All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk.
In 1492, Christopher Columbus crossed the Atlantic and medieval Europe woke up to a vast new world of opportunity. Columbus’s ‘discovery’ ushered in a century and more of daring exploration, a golden age of exploration driven by boundless curiosity, ambition and acquisitiveness.
Uncharted adventure on that scale is hard to imagine in our well-mapped world, where few places on the globe aren’t navigable via the smartphone in your pocket.
Yet somehow, we still share the trepidation of those early modern transoceanic explorers. ‘We live in uncharted times’ is a familiar tagline for today’s investors.
Why international? Why now?
International equities investors face a landscape reshaped by seismic global shifts. We’ve had a pandemic, conflict in Europe and the Middle East, up-and-down monetary policies and rising protectionism, all simultaneous with rapid technological breakthroughs. These events have distorted markets, propelling US equities to unprecedented valuations concentrated around a few tech giants.
Despite recent volatility, the US market remains twice as expensive as its international counterpart. Global indexes have rarely skewed so heavily toward North America.
Given these dynamics, scepticism toward international investing is understandable. Europe and Japan lag in productivity and innovation and emerging markets are grappling with a strong dollar. Yet the lesson from history remains: unexplored markets hold treasures worth seeking.
Today’s international markets offer real arbitrage: scale, unparalleled diversification, and compelling valuations.
Take China. Its exchanges list over 5,300 companies – more than double the MSCI Global Index constituents. Globally, the MSCI ACWI ex-US spans 46 countries and over 2,000 firms. Investors can gain exposure to diverse industries in economies at different developmental stages: from Brazilian natural resource producers to French luxury goods makers. And if US isolationism intensifies, international markets could benefit from the rerouting of trade and the need for innovation.
International equities provide transformative exposure that’s often overlooked. CRH is a good example. It’s an Irish building materials company that’s undervalued relative to US peers despite its superior growth and profitability. Or MercadoLibre (Meli), the Latin American ecommerce and fintech giant. It has returned nearly $7,500 for every $1 invested at the time of its stock market listing. Passive investors captured only the later stages of this growth, as the company did not enter major indices for over a decade after listing. Active managers can navigate and spot opportunities others overlook until it's too late.
Markets are starting to recognise these opportunities. Could this be the dawn of a new age of discovery in international investing?
New maps of the Old World
Cartography, like investing, turns complex realities into two dimensions. Maps approximate reality, distorting some elements to shed light on others. It’s similar to the ways that investors create their own projections, using mental models to interpret and try to exploit changing markets.
We apply three such ‘lenses’ to international markets. They transcend geography, sector, or style and help us identify opportunities unique to this less familiar landscape. They are persistence, interconnectedness, and serendipity.
Persistence: enduring owners, enduring businesses
Luxury businesses such as Hermès, LVMH and Ferrari persist with what they do for decades. These businesses, with no US counterparts, are often led by families whose desire to preserve and grow wealth for future generations fosters resilience and flexibility that aligns with the interests of non-family shareholders able to take the long view.
Beyond luxury, examples include Atlas Copco, the Swedish engineering business backed by the Wallenberg family. It pivoted from railway equipment in the late 1800s, to industrial compressors and, most recently, to vacuum equipment for semiconductors. It has deftly reinvented itself to stay relevant to the latest wave of technological advancements.
In pharmaceuticals, Novo Nordisk, the Danish producer of Ozempic and Wegovy drugs for diabetes and obesity respectively, is supported by its parent Novo Holdings’ foundation to incubate promising next-generation biotech.
Interconnectedness: the underground plumbing of innovation
While US tech giants dominate the headlines, their achievements hinge on international firms that design, build and maintain the infrastructure that lies beneath. Dismissing them as already commoditised overlooks their technical monopolies, which give them pricing power and structural resilience. The neural networks underpinning ChatGPT and others, as well as the chips provided by NVIDIA that drive these, couldn’t exist without graphics processing units (GPUs) made by Taiwan’s TSMC, which itself relies on Dutch business ASML’s lithography machines. Other key but little-known companies in this area include Italy’s Technoprobe (nanoscale cards to detect defects), France’s Soitec (engineered substrates for chips that increase the efficiency of data centres) and Taiwan’s Silergy, which can regulate voltage across billions of transistors.
Beyond this, examples include Adyen, a Dutch payments processor working across 150 currencies and Shopify, the Canadian software business whose logistics and ecommerce products have enabled countless small and medium-sized companies to bring their business online.
Serendipity: new solutions to old problems
In international markets local idiosyncrasies and problems drive the innovation that creates companies such as music streamer Spotify and the aforementioned ecommerce giant MercadoLibre.
In 2006, Sweden was the music piracy capital of the world, with The Pirate Bay enabling consumers illegally to access songs instantly and for free. Daniel Ek at Spotify saw the opportunity to outperform the pirates instead of fighting them. He devised a business model that married the convenience of the pirate service with an economically sustainable model for record labels, artists and shareholders.
