| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 3.9% | -4.5% | 6.7% |
Brown Capital Management's International All Company Fund declined 6.48% in Q4 2025, significantly underperforming the MSCI World ex-US Growth Index's 2.20% return. For the full year, the Fund was flat while the benchmark gained 21.94%, representing unprecedented underperformance. The firm attributes this to three factors: AI disruption concerns affecting one-quarter of underperformance as markets distinguished between AI winners and losers; company-specific issues accounting for another quarter; and style dynamics favoring cyclical over quality growth companies explaining roughly half the shortfall. Despite valuation compression across the portfolio, underlying business fundamentals remained solid with intact revenue growth expectations and operational execution. The firm maintains its focus on Exceptional Growth Companies with mission-critical products and durable competitive advantages, making no changes to long-term strategy. Portfolio actions included selling AutoStore and Tecan while adding Hub24 and Apotea. Management remains optimistic about long-term prospects, emphasizing that many holdings continue growing double-digits with resilient margins in a fundamentally sound portfolio positioned for value creation.
Brown Capital Management invests in Exceptional Growth Companies (EGCs) - businesses with mission-critical products, durable competitive advantages, and ability to compound value over decades through a concentrated, benchmark-independent approach focused on long-term fundamentals rather than short-term market dynamics.
The firm remains optimistic about the International All Company Fund's prospects despite recent underperformance. Many portfolio companies are growing revenue double-digits with resilient margins, and the team is confident in the quality, durability and long-term prospects of owned businesses. The portfolio is fundamentally sound with growing, profitable companies providing mission-critical products and services. While the path can be uneven, the commitment to EGCs positions the portfolio well for long-term value creation.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 14 2026 | 2025 Q4 | ASML, FLTR.L, HUB.AX, REA.AX, SHOP.TO, XRO.AX | AI, EGCs, growth, international, long-term, Quality, technology, underperformance |
REA AU FLTR LN SHOP XRO AU HUB AU TEMN SW AUTO NO TECN SW |
About one-quarter of underperformance came from market distinctions between AI winners and losers. Companies viewed as AI enablers like ASML and Camtek benefited, while businesses perceived to have AI disruption risk like online classifieds and software companies experienced valuation pressure. The firm assessed AI impact using four factors: data defensibility, workflow stickiness, substitution risk, and adaptation ability. Shopify was highlighted as a leading global commerce platform serving as the operating system for modern commerce. The company showed accelerating growth with 32% revenue growth and strong international expansion. Online pharmacy Apotea was added as a new position, benefiting from the structural shift toward online channels in Sweden's pharmacy market. REA Group operates Australia's leading online property marketplace with substantial scale advantages and network effects. The company was impacted by AI-related sentiment despite solid fundamentals and operational execution. The firm remains confident in marketplace platforms that sit at the center of high-value transactions with trusted, market-leading positions. The firm focuses on Exceptional Growth Companies (EGCs) with mission-critical products, durable competitive advantages, and ability to compound value over decades. 2025 was difficult for quality growth attributes as capital flowed toward more cyclical, capital-intensive businesses. The portfolio comprises growing, profitable companies providing mission-critical products that are difficult to replace. Temenos provides core banking software with cloud-native platforms managing banks' critical systems. The company showed strong operating performance despite leadership transition, with accelerating subscription revenue and expanding margins. Xero offers cloud-based accounting software with high-recurring subscription model and broad ecosystem integrations. |
| Oct 9 2025 | 2025 Q3 | 3064 JP, CYBR, DSY FP, MNDY, SHOP | Artificial Intelligence, Growth Stocks, innovation, long-term, software | - | Brown Capital underperformed benchmarks as software names lagged during a value-led quarter but reiterated conviction in Exceptional Growth Companies. Holdings like Dassault Systèmes, Shopify, and CyberArk demonstrate long-term scalability and integration of AI into mission-critical workflows. The firm continues investing in innovation and AI infrastructure to enhance its research edge. |
| Jun 30 2025 | 2025 Q2 | AJB LN, AUTO NO, ICLR, MELI, R9C GR, VENDA NO | Compounding, International Equities, marketplaces, Network Effects, profitability | - | The letter centers on marketplace business models with strong network effects, high profitability, and long runways for growth. Digital marketplaces are framed as durable compounders due to defensible positions and reinvestment capacity. International exposure provides access to underpenetrated markets and structural growth. |
| Mar 31 2025 | 2025 Q1 | AFX GR, AJB LN, COH AU, GIVN SW, ICLR, MELI, NVO, NVX AU | - | - | |
| Dec 31 2024 | 2024 Q4 | 0268 HK, 1IG GR, 3064 JP, AFX GR, CAMT, DSG CN, GIVN SW, NVO, RAA GR, SHOP, TEAM, WISE LN | - | - | |
| Sep 30 2024 | 2024 Q3 | 3064 JP, MBLY, MELI, MNDY, NVO | - | - | |
| Jun 30 2024 | 2024 Q2 | 1IG GR, AFX GR, AJB LN, NVO, OCDO LN | - | - | |
| Mar 31 2024 | 2024 Q1 | ASML, GRF SM, NVO, TEMN SW | - | - | |
| Dec 31 2023 | 2023 Q4 | - | - | - | |
