Navigating the Dynamic Tides: Touchstone Sands Capital Emerging Markets Growth Fund's Q2 2025 Journey

The second quarter of 2025 presented a tapestry of opportunities and challenges across emerging markets, a landscape expertly navigated by the Touchstone Sands Capital Emerging Markets Growth Fund. As global economic currents shifted and domestic narratives evolved, the fund demonstrated its resilience and strategic foresight, delivering performance that reflects its deep-seated commitment to identifying high-quality, innovative growth companies.

Amidst a backdrop of fluctuating interest rate expectations and geopolitical developments, emerging market equities displayed a nuanced performance.

While some regions experienced robust growth fueled by strong domestic demand and technological advancements, others faced headwinds from inflationary pressures and policy uncertainties. The Touchstone Sands Capital Emerging Markets Growth Fund's active management approach proved crucial, allowing for agility in capital allocation and a focus on businesses with sustainable competitive advantages and resilient business models.

A significant driver of performance during Q2 2025 was the fund's strategic overweighting in sectors poised for long-term structural growth.

Technology, particularly in areas like digital transformation and artificial intelligence adoption in Asia, continued to be a strong contributor. Consumer discretionary companies in markets with expanding middle classes, such as India and parts of Southeast Asia, also showed compelling returns. These companies benefited from increasing disposable incomes and evolving consumer preferences, showcasing the power of demographic tailwinds.

Geographically, markets like India continued their upward trajectory, supported by strong economic reforms and a burgeoning digital economy.

Southeast Asian nations, with their youthful populations and growing manufacturing bases, also provided fertile ground for investment. Conversely, some regions experienced more volatility, where the fund's selective approach and rigorous fundamental analysis helped mitigate potential downside risks.

Our investment philosophy emphasizes uncovering companies that can thrive irrespective of short-term market noise, focusing on intrinsic value and long-term potential.

Looking ahead, the fund maintains a cautious yet optimistic outlook on emerging markets. While global macroeconomic uncertainties persist, we believe that the structural growth drivers remain intact.

The secular trends of technological adoption, urbanization, and the rise of consumer power in emerging economies offer compelling investment opportunities for those with a long-term perspective. The fund remains committed to its disciplined, research-intensive process, continually seeking out innovative companies with strong management teams, robust financials, and the capacity for sustainable, compounding growth.

Our portfolio continues to be constructed with a high conviction in a concentrated selection of companies that we believe are leaders in their respective fields, capable of generating significant shareholder value over time.

We anticipate that ongoing reforms, demographic dividends, and technological leaps will continue to unlock value in these dynamic markets, positioning the Touchstone Sands Capital Emerging Markets Growth Fund for continued success in the quarters to come. We thank our investors for their continued trust and partnership as we navigate the exciting, evolving landscape of emerging market growth.