In the third quarter of 2025, global equity markets experienced a significant upswing, driven by robust corporate earnings reports, sustained investment in artificial intelligence, and a more accommodating stance from the U.S. monetary authorities. Despite this positive market environment, the John Hancock International Growth Fund, while achieving a positive return, did not keep pace with its benchmark index. This analysis will delve into the factors contributing to the fund's performance, its strategic positioning, and key takeaways for investors.
The fund's underperformance during the quarter was largely due to specific stock selections. Noteworthy detractors included holdings within the consumer discretionary, information technology, and materials sectors. Conversely, positive contributions from the communication services and financials sectors helped to partially offset these losses. A significant individual detractor was Constellation Software, Inc., a Canadian software firm, highlighting the impact of single stock movements on overall fund performance.
Looking at the fund's sector allocation as of September 30, it held overweight positions in financials and communication services. This strategic choice reflects a belief in the resilience and growth potential of these sectors in the current economic climate. Conversely, the fund was notably underweight in information technology and industrials, indicating a more cautious outlook on these areas. Geographically, the fund showed overweight allocations to the United Kingdom and Japan, while being underweight in developed Asia-Pacific (excluding Japan) and emerging markets.
The management's investment philosophy continues to center on identifying and investing in high-quality companies with durable growth characteristics. This approach is maintained even as policy-driven uncertainties begin to recede, allowing for a clearer focus on fundamental strengths. The fund aims for an equal-weight exposure across various investment factors, including quality, capital return, growth potential, and valuation upside, ensuring a balanced and diversified portfolio.
This quarter's results underscore the complexities of navigating global markets. While the broader market enjoyed tailwinds from strong earnings and favorable economic conditions, stock-specific and sector-specific factors played a crucial role in the fund's relative performance. The commitment to a disciplined investment process, emphasizing high-quality growth companies and strategic sector positioning, remains central to the fund's long-term objectives.