Fairtree Global Equity Fund Q4 2025 commentary

The Fund returned 1.66% for the quarter, underperforming the benchmark by 1.64%. Both developed and emerging markets delivered substantial returns, with the MSCI ACWI rising 3.29%. The biggest gainers were Switzerland and Canada, which increased by 9.4% and 7.7%, respectively, while China decreased by 7.4%. The MSCI Emerging Markets Index increased by 4.73%, driven by gains in South Korea and South Africa, which increased 24.1% and 14.1%, respectively, while Saudi Arabia fell 7.6% (all in USD).

The US market delivered a rare underperformance against the MSCI ACWI for the year, but its weight in the index remains elevated at ~64%. It previously peaked at ~55% in 2003 before bottoming at ~41% during 2008-2011. US equities rose 2.3% over the fourth quarter, supported by a gradual shift toward monetary easing and moderating macroeconomic conditions. The S&P 500 gained 2.65%, while the Nasdaq rose 2.47% over the period, despite a more subdued performance toward the end of the year. Early in the quarter, equities benefited from resilient corporate earnings, continued strength in mega-cap technology and AI-related stocks, and signs of easing trade tensions. As the quarter progressed, economic data pointed to a gradual cooling in activity. Inflation data released during the quarter showed headline CPI rising 2.7% year-on-year in November, while labour market conditions continued to soften, with unemployment edging higher to 4.6% by December, reflecting weaker hiring momentum. Against this backdrop, the Federal Reserve delivered a further 50bp rate cut over the quarter, lowering the federal funds target range to 3.50%-3.75%. Overall, investor sentiment shifted from optimism earlier in the quarter to a more cautious, but constructive stance toward year-end.

European equities advanced 6.2% over the fourth quarter, supported by an improving inflation backdrop and stable monetary policy expectations. Switzerland and the Netherlands were among the strongest performers, rising 9.4% and 3.6%, respectively, while France gained 3.4%. Inflation dynamics improved over the quarter, with eurozone headline inflation returning to the European Central Bank’s (ECB) 2% target by December, and core inflation easing to 2.3% year-on-year. Throughout the quarter, the ECB kept its deposit rate unchanged at 2%, reiterating confidence that inflation is moving sustainably toward the target.

Emerging markets advanced 4.73% over the fourth quarter, driven by pronounced country-level divergence. South Korea and South Africa were the strongest performers, which increased by 24.1% and 14.1%, respectively. South Korean equities benefited from sustained strength in technology and semiconductor stocks, supported by improving sentiment around the global electronics and AI cycle, strong export momentum and foreign inflows. South African equities were supported by an improving macro and policy backdrop, including lower global interest rates, enhanced policy credibility following a sovereign rating upgrade, and strength in financial and resource-linked stocks. By contrast, Saudi Arabia and China were the main detractors, declining 7.6% and 7.4%, respectively, as weaker oil prices weighed on Saudi equities, while the Chinese market remained under pressure amid ongoing concerns around domestic growth, the property sector and policy effectiveness.

On a sector level, Financials, Health Care and Information Technology sectors were the best-performing sectors over the quarter. Real Estate and Consumer Discretionary were the worst-performing sectors. Stock picking in the Communication Services, Materials and Information Technology sectors added to relative performance, while stock picking in Financials, Health Care and Consumer Discretionary sectors detracted from relative performance. Notable portfolio actions during the quarter included switching the holdings in Alibaba and Pinduoduo into a larger position in Naspers, while the holdings in Meta, Nvidia and Amazon were topped up at good levels. New positions were initiated in Automatic Data Processing, Philip Morris, Renesas Electronics and Harmony, while the holdings in Evolution Gaming and Apple were trimmed. The holdings in Applied Materials, Elevance Health, LVMH and Anheuser-Busch InBev were exited.

Notable contributors to Fund performance were positions in Alphabet (+97bps absolute and +13bps relative), TSMC (+30bps absolute and +12bps relative) and Impala (+28bps absolute and relative). Notable detractors from performance came from Fiserv (-43bps absolute and -39bps relative), Evolution (-40bps absolute and relative) and Microsoft (-34bps absolute and -8bps relative). The Fund is positioned with an underweight in cyclical names, in favour of technology exposure. From a geographical perspective, the Fund remains underweight in the US and Canada, while being overweight in Kazakhstan and South Africa.

Reflecting on the performance of the Fund over the past year, it was pleasing that the Fund outperformed the benchmark by 2.27% for the year, given the concentrated nature of the market’s performance. The top five performers contributed just under 8% of the 17.86% delivered by the S&P 500 total return for 2025. Only around 30% of stocks in the S&P 500 were able to outperform the index. This is the third consecutive year that market breadth has been this narrow and is only matched by the dot-com period. Normally, 45 to 50% of stocks outperform the index.