Navigating Global Currents: Touchstone International Value Fund's Q2 2025 Insight

The second quarter of 2025 presented a complex tapestry of global economic shifts and market dynamics, offering both challenges and opportunities for international value investors. As inflation concerns persisted in some regions while easing in others, and central banks recalibrated their monetary policies, the Touchstone International Value Fund remained steadfast in its disciplined approach to identifying undervalued companies with robust fundamentals.

Our strategy throughout Q2 2025 focused on maintaining a diversified portfolio across various geographies and sectors, emphasizing companies with strong balance sheets, sustainable competitive advantages, and attractive valuations.

We continued to prioritize businesses demonstrating resilience in an uncertain environment, capable of generating consistent free cash flow and returning capital to shareholders.

Performance during the quarter reflected the nuanced market environment. While certain developed markets experienced a resurgence driven by renewed optimism around economic growth, emerging markets showed a more mixed picture, influenced by commodity price fluctuations and localized geopolitical developments.

The Fund's allocation to European industrials and select Asian technology leaders proved particularly beneficial, capitalizing on improving supply chain dynamics and increasing demand in specific niches. Conversely, some exposure to Latin American consumer staples faced headwinds due to currency volatility and higher input costs.

Looking deeper into sector contributions, the healthcare sector, particularly innovative biopharmaceutical companies, continued to offer defensive characteristics and long-term growth potential, contributing positively to the fund's relative performance.

Financials, especially those with strong retail banking operations in stable economies, also demonstrated resilience, benefiting from a sustained higher-for-longer interest rate narrative in some key markets.

From a country perspective, our overweight positions in Germany and Japan, where we identified compelling value propositions amidst macroeconomic reforms and corporate governance improvements, delivered solid returns.

We selectively trimmed positions in regions where valuations appeared stretched or where regulatory risks increased, reallocating capital to areas offering more attractive risk-adjusted returns.

The outlook for the latter half of 2025 remains cautiously optimistic. We anticipate continued divergence in global economic growth rates, with certain economies potentially entering a synchronized easing cycle while others maintain a tighter stance.

Geopolitical tensions, particularly in Eastern Europe and parts of Asia, will continue to warrant close monitoring, as will the ongoing evolution of supply chains and trade policies.

Our investment team is actively engaged in bottom-up research, seeking out companies that are undervalued relative to their intrinsic worth, regardless of broader market sentiment.

We believe that a patient, value-oriented approach, coupled with rigorous fundamental analysis, is the most effective way to navigate these dynamic international markets and deliver long-term value for our shareholders. We remain committed to our investment philosophy, confident that focusing on quality businesses trading at a discount will continue to yield favorable outcomes in the quarters ahead.