Capital Group International Developed Equity
Mandate commentary
Q3 2025
Highlights
① International stocks rose modestly during the quarter but lagged the MSCI EAFE Index. Emerging markets were a bright spot, supported by a strong rally in Chinese equities. Japanese stocks outperformed most developed markets, while European equities advanced despite political and economic headwinds. The U.S. Federal Reserve cut rates by a quarter of a percentage point, and the U.S. dollar stabilized after earlier weakness.
② Balancing geopolitical uncertainty with positive economic fundamentals.
③ Broad diversification remains the best way to handle mixed market conditions.
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
Health care was an area of relative strength, aided by lighter exposure and strong stock selection. EssilorLuxottica was a top contributor, boosted by robust demand for its smart eyewear developed with Meta. BeOne Medicines also contributed after positive clinical trial results for its oncology treatment.
Information technology provided notable gains through holdings such as Taiwan Semiconductor Manufacturing Company (TSMC), which surged on strong earnings and AI-driven chip demand.
Industrials saw positive contributions from aerospace and defence names, including Rolls-Royce, which benefited from increased defence spending commitments in Europe.
Performance detractors
Materials detracted the most from relative results, due to weak stock selection, with Sika among the largest individual detractors.
Financials weighed on performance, particularly investments in financial exchanges, such as the London Stock Exchange, which declined on concerns over slowing subscription growth and competitive pressures, and a lack of exposure to Japanese banks.
Within industrials, transportation and freight companies, like DSV and TFI International, underperformed amid worries about freight trends and pricing.
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 | 3.29%
| 13.49%
|
Mandate repositioning
Industrials remain the largest sector allocation, with a continued emphasis on aerospace and defence companies, supported by rising defence budgets and secular growth drivers, such as reshoring and AI infrastructure.
Financials exposure increased through selective additions to European banks, including Intesa Sanpaolo, reflecting improved profitability and shareholder returns.
Technology continues to be a key focus, particularly in semiconductors and IT services, while health care positions were adjusted to capture opportunities in innovative treatments, despite near-term volatility.
Market overview: signs of optimism emerge, despite the noise during "Liberation Day" fallout
The third quarter delivered broad gains across asset classes, with market performance largely overriding a backdrop of cautious sentiment. Investors looked past persistent trade policy headlines, increasingly treating the U.S. administration's tariff policy as noise rather than a core risk. The primary catalysts for the positive performance were a subtle shift toward lower-interest-rate expectations and resilient corporate earnings.
Signals from the U.S. Federal Reserve of imminent rate cuts were followed by a quarter percentage cut in September. Government bond yields eased into the quarter's end, supporting bond prices, while corporate bonds outperformed government bonds.
Market outlook: solid reasons for optimism, despite ongoing uncertainty
Looking ahead, the normalization of inflation is a key development, providing central banks with the flexibility to begin an easing cycle over the next six to 12 months. This anticipated shift toward more accommodative monetary policy is expected to lower borrowing costs, creating a supportive foundation for economic activity.
This should help the macroeconomic environment sustain corporate strength. Earnings are projected to remain robust, building on a consistent trend of exceeding expectations. Resilient corporate profitability continues to be a primary driver of market performance.
The combination of impending rate cuts and durable earnings growth establishes a constructive outlook for equities. This environment reinforces the principle that focusing on underlying fundamentals, rather than reacting to short-term market volatility, is a prudent strategy for capturing future growth potential.
To discuss your investment strategy, speak to your IG Advisor.
Azure Managed Investments™ provides discretionary investment management services distributed by IG Wealth Management Inc., Investment dealer. We will manage your Azure Managed Investments Accounts on a segregated basis in accordance with your investment policy statement and the resulting mandate selected by you. Mandates will be managed by I.G. Investment Management, Ltd. and partner organizations. You are required to make a minimum initial investment of $150,000; please read the Azure Managed Investment Account Agreement for complete details, including fees and expenses.
This commentary may contain forward-looking information, which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised, whether as a result of new information, changing circumstances, future events or otherwise.
This commentary is published by IG Wealth Management. It is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. It may contain certain forward-looking statements regarding the market conditions which are based upon assumptions believed to be reasonable at the time of publishing. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.
Past performance may not be repeated and is not indicative of future results. Actual performance may vary due to a range of factors including but not limited to current market conditions, timing of contributions and withdrawals, client-imposed restrictions, fees, expenses, tax considerations and other individual circumstances. There are no assurances that any mandate will achieve its objectives and/or avoid any losses.
Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.