Global Equity Fund Q2 Update

For the T. Rowe Price Global Equity Fund in the second quarter of 2025, it was definitely one that was characterised by intense volatility.

We came into the quarter more cautiously positioned, acknowledging that the risks around Trump were elevated and that definitely rewarded the strategy early on in the quarter as Liberation Day surprised investors, sparking a deep sell off that tended to be quite swift.

However, with a very quick reversal on trade policy and markets from that point rallied very, very strongly, ending up a little more than 5% in Australian dollar terms for that second quarter.

What that meant for our strategy being a little bit more conservatively positioned is we did underperform for the quarter after fees by 1.3%, but 80% of that underperformance actually came from a little bit of cash that we were holding less than 1%.

That was a drag with a fast rising market, but also our position in private companies which don't get revalued higher as public equity markets lift.

So if we think about the 95 odd percent of our portfolio in public equities where we lost a little bit of ground around 40 to 50 basis points in the portfolio in one area was in tech and that was our underweight to the really high growth, high momentum, higher beta companies that benefited from a very distinct change in AI optimism.

Some of these names such as Oracle, NVIDIA, Broadcom rallying as much as 40% to 60% in the quarter and our underweights to these was a key to tractor.

In addition to that, it was actually our position in some of the emerging market financials.

So some of these banks are still tied up with a little bit of worry around trade uncertainty and a few other things happening in the specific economies like Indonesia.

But these are companies that we have gone through them early in the quarter.

We still feel very strong about their prospects and how they will see economic growth and benefit from that from the area ahead

despite tariffs. Not all emerging market countries all emphasise are impacted in the same way by tariffs.

Some are domestic economies, Indonesia for example.

Some of them are also not just domestic economies like Philippines, but they are not exporting products, they are exporting services.

When we look at the shape of the market though, however, it was really interesting to see that regions around the world basically performed in line with each other.

There were no distinct leaders when we look at that.

And that is different to the first quarter where we saw a really big broadening of the market with the US distinctly underperforming.

When we look at sectors, however, it was really something that we saw that very high AI optimism and the high bit of momentum risk flowing through those stocks benefit the IT sector and the communications sector.

As we look ahead from here, we are really decisively remaining balanced and diversified.

We are not outright cautious in the portfolio, but we're being really diligent and deliberate in not wanting to add too much risk to the portfolio.

That's because we think that there are a lot of risks in the market that are not being priced in.

And until we get more clarity on these, we'd prefer to err on the side of capital preservation and still let our stock picking work in the portfolio, but make sure there's enough protection in the portfolio for some of that uncertainty.