investment and portfolio - The second quarter of 2025 has proven to be a pivotal period for Harding Loevner's International Small Companies Equity portfolio, marking a significant 17.0% increase gross of fees. This performance ...
comes amid dramatic shifts in global economic power dynamics and technological transformation.
Geographic Positioning and Performance Drivers
The fund's strategic underweight position in Japan, combined with well-selected investments in India, proved to be crucial success factors. The overweight stance in the European Monetary Union (EMU) further contributed to the portfolio's robust performance. This geographic diversification strategy reflects a deeper understanding of regional economic strengths and emerging opportunities.
Technological Transformation and Business Model Evolution
A notable trend emerging from the portfolio is the shifting business models in the technology services sector, exemplified by France-based Alten's strategic pivot. The company's move from traditional Time & Materials (T&M) contracts, which currently constitute 38% of revenue, toward fixed-price and outcome-based contracts represents a broader industry evolution. This transition signals a more mature approach to technology service delivery and risk management.
Global Economic Power Shifts
The portfolio's performance exists against a backdrop of significant global economic realignment. The gradual erosion of US dollar dominance, China's expanding influence in Africa and South America, and strengthening Sino-Russian cooperation are creating new investment opportunities and risks. These geopolitical shifts are particularly relevant for small-cap companies that often have more focused geographic exposure.
AI Integration and Industry Impact
Artificial Intelligence's role in transforming industries mirrors historical technological revolutions, suggesting profound implications for small-cap companies. The portfolio's investments reflect careful consideration of how AI adoption will affect different sectors and regions, with particular attention to companies positioned to benefit from this technological wave.
Geographic Positioning and Performance Drivers
The fund's strategic underweight position in Japan, combined with well-selected investments in India, proved to be crucial success factors. The overweight stance in the European Monetary Union (EMU) further contributed to the portfolio's robust performance. This geographic diversification strategy reflects a deeper understanding of regional economic strengths and emerging opportunities.
Technological Transformation and Business Model Evolution
A notable trend emerging from the portfolio is the shifting business models in the technology services sector, exemplified by France-based Alten's strategic pivot. The company's move from traditional Time & Materials (T&M) contracts, which currently constitute 38% of revenue, toward fixed-price and outcome-based contracts represents a broader industry evolution. This transition signals a more mature approach to technology service delivery and risk management.
Global Economic Power Shifts
The portfolio's performance exists against a backdrop of significant global economic realignment. The gradual erosion of US dollar dominance, China's expanding influence in Africa and South America, and strengthening Sino-Russian cooperation are creating new investment opportunities and risks. These geopolitical shifts are particularly relevant for small-cap companies that often have more focused geographic exposure.
AI Integration and Industry Impact
Artificial Intelligence's role in transforming industries mirrors historical technological revolutions, suggesting profound implications for small-cap companies. The portfolio's investments reflect careful consideration of how AI adoption will affect different sectors and regions, with particular attention to companies positioned to benefit from this technological wave.