Global Equity Fund Quarterly Review

Reviewing the T. Rowe Price Global Equity Fund return for the third quarter of 2025, the portfolio delivered a 4.41% net of fee return for the quarter, but did lag a very strong global equity market, the All Country World Index, up around 6.5%, both in Australian dollar terms.

When we look at the market backdrop though, it was really one characterised by increased hype, speculation and risk taking, particularly from retail investors.

There is a lot of higher risk appetite in general.

However, there was more AI deal activity announced during the quarter, particularly from OpenAI, which increased the sentiment and willingness of investors to think further out about how much investment and opportunity there is in AI.

This however is extending to other parts of the market, thematics such as quantum computing, space stocks, etcetera, all doing exceptionally well.

When we look at this in terms of risk factors, it actually means that for the third quarter we saw high risk stocks outperform high quality stocks to the tune of almost 20% for the Russell 1000, which is a good gauge of some of the largest companies in the US market.

So in this environment, we do have a preference for high quality durable growth companies and not owning some of these stocks which we think are higher risk and also have excessive valuations did hold back returns.

Well known stocks such as Tesla, Palantir and Oracle are good examples of stocks that are underweights did impact performance, each of those three were in our top 10 detractors. Outside of our underweight to some of the more speculative AI and also other themes in the market, EM was also a drag during the quarter.

And despite three of our best country exposures being an EM, it was actually specific country issues in the political space in Indonesia, Argentina and also Philippines that have all had their own political disappointments impacting those country returns.

And in addition to India for other reasons, those four countries did mean that EM was also a detractor.

As we look forward from here, we do still continue to believe that it is more prudent for us to think about the entirety of this cycle we are in at the moment.

We are not chasing the more speculative stocks in the market. We are also remaining very valuation sensitive.

And if speculation continues, it might mean that we continue to lag in the fast rising market.

But we do think it's important to think about the medium term for our investors and a more durable approach with stocks we believe don't have valuation risks, but also we'll be able to manage this cycle to the other side is a more responsible way for us to invest going forward.