Unanswered needs in emerging markets don’t just breed innovation but encourage wholesale technological leapfrogging. In Latin America low ecommerce penetration, unreliable logistics networks, piecemeal regulation and ‘underbanking’ made digital transactions nearly impossible. Meli saw this as an opportunity and has built its own ecosystem, which includes last-mile delivery, fulfilment centres, a digital payments platform and a credit business. This combination of local knowledge and creative commercial flair has built the firm a defensive moat that even Amazon can’t cross.
Conclusion: a new era for international investing
In the original age of discovery, navigators filled the blank spaces in their maps with fantastic creatures and mythical cities. Today’s passive investors share something of their trepidation: instead of venturing into the vast and uncertain territory, they stick to the well-charted edges, as represented by the indexes. But it’s only active management that makes the big discoveries.
Pronouncements from the Trump White House have shaken long-established norms of global trade. But while the decline of the liberal trade order is alarming, it’s also recalibrating global opportunities. International equities are poised to thrive in a multipolar world, driven by new trade routes, economic centres, and accelerated innovation.
Navigating this landscape means looking beyond short-term signals. The lenses of persistence, interconnectedness, and serendipity guide investors toward companies like Ferrari, resilient amid tariffs; TSMC, essential to global tech; and MercadoLibre, thriving through economic turmoil.
This new age of discovery demands investors venture beyond the familiar maps, setting forth to explore international markets to uncover the gems that are often hiding in plain sight.
Risk factors
This communication was produced and approved in May 2025 and has not been updated subsequently. It represents views held at the time and may not reflect current thinking.
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 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.
Important Information
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.
Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.
Financial Intermediaries
This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.
Europe
Baillie Gifford Investment Management (Europe) Ltd (BGE) is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. BGE also has regulatory permissions to perform Individual Portfolio Management activities. BGE provides investment management and advisory services to European (excluding UK) segregated clients. BGE has been appointed as UCITS management company to the following UCITS umbrella company; Baillie Gifford Worldwide Funds plc. BGE is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co. Baillie Gifford Overseas Limited and Baillie Gifford & Co are authorised and regulated in the UK by the Financial Conduct Authority.
South Korea
Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.
Japan
Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.
Australia
Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a “wholesale client” within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”). Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client. In no circumstances may this material be made available to a “retail client” within the meaning of section 761G of the Corporations Act.
This material contains general information only. It does not take into account any person’s objectives, financial situation or needs.
China
Baillie Gifford Investment Management (Shanghai) Limited 柏基投资管理(上海)有限公司(‘BGIMS’) is wholly owned by Baillie Gifford Overseas Limited and previously provided investment research to the Baillie Gifford Group pursuant to applicable laws. BGIMS is incorporated in Shanghai in the People’s Republic of China (‘PRC’) as a wholly foreign-owned limited liability company with a unified social credit code of 91310000MA1FL6KQ30.
Baillie Gifford Overseas Investment Fund Management (Shanghai) Limited
柏基海外投资基金管理(上海)有限公司 (‘BGQS’) is wholly owned by Baillie Gifford Overseas Limited. BGQS is incorporated in Shanghai as a limited liability company with its unified social credit code of 91310000MA1FL7JFXQ. BGQS is a registered Private Fund Manager with AMAC with a registration code of P1071708. BGQS has been approved by Shanghai Municipal Financial Regulatory Bureau for the Qualified Domestic Limited Partners (QDLP) Pilot Program, under which it may raise funds from PRC investors for making overseas investment.
Hong Kong
Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 licence from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 can be contacted at Suites 2713-2715, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. Telephone +852 3756 5700.
South Africa
Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.
North America
Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.
The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission ('OSC'). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories. Baillie Gifford International LLC is regulated by the OSC as an exempt market and its licence is passported across all Canadian provinces and territories. Baillie Gifford Investment Management (Europe) Limited (‘BGE’) relies on the International Investment Fund Manager Exemption in the provinces of Ontario and Quebec.
Israel
Baillie Gifford Overseas is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This material is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.
Singapore
Baillie Gifford Asia (Singapore) Private Limited is wholly owned by Baillie Gifford Overseas Limited and is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence to conduct fund management activities for institutional investors and accredited investors in Singapore. Baillie Gifford Overseas Limited, as a foreign related corporation of Baillie Gifford Asia (Singapore) Private Limited, has entered into a cross-border business arrangement with Baillie Gifford Asia (Singapore) Private Limited, and shall be relying upon the exemption under regulation 4 of the Securities and Futures (Exemption for Cross-Border Arrangements) (Foreign Related Corporations) Regulations 2021 which enables both Baillie Gifford Overseas Limited and Baillie Gifford Asia (Singapore) Private Limited to market the full range of segregated mandate services to institutional investors and accredited investors in Singapore.
156003 10055480
