably and affordably, in the right regions. That’s why we continue to back the ‘picks and shovels’ of the industry, while also spending time to understand substitutes and parallel stacks being developed around the globe, the ripple effects of which could be profound. As NVIDIA’s CEO noted recently, “anyone who discounts Huawei and Chinese manufacturing capabilities is deeply naive.”

The portfolio has meaningful exposure to the semiconductor value chain. Holdings in TSMC, ASML, Disco and Advantest each offer unique exposures to what we believe is the most valuable supply chain in the world. We see a notable disconnect between US hyperscalers’ capital expenditure forecasts and the growth expectations currently priced into the global supply chain. While hyperscaler investment appears durable, the supply chain’s growth potential is still materially underestimated. Many critical enablers of AI and advanced computing are still underappreciated by the market.

Advantest, in particular, has seen considerable share price strength in recent months. Markets are recognising the company’s position as the leading provider of test equipment for advanced semiconductors, a bottleneck as chip complexity and AI workloads scale. We expect continued demand tailwinds here as testing intensity grows. Similarly, both ASML and TSMC are among the top contributors to the portfolio's performance over the quarter, reflecting their essential roles at the leading edge of semiconductor manufacturing.

From rails to riders: the continuous rise of digital consumption

Historically, the greatest value has often emerged not just from building infrastructure, but from the businesses that operate on top of it. Railroads enabled commerce, but it was the companies moving goods and people that captured enduring growth. Today, the same logic applies in the digital world. The scale and local relevance that define digital infrastructure also underpin the consumer platforms we favour. Turning from the rails to the riders, we continue to see compelling opportunities in the rise of digital consumption.

Leading emerging market consumer internet companies illustrate the scale of the opportunity. They sit at the intersection of vast addressable markets and improving unit economics.

Crucially, today’s leaders are no longer dependent on external capital. They are increasingly self-funding and self-reinforcing. In many cases, fintech integration and logistics capabilities deepen their competitive moats. This is most evident in the case of MercadoLibre, which, despite detracting from performance during the quarter, remains one of the strategy’s leading contributors over the last five years.

MercadoLibre continues to demonstrate what an integrated commerce–fintech flywheel looks like in full motion. Even as the company invests in free shipping in Brazil to deepen customer habits, profitability remains intact. We’ve seen this playbook before: near-term trade-offs that consolidate share, reinforce loyalty, and ultimately strengthen the franchise.

Nubank is executing with similar clarity. Growth is no longer just about adding new clients. The story is shifting toward expanding share of wallet with credit, savings and insurance products, all underpinned by powerful data, low distribution costs, and a brand with exceptional customer resonance. Profitability at this stage reinforces the durability of its economics, even as the macro backdrop shifts.

We have also spent time with Sea and Coupang recently, two companies whose models rhyme more than they overlap. Sea’s integrated ecosystem is thriving, with commerce and gaming reinforcing one another, while new engagement mechanics, like live streaming and gamification, keep users deeply embedded. Coupang, by contrast, remains the clearest expression of ‘logistics as a moat’, building scale advantages through relentless efficiency and density. Both approaches are working, each suited to its home market and growth ambitions.

Looking ahead, we will be travelling to Southeast Asia, Vietnam, and Singapore before the end of the year. The region blends rising incomes with entrepreneurial energy and, increasingly, local pools of capital. There is no substitute for on-the-ground meetings with founders and management teams – they allow us to test ideas, judge governance and get a true sense of our growing opportunity set.

Enduring scarcity at the other end of change

Digital infrastructure and consumption are the two most prominent structural trends represented in the portfolio. At the other end of the spectrum sit companies unlikely to be fundamentally altered by digital advances. Luxury brands such as Hermès and Ferrari, whose value rests on scarcity, craftsmanship, heritage, and pricing power, may use digital tools to enhance operations, but the core product and demand drivers are unlikely to change.

We have held Ferrari in the strategy since it was spun off from Fiat in 2016. In fact, it was Ferrari, long the jewel in the Fiat crown, that drew us to add Fiat to the portfolio in 2012, as we noted at the time:

“The main attraction of Fiat is undoubtedly Ferrari, a supply-constrained luxury brand for which demand in a number of countries is growing rapidly. This has consistently been a profitable part of the Fiat group, but what appeals to us is the potential for production to rise rapidly for some time, as happened at Porsche a few years ago. We think it is quite conceivable that Ferrari could produce 2-3x its current number of cars without damaging its brand.”

Over the following decade, Ferrari has indeed doubled sales volumes and compounded its advantages with a willingness to grow value rather than units. That discipline is set to be on display again at Ferrari’s Capital Markets Day later this month, where management will outline the first-ever full electric Ferrari. The important point for us is not a single model, but the consistency of Ferrari’s stewardship of the brand, protecting scarcity and compound advantages. That they do this so consistently, and the financial outputs they produce, can sometimes be taken for granted, yet what they have achieved is remarkable value creation for shareholders.

