| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Global equities rose modestly in Q4 2025, with the MSCI ACWI gaining 3.3% as solid corporate earnings and better-than-expected U.S. economic growth offset valuation concerns. The Federal Reserve delivered two rate cuts, bringing the total to three reductions in 2025 and lowering rates to 3.50%-3.75%. Health care stocks led sector performance, reversing earlier underperformance, while materials benefited from rising commodity prices. AI-linked companies including Alphabet, NVIDIA and Microsoft reported stellar earnings, though investor worries about high AI valuations persisted. Emerging markets advanced 5% despite Chinese stocks declining 7% on weak economic data. European equities gained 6% amid improving growth prospects, while Japanese stocks rose on optimism over improved U.S.-Japan trade ties. Fixed income markets advanced as bonds benefited from rate cuts. Key risks include AI bubble concerns, geopolitical uncertainties affecting China, and elevated eurozone inflation. Catalysts include potential additional Fed cuts in 2026, accelerating AI adoption, and strong corporate earnings across sectors.
Global markets delivered modest gains in Q4 2025 supported by solid corporate earnings, accommodative monetary policy, and strong AI-driven demand, though concerns about AI valuations and geopolitical uncertainties create mixed signals for future performance.
Mixed outlook with optimism tempered by risks. AI adoption continues to drive semiconductor profits but valuation concerns persist. Central bank policies remain supportive with Fed likely to cut further in 2026, though timing depends on Trump's Fed Chair nomination. Economic growth shows resilience in U.S. and Europe, but China faces deflation risks. Commodity demand remains strong, particularly copper linked to AI infrastructure.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 5 2026 | 2025 Q4 | 7203.T, 7974.T, AAPL, AMZN, AZN, BHP.AX, FMG.AX, GOOGL, HD, IBE.MC, LLY, META, MSFT, NFLX, NVDA, RHM.DE, RIO.AX, ROG.SW, SPOT, XRO.AX | AI, earnings, equities, fixed income, Global Markets, inflation, rates | - | AI stocks showed mixed performance with investor worries about high valuations offset by stellar quarterly earnings from AI-linked companies including Alphabet, NVIDIA and Microsoft. Semiconductor giants SK Hynix and TSMC posted record-high profits driven by accelerating AI adoption. However, concerns about an AI bubble created drag on global tech stocks in early December. The Fed cut interest rates at October and December meetings, bringing total reductions to three in 2025 and lowering the target range to 3.50%-3.75%. The Bank of Japan raised its key rate to a 30-year high at 0.75%. The ECB held rates steady despite elevated eurozone inflation remaining above the 2% target. U.S. inflation slowed to 2.7% in November from 3% in September. Eurozone inflation rose to 2.2% in November, remaining above the ECB's 2% target for three consecutive months. Japan's core inflation rose 3.0% in November, well above the central bank's 2% target. |
| Oct 31 2025 | 2025 Q3 | - | duration, Federal Reserve, inflation, International Equities, Small Cap Value | - | With the Fed resuming rate cuts and inflation still above target, they see a cooling but growing U.S. economy supportive for risk assets into year-end. International equities and small caps screen attractive on valuation with a weaker dollar and policy stimulus, while fixed income stays intermediate-duration and quality-tilted. They emphasize broad diversification across styles, caps, and geographies given rotations and policy uncertainty. |
| Jul 31 2025 | 2025 Q2 | - | diversification, inflation, interest rates, International Equities, Trade Policy | - | |
| May 1 2025 | 2025 Q1 | - | - | - | |
| Jan 30 2025 | 2024 Q4 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity | |
| 2025 Q3 |
RatesFed cut rates by 25bps on December 10 while describing growth as moderate and inflation as still somewhat elevated. Markets took message as cut now, likely pause soon. The opportunity set was less about calling one Fed meeting and more about trading the path via rates and FX. |
Fed Easing Policy Duration Curve |
| 2025 Q2 |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through |
InternationalHigh-quality international businesses trade at fractions of US multiples, with the manager positioning clients to take advantage of this divergence. Despite US equity market dominating investor mindshare, the rest of the world returned 32.6% in dollar terms in 2025 versus SPY's 17.7%. |
Discount Opportunity Outperformance Quality Positioning | |
RatesFed cut rates by 25bps on December 10 while describing growth as moderate and inflation as still somewhat elevated. Markets took message as cut now, likely pause soon. The opportunity set was less about calling one Fed meeting and more about trading the path via rates and FX. |
Fed Easing Policy Duration Curve | |
