The Touchstone Non-U.S. Equity Fund faced a challenging period in the third quarter of 2025, falling short of its benchmark, the MSCI All Country World ex-U.S. Index. This occurred despite a general upward trend in global equity markets, which saw the benchmark index achieve an unprecedented high by the end of the quarter. The fund's strategy is rooted in a detailed, bottom-up security analysis, emphasizing fundamental and sector-specific research. It aims to pinpoint companies exhibiting robust or improving returns on capital, significant competitive advantages, and compelling valuations. Furthermore, investment decisions are guided by an assessment of six crucial characteristics: potential competitive advantages, growth in end markets, quality of management, material environmental, social, and governance (ESG) factors, valuation, and balance sheet resilience.
Detailed Report on Third Quarter 2025 Market Dynamics and Fund Performance
In the third quarter of 2025, global equity markets displayed a positive trajectory, culminating in the MSCI All Country World ex-U.S. Index reaching its highest point ever. Leading sectors in this upturn included Materials, Consumer Discretionary, and Information Technology. However, the Touchstone Non-U.S. Equity Fund (Class A Shares, Load Waived) did not mirror this broader market success, instead underperforming its benchmark. This divergence in performance was notably influenced by specific stock selections within the financial sector, most prominently London Stock Exchange (LDNXF), which yielded weaker returns than anticipated. Additionally, the fund's holdings in the materials and communication services sectors also contributed to the overall underperformance. Despite these short-term setbacks, the fund's investment philosophy remains steadfast. It continues to prioritize companies that demonstrate strong financial health, strategic market positioning, and sound management, aiming for long-term growth and stability for its investors.
This quarter's performance highlights the inherent volatility and unpredictable nature of global equity markets, even for funds employing rigorous analytical strategies. It underscores the importance of a well-defined investment process that integrates both quantitative and qualitative factors, including emerging considerations like ESG. While short-term underperformance can be a cause for concern, it also serves as a reminder of the long-term perspective required in investment management. For investors, understanding the drivers behind such results and the fund's strategic responses is key to maintaining confidence in their portfolio choices. The fund's commitment to identifying businesses with sustainable competitive advantages and strong balance sheets, coupled with an awareness of broader market trends and sector-specific dynamics, remains a cornerstone of its approach to navigating complex market conditions.