Navigating the Currents: Northern Funds' International Equity Fund Commentary for Q3 2025

Well, what a quarter it was, wouldn't you say? The third quarter of 2025, stretching from July through September, certainly kept us on our toes in the world of international equities. It wasn't exactly a smooth sail for global markets; indeed, we observed a fair bit of choppiness, with a noticeable pullback in sentiment as the quarter drew to a close. Factors like persistent inflation concerns across major economies, central banks signaling a 'higher for longer' interest rate mantra, and some lingering geopolitical uncertainties all contributed to a more challenging environment.

Amidst this backdrop, the Northern Funds International Equity Fund, like many others, found itself navigating some tricky waters. While the broader market indices for international developed and emerging markets experienced a downturn during this period, our fund delivered a performance that, while not immune to the overall pressures, reflected our disciplined approach to stock selection. We strive, always, to uncover quality businesses with robust fundamentals, regardless of the prevailing macro winds.

Looking a little closer at what drove things within the portfolio, several themes emerged. Our strategic overweight to certain sectors, particularly those we identified as having strong structural growth drivers and resilient business models, offered some insulation. For instance, selective industrials in Europe, demonstrating pricing power and healthy backlogs, continued to contribute positively. Conversely, some of our positions in specific emerging market technology names, particularly those with higher sensitivity to interest rate expectations and regulatory shifts, faced headwinds, impacting overall returns. It's never a straightforward path, you know?

We saw varying regional performances, too. European markets, despite their own set of economic challenges, showed flashes of resilience, whereas parts of Asia, especially mainland China, continued to grapple with internal economic shifts and policy adjustments. Our investment process remains steadfast: we focus on individual company merit, conducting thorough fundamental analysis rather than making broad directional bets on countries or regions. We believe that by truly understanding a business, its competitive advantages, and its management team, we can unearth value even in turbulent times.

So, what's our take as we look ahead? The global economic outlook remains a fascinating mosaic, really. We anticipate continued volatility, driven by the ongoing tug-of-war between inflation, economic growth, and central bank policy. However, we also see pockets of opportunity emerging as valuations become more attractive for high-quality businesses that might have been unfairly penalized by broader market sentiment. Our team is diligently scanning the landscape for these dislocations, seeking companies with strong balance sheets, sustainable competitive advantages, and clear pathways to long-term earnings growth.

Rest assured, our commitment to a long-term, fundamentally driven investment strategy remains unwavering. We're not chasing fads or making rash decisions based on short-term noise. Instead, we're focused on building a portfolio of excellent companies, globally diversified, that we believe are well-positioned to deliver value for our investors over the long haul. It's a continuous journey of research, evaluation, and thoughtful portfolio management, and we appreciate your trust in us.