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This article is for informational purposes only – please read our Terms and Conditions.
At the end of Q2 we wrote about the increasing positive contribution to global equity returns from non-US markets as investors were drawn to the more attractive risk-reward opportunity on offer. This trend has continued during the second half of 2025 (see Graph 1 below), with the global ex-U.S. benchmark moving in-line with the U.S. since mid-year, and more recently outperforming in local-currency terms (i.e. outperformance has not been because of changes in the U.S. dollar exchange rate).
Among key sectors, global ex-U.S. financials and industrials (the second and third largest sectors behind technology in the global benchmark) also highlight that non-U.S. markets have offered diversification benefits (see Graph 2 above). Global ex-U.S. financials have solidly outperformed the U.S. sector in U.S. dollar terms YTD and apart from Q4 2024 have outperformed over most of the past two years. Global ex-U.S. industrials have held their own against their U.S. counterparts over the past two years. Both financials and industrials trade at a significant discount to the U.S. sectors on 12-month forward P/B (financials) and P/E (industrials) ratio basis. The fund is currently overweight both global sectors.
Whilst the US valuation premium reflects historically superior growth and profitability trends, amplified in recent years by the high concentration of the Mag 7 in the index, ROE expectations for the US are at extremes versus more average and improving levels for non-US markets. As such, we believe the bar for positive earnings surprises in the US is much higher than for the rest of the world. If economic activity improves further on a global basis over the next twelve months, non-US markets should continue to offer more earnings beta, in addition to sector and currency diversification benefits (from a US dollar base currency standpoint).
This view has been expressed in the Martello Global Equity Fund for some time, with a c. 13% underweight to the US market, an underweight to the IT sector and a corresponding overweight to non-US markets, predominantly European but with increasing exposure to EM.
During November we saw markets take a breather at a global index level, after a strong run (and recovery) during the previous ten months. Although the US government shutdown ended mid-month, and the concluding Q3 earnings season supported a continued strong trend, this failed to ignite another leg up for the broader tech sector, although individual stocks did prosper.
An example is the fund’s largest holding, Alphabet (6.9% of NAV), which returned +15% in November and over 70% YTD. In a few short months, the market has changed its mind significantly about the stock and re-rated it to reflect its now clear AI strategy (see chart below). Whilst more subtle than other tech giants, Alphabet has demonstrated that it’s not just a giant of ‘search’ and the ‘has-been’ internet, but its also a central player in the global AI infrastructure. It is well-funded and vertically integrated and offers not just the leading AI model in Gemini 3 but also Ironwood TPUs, which are more efficient and possibly better suited to customers AI cloud-based requirements.
Graph 1: US Mega Caps | 12 Month Returns
Source: Bloomberg; 1 December 2025
Whilst returns were muted at the index level, this hid some significant market rotation under the surface during the month. Despite strong fundamentals, growth sectors failed to out-perform, and previous laggards such as healthcare and staples performed well. Roche (3.2% of NAV) produced the strongest portfolio return during November after a series of favourable pipeline results in breast cancer and multiple sclerosis treatments, leading to increased growth projections for 2026. Currently the fund is weighted 14.7% to healthcare, a sector that is enjoying renewed interest and is attractively priced given individual stock growth outlooks.
Having added LVMH to the fund in July, it has recently been increased to a 4% weight. The stock has bounced strongly from its five-year low (June ’25) on the back of an anticipated recovery in luxury goods sector in 2026, up to 6% growth versus 2% in 2025. LVMH have made good progress in restructuring their wines and spirits division whilst their broad geographic and business mix positions them well to continue their sector leadership.
As we move towards the end of the first year of Trump 2.0, and despite the many policy and geopolitical hurdles markets have faced, we are pleased to have maintained a c. 5% outperformance of our global benchmark from mid-Q1. The majority of our out-performance is due to stock selection, and this has gone hand-in-hand with our focus on diversification to enhance returns and protect against concentration risks, and we believe the same approach will be important again in 2026.
The views, thoughts and opinions expressed within this article are those of the author, and not those of Capital International Group Limited (Group) and/or any of its subsidiary companies and as such are neither given nor endorsed by the Group or any company within the Group. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Group to buy or sell any product or security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. The Group, its subsidiary companies, clients, and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute views as at the date of issue thereof and are subject to change. Capital International (Jersey) Limited is a subsidiary of Capital International Group Limited and is regulated by the Jersey Financial Services Commission for the conduct of Investment Business and Fund Services Business. Capital International and Capital International Asset Management are trading names of Capital International (Jersey) Limited. In South Africa, Capital International (Jersey) Limited is authorised as a Financial Services Provider (FSP No.51164).
