During the fourth quarter of 2025, a general upward trend was observed across developed markets outside the U.S., although China presented a contrasting picture of underperformance. The financial landscape witnessed a significant reallocation of capital, moving from growth-oriented investments towards value stocks, largely influenced by uncertainties surrounding artificial intelligence. Amidst these dynamics, the International Growth Fund's Investor Class registered a modest gain of 0.33%. Key contributors to this performance included strong quarterly results from Societe Generale and a notable surge in demand for automation solutions in manufacturing, driven by the integration of AI and robotics.
The quarter ending December 31, 2025, saw varied performances across global markets. Developed economies beyond the United States generally experienced positive momentum, with regions such as the United Kingdom, the Eurozone, and Japan showing consistent growth. Conversely, China's market faced headwinds, leading to it being a notable laggard. This period was also characterized by a cautious stance from most central banks, which either maintained or reduced interest rates.
A significant theme of the quarter was the market's response to artificial intelligence. Initially, the excitement around AI led to a surge in technology stocks. However, as uncertainties regarding AI's long-term impact on traditional business models and potential supply chain constraints emerged, investors began shifting their focus. This resulted in a broad rotation out of high-growth technology sectors and into more established, value-oriented companies.
The International Growth Fund’s strategic adjustments during this period reflected these market shifts. The fund reduced its exposure to companies heavily reliant on the data center supply chain, anticipating potential overvaluation and future volatility. Simultaneously, it increased positions in sectors perceived as offering better value and more resilient business models in the evolving economic landscape.
Individual company performances also played a crucial role. Societe Generale, a major European banking group, reported exceptionally strong quarterly figures. This positive outcome was primarily attributed to a robust recovery in its retail banking division, leading to an upgraded profit outlook. This demonstrated the resilience of certain traditional sectors even amidst broader market reconfigurations.
Furthermore, the increasing adoption of factory automation, driven by advancements in AI and robotics, created new opportunities. Businesses globally are investing in AI-integrated processes to enhance efficiency and productivity. This trend significantly boosted demand for companies operating in the industrial automation and robotics space, becoming an important factor for investment considerations.
Looking back at the fourth quarter of 2025, the global market presented a complex interplay of regional growth disparities and a significant recalibration of investment strategies influenced by artificial intelligence. While non-U.S. developed markets generally prospered, China faced challenges. The fund successfully navigated this environment, adapting its portfolio by reducing exposure to certain AI-sensitive areas and increasing holdings in stable, value-driven companies and those benefiting from the broader industrial application of AI.