| Sep 30 2023 | 2023 Q3 | - | - | - | |
| Jun 30 2023 | 2023 Q2 | - | - | - | |
| Mar 31 2023 | 2023 Q1 | - | - | - |
| 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 |
E-commerceSeveral investments in e-commerce leaders across Asia and Latin America, including MercadoLibre, Sea Limited and Alibaba, faced a more competitive operating environment during the period. As long-term investors, SGA observes that competitive intensity in these markets tends to ebb and flow over shorter time horizons, with market leaders typically emerging from such periods with strengthened strategic positions given inherent network effects. |
Marketplaces Competition Network Effects Asia Latin America | |
MarketplacesREA Group operates Australia's leading online property marketplace with substantial scale advantages and network effects. The company was impacted by AI-related sentiment despite solid fundamentals and operational execution. The firm remains confident in marketplace platforms that sit at the center of high-value transactions with trusted, market-leading positions. |
Digital Platforms Network Effects Real Estate Australia Scale | |
QualityThe company emphasizes investing in businesses with excellent economics, durable competitive advantages, and high-integrity management. This quality focus is evident in concentrated equity holdings and operating business acquisitions. |
Durable Advantages Management Quality Economic Moats Competitive Position | |
SoftwareSoftware companies are experiencing significant declines as the market reassesses AI impacts. Concerns include reduced seat-based revenue from efficiency gains, lower pricing power from AI-first competitors, and decreased new customer bookings. However, some software solutions may be less easily replaced by AI, particularly those requiring high security and user interconnectedness. |
SaaS Pricing Power Competition Enterprise Software Security | |
| 2025 Q3 |
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 |
Growth |
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Innovation |
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Patience |
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Software |
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| 2025 Q2 |
MarketplacesREA Group operates Australia's leading online property marketplace with substantial scale advantages and network effects. The company was impacted by AI-related sentiment despite solid fundamentals and operational execution. The firm remains confident in marketplace platforms that sit at the center of high-value transactions with trusted, market-leading positions. |
Digital Platforms Network Effects Real Estate Australia Scale |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | REA AU | REA Group Ltd. | Communication Services | Interactive Media & Services | Bull | New York Stock Exchange | AI, Data, marketplace, Networkeffects, Property | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | FLTR LN | Flutter Entertainment plc | Consumer Discretionary | Gambling | Bull | New York Stock Exchange | Gambling, innovation, Regulation, scale, Sportsbooks | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | SHOP | Shopify Inc. | Information Technology | Application Software | Bull | New York Stock Exchange | ecommerce, Margins, Merchants, Payments, Software | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | XRO AU | Xero Limited | Information Technology | Application Software | Bull | New York Stock Exchange | Accounting, AI, Payments, SaaS, Subscriptions | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | HUB AU | Hub24 Ltd. | Financials | Asset Management & Custody | Bull | New York Stock Exchange | consolidation, Inflows, Margins, Platforms, Wealthmanagement | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | TEMN SW | Temenos Group AG | Information Technology | Application Software | Bull | Swiss Exchange | Corebanking, Margins, Modernization, SaaS, Subscriptions | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | AUTO NO | AutoStore Holdings Ltd. | Industrials | Industrial Machinery | Bear | Oslo Børs | Automation, backlog, Competition, durability, Warehouses | Login |
| Jan 14, 2026 | Fund Letters | Kayode O. Aje | TECN SW | Tecan Group AG | Health Care | Life Sciences Tools & Services | Bear | Swiss Exchange | Automation, Cyclicality, durability, instruments, lifesciences | Login |
| TICKER | COMMENTARY |
|---|---|
| ASML | ASML, TSMC, and Arista Networks are key players in the AI build out supply chain. |
| FLTR.L | Ireland-domiciled Flutter Entertainment is a good example. Shares declined amid a combination of regulatory headlines, bettor-friendly sports results that temporarily weighed on sportsbook economics, and, most importantly, investor concerns that the emergence of prediction markets could disrupt the company's core online sportsbook business. |
| HUB.AX | Wealth platform provider HUB24 delivered a strong year of financial performance and operating execution. Shares in the company returned 39.1% over the calendar year. Over the course of the year, and following a detailed review of industry flow data, we formed the view that HUB24 has begun to pull ahead of Netwealth in competitive positioning and execution. |
| REA.AX | In contrast, the Fund's largest detractors were Pro Medicus, REA Group and WiseTech Global, which declined by 11.5%, 20.3% and 43.3% respectively. |
| SHOP.TO | Non dividend paying technology names Shopify and Celestica had also meaningful contribution to the index returns for the year, detracting our relative outcome. |
| 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. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
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| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
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