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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Constructive on cash-generative international value equities, leaning into resilient financials and industrials while avoiding expensive mega-cap technology stocks vulnerable to rising global bond yields."
During the third quarter of 2026, the Polaris International Equity Composite gained 1.85% net of fees, outpacing the MSCI EAFE Index benchmark return of 0.88%. On a year-to-date basis, the strategy delivered 20.28% net of fees compared to 10.81% for the index. Relative performance was driven by outperformance across six of eleven sectors, most notably financials, communication services, consumer discretionary, and health care. Detractions were concentrated in information technology due to interim volatility in memory-chip holdings, while cash allocation remained modest at 1.4%. Macroeconomic conditions were characterized by escalating interest rate pressures, driven by near-term commodity inflation stemming from Middle East tensions and structural worries regarding sovereign fiscal deficits. With 10-year Treasury yields surpassing 5% and central banks in Europe, Japan, and Australia hiking rates, the manager notes increasing vulnerability in narrow, mega-cap technology and artificial intelligence valuations. These higher risk-free rates are raising required equity returns and beginning to pressure interest-sensitive sectors. Portfolio activity was marked by disciplined patience, with zero new purchases or completed sales executed during the period. Capital allocation remains heavily anchored in Europe at 46.6% and Asia including Japan at 39.8%, with top sector weightings in financials at 27.9% and industrials at 19.5%. Management highlighted positive earnings contributions from financials like Shinhan Financial and Mitsubishi UFJ, alongside resilient industrial and consumer franchises, while selectively seeking undervalued, cash-generative opportunities.
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