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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Harding Loevner International Equity 2026 Q3 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q3 2026 Letter Analysis

Harding Loevner International Equity Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Harding Loevner International Equity. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+1.28%

YTD+15.81%

Annualized+7.99%

Positioning StanceCONSTRUCTIVE

GeographyEurope, Emerging markets, Other

Digest Analysis

Quick Take

"Outperforming the benchmark as strong stock selection in Health Care and Consumer Discretionary outweighed semiconductor pullbacks, while the managers rotated capital into Lenovo, Hitachi, and Itaú Unibanco."

Executive Summary

Harding Loevner International Equity composite delivered a net return of 1.28% in the third quarter of 2026, bringing its year-to-date net performance to 15.81% and outperforming its benchmark, the MSCI All Country World ex US Index. Cash stood at 2.6% of the portfolio at quarter-end. Strategy performance reflected resilient equity markets that advanced despite severe headwinds across fixed income and energy markets. Sector allocation remained overweight Industrials, Health Care, and Information Technology, while maintaining an intentional underweight stance toward Financials, Materials, and Energy. The investment team highlighted an extraordinary macroeconomic divergence: long-term bond yields soared above 5% alongside persistent inflation and sovereign fiscal deficits, yet equity markets remained buoyant on sustained corporate earnings and artificial intelligence infrastructure spending. Crucially, broad optimism has compressed international valuation spreads between speculative or cyclical equities and high-quality franchises to their narrowest levels in nearly three decades. The managers observe that historically, when quality valuation spreads compress to neutral or below, high-quality international equities have subsequently outperformed 77% of the time, signaling an impending reversal of recent value-style dominance, particularly as commercial banks face margin peaking and latent credit loss cycles. Portfolio turnover during the quarter broadened the fund's sources of future growth while trimming fully valued holdings. The strategy initiated new long positions in Chinese hardware leader Lenovo, Japanese industrial systems powerhouse Hitachi, and re-established a stake in Brazilian lender Itaú Unibanco, while funding these additions through complete divestments of Epiroc, Safran, Daifuku, Sysmex, AstraZeneca, and Telkom Indonesia.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

62%

CautiousHigh

Moderate (62%)

The portfolio maintains moderate-to-high conviction evidenced by a disciplined 83% active share, detailed single-stock underwriting memos for new holdings Lenovo and Hitachi, and clean exits of six impaired positions. However, the strategy remains moderately diversified across 45-50 liquid international holdings with individual position sizes capped beneath 5.0%, and retains an underweight stance toward large-weight sectors like Financials.

Growth Outlook

58%

BearishBullish

Neutral (58%)

The managers view international market dynamics with constructive optimism for high-quality franchises, highlighting favorable multi-year setups after valuation spreads reached 30-year lows. Nevertheless, overall sentiment is kept in check by surging developed-market sovereign bond yields over 5%, oil prices above $100, and looming credit loss risks across commercial banking.

Risk Appetite

65%

DefensiveAggressive

Balanced (65%)

Capital positioning reflects a pro-growth posture, maintaining 97.4% equity exposure with cash held tightly at 2.6%. The fund broadened its technology and industrial cyclical growth exposure via new positions in Lenovo and Hitachi, offset selectively by an underweight allocation to highly leveraged banks and materials.

Capital Deployment

55%

De-riskingDeploying

Net Neutral (55%)

Capital deployment is net neutral, as portfolio cash remained stable at 2.6%. Fresh capital allocations into Lenovo, Hitachi, and Itaú Unibanco, alongside additions to BBVA, were fully funded by proceeds harvested from the complete liquidations of Epiroc, Safran, Daifuku, Sysmex, AstraZeneca, and Telkom Indonesia.

Forward Guidance

60%

CautiousExpansionary

Neutral (60%)

The team plans to continue reallocating capital away from fully priced industrial and healthcare leaders toward attractively valued compounders exposed to enterprise edge computing and electrical infrastructure. They intend to maintain strict quality hurdles and limit traditional commercial bank allocations ahead of anticipated credit loss deterioration.

Language Signal

55%

BearishBullish

Balanced (55%)

The letter balances optimistic growth terminology regarding AI diffusion, historical quality index outperformance, and solid profitability against cautionary language surrounding shocking sovereign bond yield spikes, yawning fiscal deficits, crude oil inflation, and prospective bank credit write-offs.

Perceived Risk

66%

Low RiskElevated

Elevated Risk (66%)

The managers perceive elevated systemic and macro risks, explicitly citing benchmark US Treasury yields soaring beyond 5%, persistent inflation, undisciplined fiscal budget deficits in developed economies, Middle Eastern geopolitical disruption with $100 crude, and impending credit loss cycles across the banking system.

Opportunity Density

68%

ScarceAbundant

Abundant (68%)

The managers identify an attractive international opportunity set specifically within neglected quality growth compounders as valuation spreads narrow. They successfully found compelling entry points in AI hardware, power engineering, and select emerging-market banking franchises after selective price corrections.

Time Horizon

78%

Short-TermLong-Term

Decade+ (78%)

Underwriting emphasizes multi-year compounding horizons, referencing a 25-year empirical study of quality index performance cycles and analyzing industrial restructuring programs that unfolded over five-plus years. Investment theses for core holdings rely on structural multi-year secular transitions rather than short-term trading catalysts.