Commentary
4Q2024 - International Growth Commentary
We view earnings growth as the Portfolio’s long-term driver. While returns have been muted this year, the Portfolio’s strong earnings growth trends remain intact, reinforcing our confidence in its long-term potential.
- Non-U.S. markets experienced a bout of volatility to end 2024. U.S. election uncertainty cleared during the fourth quarter, while ongoing Eastern Europe and Middle East conflicts experienced notable changes. Most economies globally continue to grind along at low levels of growth. Much of today’s investing backdrop remains consistent with what we’ve seen in the last two years.
- During the fourth quarter, the International Growth Composite Portfolio (the “Portfolio”) declined by -7.08% gross of fees and -7.36% net of fees, outperforming the MSCI All Country World Index (ex-US) (the “Index”), which delivered -7.60%.
- The Portfolio’s annual underperformance stemmed from broad weakness in Health Care, impacted by large pharma budget cuts and a challenging biotech funding backdrop, and weaker sentiment due to the appointment of RFK Jr. as the incoming head of the U.S. Health and Human Services administration.
- Underweight exposures to Financials and Industrials adversely impacted annual relative performance, while notable episodes of heightened volatility impacted relative performance in April, September, and December.
- The top contributors to the Portfolio’s performance in the quarter, both relative and absolute, were Shopify, Sage Group, and SAP. The bottom relative detractors were ICON plc, Evolution, and MercadoLibre, while the bottom absolute detractors were ICON plc, Novo Nordisk, and MercadoLibre.
- Portfolio turnover was higher than average in the fourth quarter as we sold out of five small weights and added new positions in five companies.
- New additions included Nu Holdings, Monday.com, Schneider Electric, Spotify, and Willis Towers Watson. Eliminated positions included Kering, LVMH, Temenos, CSL, and Accenture.
- Overall, the positions we exited this quarter failed to meet our growth expectations, and we feel the new additions contribute nicely to our aim for mid-teens earnings per share growth across the Portfolio.