Q3 2025 Fund Commentary

Market commentary

Global equity markets rose in the third quarter of 2025 as tariff anxieties eased, central banks became more accommodative and information technology sector leadership persisted. In July, sentiment improved on clearer trade signals and resilient U.S. corporate earnings and in August, equities gained despite volatility around new tariff measures. In September, the U.S. Federal Reserve Board (Fed) cut interest rates, which supported interest-rate-sensitive assets and lifted risk appetite.

While the Fed cut interest rates by 0.25%, the European Central Bank and Bank of England held policy rates steady. The Bank of Japan kept rates unchanged but edged toward normalization. These dynamics, calmer interest-rate volatility and solid corporate results supported riskier assets. Non-U.S. equity markets rose, with emerging market equities outperforming developed markets and international value stocks outperforming international growth stocks.

Performance

The Fund’s relative exposure to Alibaba Group Holding Ltd. and CRH PLC contributed to performance. Alibaba’s shares rose because of performance in its cloud-computing and e-commerce segments, driven by growth in products and services related to artificial intelligence. CRH delivered better-than-expected results and raised its full-year forecast largely because of resilient demand for U.S. infrastructure and non-residential projects.

Relative exposure to Orsted AS and CNH Industrial NV detracted from performance. Orsted announced a rights issue in August in response to a “stop work” order issued by the U.S. administration on a U.S. offshore wind project. With funding challenges from the U.S. administration’s regulatory approach, Orsted finds itself having to absorb additional U.S. risk. CNH Industrial was affected by Deere & Co.’s weak forecast and a profit warning from machinery manufacturer Caterpillar Inc. because of U.S. tariffs.

At the sector level, stock selection in materials, consumer discretionary and information technology contributed to performance. Stock selection within industrials, utilities and communication services detracted from performance.

At the regional level, stock selection and overweight exposure to Asia (excluding Japan) contributed to performance. Stock selection and overweight exposure to Europe detracted from performance.

Portfolio activity

Toyota Motor Corp. was added based on the sub-advisor’s view that the market has underestimated the potential earnings related to hybrid transition. Universal Music Group NV was added as it revamps its streaming model to boost pricing control and margins, improve predictability and strengthen its market position. BNP Paribas SA was added based on the combination of diversification, operational discipline and a positive macroeconomic backdrop. Taking advantage of volatility, the sub-advisor increased Unilever PLC, Veolia Environnement SA and Samsung Electronics Co. Ltd.

Orsted was sold after the U.S. administration issued a stop order on its offshore wind projects in the U.S. Antofagasta PLC was sold after share price appreciation. The sub-advisor sold Tokyo Electron Ltd. after it cut its full-year operating profit forecast by over 20%, citing adjustments in semiconductor manufacturers’ capital investment plans. Standard Chartered PLC, Mitsubishi Electric Corp. and Infineon Technologies AG were reduced to capture gains.

Outlook

Stock selection continues to drive the sub-advisor’s investment decisions. The sub-advisor uses a multidimensional approach at the stock and portfolio level based on a strategy of staying balanced across exposures.