Martello Global Equity Fund – Q4 2025
This article is for informational purposes only – please read our Terms and Conditions.
At the end of Q2 we wrote about the increasing positive contribution to global equity returns from non-US markets as investors were drawn to the more attractive risk-reward opportunity on offer. This trend has continued during the second half of 2025 (see Graph 1 below), with the global ex-U.S. benchmark moving in-line with the U.S. since mid-year, and more recently outperforming in local-currency terms (i.e. outperformance has not been because of
changes in the U.S. dollar exchange rate).
Among key sectors, global ex-U.S. financials and industrials (the second and third largest sectors behind
technology in the global benchmark) also highlight that non-U.S. markets have offered diversification benefits (see Graph 2 above). Global ex-U.S. financials have solidly outperformed the U.S. sector in U.S. dollar terms YTD and apart from Q4 2024 have outperformed over most of the past two years. Global ex-U.S. industrials have held their own against their U.S. counterparts over the past two years. Both financials and industrials trade at a significant discount to the U.S. sectors on 12-month forward P/B (financials) and P/E (industrials) ratio basis. The fund is currently overweight both global sectors.
Whilst the US valuation premium reflects historically superior growth and profitability trends, amplified in recent
years by the high concentration of the Mag 7 in the index, ROE expectations for the US are at extremes versus
more average and improving levels for non-US markets. As such, we believe the bar for positive earnings
surprises in the US is much higher than for the rest of the world. If economic activity improves further on a global
basis over the next twelve months, non-US markets should continue to offer more earnings beta, in addition to
sector and currency diversification benefits (from a US dollar base currency standpoint).
This view has been expressed in the Martello Global Equity Fund for some time, with a c. 13% underweight to the
US market, an underweight to the IT sector and a corresponding overweight to non-US markets, predominantly
European but with increasing exposure to EM.
During November we saw markets take a breather at a global index level, after a strong run (and recovery) during
the previous ten months. Although the US government shutdown ended mid-month, and the concluding Q3
earnings season supported a continued strong trend, this failed to ignite another leg up for the broader tech
sector, although individual stocks did prosper.
An example is the fund’s largest holding, Alphabet (6.9% of NAV), which returned +15% in November and over 70%
YTD. In a few short months, the market has changed its mind significantly about the stock and re-rated it to reflect
its now clear AI strategy (see chart below). Whilst more subtle than other tech giants, Alphabet has demonstrated
that it’s not just a giant of ‘search’ and the ‘has-been’ internet, but its also a central player in the global AI
infrastructure. It is well-funded and vertically integrated and offers not just the leading AI model in Gemini 3 but
also Ironwood TPUs, which are more efficient and possibly better suited to customers AI cloud-based
requirements.
Graph 1: US Mega Caps | 12 Month Returns
Whilst returns were muted at the index level, this hid some significant market rotation under the surface during the
month. Despite strong fundamentals, growth sectors failed to out-perform, and previous laggards such as
healthcare and staples performed well. Roche (3.2% of NAV) produced the strongest portfolio return during
November after a series of favourable pipeline results in breast cancer and multiple sclerosis treatments, leading
to increased growth projections for 2026. Currently the fund is weighted 14.7% to healthcare, a sector that is
enjoying renewed interest and is attractively priced given individual stock growth outlooks.
Having added LVMH to the fund in July, it has recently been increased to a 4% weight. The stock has bounced
strongly from its five-year low (June ’25) on the back of an anticipated recovery in luxury goods sector in 2026, up
to 6% growth versus 2% in 2025. LVMH have made good progress in restructuring their wines and spirits division
whilst their broad geographic and business mix positions them well to continue their sector leadership.
As we move towards the end of the first year of Trump 2.0, and despite the many policy and geopolitical hurdles
markets have faced, we are pleased to have maintained a c. 5% outperformance of our global benchmark from
mid-Q1. The majority of our out-performance is due to stock selection, and this has gone hand-in-hand with our
focus on diversification to enhance returns and protect against concentration risks, and we believe the same
approach will be important again in 2026.
The views, thoughts and opinions expressed within this article are those of the author, and not those of Capital International Group Limited (Group) and/or any of its subsidiary companies and as such are neither given nor endorsed by the Group or any company within the Group. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Group to buy or sell any product or security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. The Group, its subsidiary companies, clients, and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute views as at the date of issue thereof and are subject to change. Capital International (Jersey) Limited is a subsidiary of Capital International Group Limited and is regulated by the Jersey Financial Services Commission for the conduct of Investment Business and Fund Services Business. Capital International and Capital International Asset Management are trading names of Capital International (Jersey) Limited. In South Africa, Capital International (Jersey) Limited is authorised as a Financial Services Provider (FSP No.51164).
Gary Hill
Investment Director