The Touchstone Non-U.S. Equity Fund faced a challenging third quarter in 2025, lagging behind its benchmark, the MSCI All Country World ex-U.S. Index. This period saw significant shifts within its portfolio, marked by both strong performers and notable detractors. The fund's strategic adjustments reflect a dynamic approach to navigating global equity markets, balancing established holdings with emerging opportunities.
Detailed Investment Performance Analysis for Q3 2025
During the third quarter of 2025, the Touchstone Non-U.S. Equity Fund experienced a period of underperformance relative to its benchmark, the MSCI All Country World ex-U.S. Index. A primary factor contributing to this was the position in Nintendo Co., Ltd. (Japan, Consumer Discretionary sector). After an impressive run earlier in the year, fueled by high expectations surrounding the anticipated launch of the Switch 2, Nintendo became the second-largest detractor for the quarter as market sentiment shifted. Conversely, Alibaba Group Holding Ltd. (China, Consumer Discretionary sector), a prominent Chinese technology and e-commerce giant, emerged as the top-performing position, demonstrating robust growth and strong market confidence.
In a strategic portfolio adjustment, the fund initiated a new position in MercadoLibre, Inc. (Uruguay, Consumer Discretionary sector). This move targets the rapidly expanding e-commerce landscape in Latin America, capitalizing on MercadoLibre's comprehensive ecosystem, which includes a marketplace, fintech services, and logistics capabilities. Concurrently, the fund divested its entire holding in Deutsche Telekom AG (Germany, Communication Services sector). This decision was based on a reassessment of the company's valuation, primarily driven by the performance of its T-Mobile U.S., Inc. shares, which reached a level deemed overvalued by the fund's managers. This elimination allowed the fund to reallocate capital to more promising growth opportunities, aligning with its commitment to active management and dynamic portfolio construction.
This quarter's performance underscores the inherent volatility and dynamic nature of global equity markets. The fund's experience highlights the importance of continuous evaluation and proactive adjustments to investment strategies. While some high-profile investments may face temporary headwinds, the ability to identify and capitalize on new growth sectors, such as Latin American e-commerce, and to divest from overvalued assets, is crucial for long-term success. Investors are reminded that even well-managed funds can experience periods of underperformance, and a diversified, actively managed approach remains key to navigating complex market environments.