Contrast that with Porsche's recent experience. A distant peer by brand cache, Porsche has delivered a very different experience since its 2022 listing. The company continues to reduce its financial outlook, reflecting slower-than-hoped electric vehicle (EV) uptake and the profitability drag of overlapping launches. We do not doubt Porsche’s engineering depth, but the franchise currently faces high execution risk across electrification and pricing power, variables where Ferrari’s smaller scale and tighter control have historically been assets.

Luxury businesses remind us that brand is a system: product excellence, scarcity management, and a culture that knows when not to grow. Ferrari has been exemplary in each dimension. We will listen closely to the Capital Markets Day to hear how the company intends to carry those principles into an electric era, but we approach that event as long-term owners of a scarce asset.

Transactions

During the quarter, we added a holding in CATL for the portfolio. CATL is the global leader in EV batteries and a critical enabler of the energy transition. With nearly 40 per cent global market share and a deeply integrated business model that spans from raw materials through manufacturing and recycling, CATL has established itself as the partner of choice for leading automakers, including Tesla, BMW, and Geely. Its scale, technological edge, and cost leadership allow the company to deliver reliable solutions at the forefront of the EV revolution, while also positioning it at the heart of a rapidly expanding global supply chain. Under the visionary leadership of founder and chair Robin Zeng, CATL has consistently anticipated industry shifts and driven innovations that set the pace for the global battery sector.

Looking to the decade ahead, CATL’s opportunity set extends well beyond EVs. The company is already building a strong foothold in large-scale energy storage systems, which are essential for supporting renewable power generation and grid stability. This segment could become a material share of revenues over time. Meanwhile, CATL’s innovations in new chemistries such as sodium-ion and fast-charging lithium iron phosphate broaden its applications across transport, shipping, and aviation. With ongoing global expansion through new factories in Europe and partnerships in North America and Asia, CATL is evolving from a Chinese champion into a truly global powerhouse.

We have also been actively reviewing the landscape for next-generation cancer therapies and have initiated a new position in Akeso for the portfolio. Akeso is a fast-growing Chinese biotech company with a broad portfolio of antibody therapeutics spanning oncology, autoimmune, metabolic, and dermatological diseases. While nearly 90 per cent of its revenues are currently generated in Mainland China, we believe Akeso is well-positioned to transition from a domestic innovator into a globally relevant biopharma company. The company has already commercialised seven innovative therapeutics, with two more under regulatory review, and maintains a long pipeline of promising candidates. The standout asset is Ivonescimab, which has delivered strong late-stage clinical data in lung cancer and led to a landmark licensing deal with Summit Therapeutics. With the potential to become a new standard of care in cancer immunotherapy, Ivonescimab offers a significant upside skew to the investment case. Looking ahead, we believe Akeso has the potential to evolve into a global biopharmaceutical powerhouse on a par with established names such as Roche or AstraZeneca. Although execution and regulatory hurdles remain, we think the market is underestimating the long-term opportunity for this emerging Chinese biotech.

Innovation Endures, Sovereignty Matters

The portfolio has continued to generate positive absolute returns, though relative performance has been behind the wider market this quarter and year to date. We understand that these phases can be discouraging, but they are a natural feature of long-term growth investing.

Looking ahead, growth prospects remain compelling. On average, the portfolio companies reinvest about 8 per cent of their sales into research and development, more than twice the market average, fuelling innovation and long-term value creation. This commitment supports future annualised sales and earnings growth projections of mid to high teens per cent, comfortably ahead of market expectations.

With strong profitability, disciplined balance sheets and no reliance on financial leverage, we believe and remain confident that the portfolio is positioned to deliver strong returns and ultimately outpace the market.

Just as semiconductors embody sovereignty in the digital age, and as consumer platforms redefine scale and relevance in commerce, so too does healthcare innovation represent the next frontier of resilience and value creation. In each case – whether it is chips enabling AI, platforms reshaping consumption, luxury brands preserving scarcity, or biotech’s unlocking new standards of care – the common thread is the pursuit of scarce assets with compounding advantages. These are enterprises aligned with structural change, not short-term cycles. Our role as long-term growth investors is to identify and support those scarce franchises early, to stay patient as they scale, and to remain aligned with managements who focus on long-term value creation. That is the long game we continue to play: backing innovation and stewardship where they intersect to create enduring value.

International Growth

Annual past performance to 30 September each year (%)

Annualised returns to 30 September 2025 (%)

*MSCI EAFE Index prior to 30 September 2018

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.

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