Trade |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| 7203.T | In June 2025, the Toyota Group announced a massive deal to dissolve its historic cross-shareholding structure. This included a $26 billion tender offer for shares of Toyota Industries. As Japan's bellwether corporation, Toyota's move to prioritize capital efficiency over stable cross-holdings is being viewed by analysts as the final nail in the coffin for the old, opaque way of doing business in Japan. |
| 7974.T | Shares of Nintendo dropped, weighed down by investor concerns that rising costs for its manufacturing parts, including memory chips, could negatively impact its profit. |
| AAPL | Apple Inc. represents 1.6% of company owned with cost basis of $6,255 million and market value of $61,962 million, providing $280 million in 2025 dividends. |
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| AZN | World-class pharmaceutical and medical products manufacturer |
| BHP.AX | BHP delivered +7% performance as copper and gold positions continued to make a meaningful contribution to performance, supported by higher commodity prices. |
| FMG.AX | Miners like BHP, Rio Tinto and Fortescue saw their shares rise as demand for metals like copper pushed prices to record highs. |
| GOOGL | In the third quarter, Google, Kairos Power, and the Tennessee Valley Authority announced a major collaboration centered on a novel power purchase agreement. Google followed this announcement with another significant step forward. On October 27, Google and NextEra Energy announced plans to restart the Duane Arnold Energy Center. |
| HD | Conversely, our biggest detractors this quarter were DR Horton (DHI), Lennar Corp (LEN), Home Depot (HD). |
| IBE.MC | Spanish energy company Iberdrola reported a 17% rise in third-quarter net profit to €5.3 billion and raised its full-year profit guidance to €6.6 billion. Iberdrola shares gained nearly 15% for the quarter. |
| LLY | Eli Lilly shares were a top performer in 4Q25 after delivering strong Q3 2025 earnings in October. Revenue rose 54% year-over-year to $17.6 billion, and adjusted EPS of $7.02 beat consensus of $6.02. Growth was driven by its GLP-1 franchises, Mounjaro and Zepbound, where sales more than doubled year-over-year, alongside strength in other therapeutic areas. Management raised full-year guidance for both revenue and earnings, reinforcing investor confidence in the company's growth outlook. |
| META | On January 9, Meta Platforms unveiled a new agreement with Vistra—the largest generator of competitive electricity in the United States—as well as with TerraPower and Oklo. The announcement builds on Meta's agreement last year with Constellation Energy and positions the company to become one of the largest corporate purchasers of nuclear-generated electricity in the United States. |
| MSFT | MSFT was a detractor in 4Q25 following its fiscal first-quarter 2026 earnings report released on October 29. While results were better than expected operationally, investor reaction was driven by guidance and capital expenditure intensity rather than headline performance. Revenue grew 17% year-over-year, exceeding consensus expectations, and Azure revenue increased 39% year-over-year, also ahead of estimates. However, management guided to a sequential deceleration in Azure growth in fiscal Q2, signaling some moderation after a period of exceptional demand. |
| NFLX | NFLX was the portfolio's largest detractor in 4Q25 following investor concerns around near-term subscriber growth and rising content spending. While revenue grew approximately 10% year-over-year, management guided to slower net subscriber additions in North America and Europe after recent price increases, and margins were pressured by elevated investment in live sports and international content. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
| RHM.DE | The top three contributors to this underperformance came from Rheinmetall (German Defense). The top three contributors to this outperformance came from Rheinmetall (German Defense) |
| RIO.AX | Miners like BHP, Rio Tinto and Fortescue saw their shares rise as demand for metals like copper pushed prices to record highs. |
| ROG.SW | Top gainers among the Fund's holdings included Roche (+27%) |
| SPOT | Spotify is the world's leading audio streaming platform. Third-quarter results showed continued operating progress, with users increasing 11% to 713 million and subscribers growing 12% to 281 million. Meanwhile, operating income expanded to a mid-teens margin, alongside a record quarterly free cash flow. Despite the momentum, the shares weakened as investors reset near-term margin expectations. Spotify has been a top contributor to long-term Fund performance, and we remain confident that pricing, product innovation, advertising efficiency, and an expanding ecosystem can continue to widen margins over time, as reinforced this quarter by the launch of Spotify recommendations within ChatGPT. |
| XRO.AX | Xero detracted in the quarter due to a combination of company-specific execution concerns and AI-related sentiment. On the company-specific side, the announced acquisition of Melio, a U.S.-based digital payments platform focused on small businesses, raised questions around capital allocation and the timing of strategic benefits. |
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