Capital Group International Developed Equity
Mandate commentary
Q4 2025
Highlights
① International stocks rose modestly, led by emerging markets and Japan, while Europe advanced, and U.S. rate cuts and a weaker dollar supported sentiment.
② Global growth strengthened as inflation eased, and policy turned supportive.
③ Equities and quality fixed income remain positioned for growth.
Mandate overview
In a quarter where global equities posted gains, the mandate advanced but underperformed its benchmark, the MSCI EAFE Index. Relative results were primarily impacted by sector allocation, stock selection in certain areas and a drag from cash holdings.
Mandate: Modest gains amid mixed sector dynamics
Performance contributors
Stock selection in utilities boosted relative results, with ENGIE and RWE contributing strongly as both benefited from supportive fundamentals and positive outlooks, including ENGIE’s confidence in meeting the upper end of its full-year guidance and sustained U.S. demand for long-term renewable contracts.
Financials were another major contributor, led by European banks, such as NatWest and Standard Chartered, which outperformed on the back of stronger-than-expected results and upgraded guidance, driven by growth in wealth management and global banking.
Performance detractors
Health care detracted the most from relative results, due to weak stock selection. Not holding Roche hurt relative returns, and Novo Nordisk lagged, as investors worried about rising weight-loss drug competition from Eli Lilly.
Names detracted within industrials, aerospace, defence and professional services, with BAE Systems and Rolls-Royce giving back gains on profit-taking, and Wolters Kluwer falling on concerns that AI could invite new competitors, despite solid results.
Stock selection in materials weighed on performance overall, although Barrick Mining remained a bright spot, thanks to strong gold prices.
Cash holdings also detracted from relative returns.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
CAPITAL GROUP INTERNATIONAL DEVELOPED EQUITY | 3.65%
| 17.62%
|
Mandate repositioning
Industrials remain the largest sector allocation, supported by themes such as rising air traffic, increased defence spending, reshoring and AI-driven power demand.
Financials exposure is near all-time highs, as European banks strengthen and return capital. Technology holdings are extending beyond leading-edge semiconductor and semiconductor-equipment manufacturers, while utilities exposure has increased to capture long-term renewable demand tied to data-centre growth.
Market overview: global growth strengthened, inflation eased, policy supportive
Markets ended the fourth quarter of 2025 on a strong note, capping a year defined by resilience and broad-based gains. Equities led performance, as investors looked beyond policy noise and focused on improving fundamentals. Global markets advanced, supported by steady corporate earnings, easing inflation pressures and a clear shift toward lower interest rates. Canada outperformed most developed peers, driven by strength in materials and financials, while European and Asian markets rebounded on firmer trade activity and renewed investor confidence. In the U.S., equity performance remained positive, led by technology and communication services, with improving breadth across sectors signalling a healthier market foundation.
Fixed income delivered modest but positive returns, as central banks continued to ease policy. Government yields declined on the short end while longer maturities remained stable, allowing coupon income to drive returns. Credit conditions stayed firm, underscoring the strength of corporate balance sheets entering 2026.
Market outlook: equities and quality fixed income positioned for growth
Entering 2026, global markets are positioned on a solid footing. Easing monetary policy and supportive fiscal conditions are expected to sustain growth across major economies. In the U.S., healthy earnings and productivity gains continue to anchor performance. Canada benefits from resource strength and steady financials, while Europe and Asia offer improving valuation opportunities through accelerating trade and industrial expansion. Fixed income markets provide renewed income potential as yields stabilize, and credit quality remains robust.
Overall, conditions favour a balanced, diversified approach.
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