2Q 2026 International Equity Commentary

The Polen International Equity Strategy (the "Portfolio") returned +21.35% (net of fees) in the second quarter of 2026, outperforming the MSCI ACWI ex-US Index (the "Index") by nearly 700 basis points. Stock selection, sector allocation, and geographic positioning all contributed positively to relative performance. The Portfolio's large overweight to Technology drove the majority of the positive allocation effect, contributing 326 basis points, while top stock contributors — SK hynix, Samsung Electronics, Kioxia Holdings, and Taiwan Semiconductor Manufacturing Company (TSMC) — added a combined 1,156 basis points.

The quarter was shaped by easing geopolitical tensions following the US-Iran ceasefire, renewed enthusiasm for AI-linked growth, and strong corporate earnings, though the macro backdrop grew more complicated later in the period as central banks maintained hawkish postures and trade policy uncertainty persisted.

What Drove International Equity Markets in Q2 2026?

Global equity markets rallied sharply in the second quarter, supported by a reduction in geopolitical risk after the US and Iran reached a ceasefire agreement in April. Shipping traffic through the Strait of Hormuz resumed and oil prices declined meaningfully from their Q1 peak. Combined with continued acceleration in AI infrastructure spending and resilient corporate earnings, this helped drive broad gains across global equity markets.

Leadership was initially concentrated in large-cap growth stocks and US hyperscalers before broadening into small caps and cyclicals as the quarter progressed. Semiconductor companies — particularly memory-related businesses — were notable standouts, benefiting from capacity constraints, strengthening pricing power, and sustained demand tied to AI infrastructure buildouts. Market leadership began to rotate in June, however, as investors took profits in growth positions and moved into more cyclical and value-oriented sectors. In our view, this backdrop raises the importance of durable earnings growth as a differentiator between resilient and vulnerable equities heading into the second half of the year.

How Did the Portfolio Generate Nearly 700 Basis Points of Outperformance vs. the Index?

Memory was the dominant performance driver. AI applications require substantially greater memory intensity than many prior computing workloads, and we believe demand is running materially ahead of supply across NAND and DRAM. The Portfolio is positioned to benefit from this theme through holdings in Samsung Electronics, SK hynix, and Kioxia Holdings. The earnings power of this group has been supported by demand running ahead of supply, which has allowed the group to raise prices aggressively and, in some cases, sell capacity multiple years forward. TSMC, the leading global foundry for advanced semiconductors used in AI training and inference, continued to experience what we believe is demand running well ahead of manufacturing capacity, supporting strong pricing power, margin expansion, and upward revisions to earnings estimates.

Top stock contributors included SK hynix, Samsung Electronics, Kioxia Holdings, and TSMC, adding a combined 1,156 basis points. The largest detractors were Shell plc, Toho, Equinor ASA, and Saab AB, detracting a combined 128 basis points. Shell plc and Equinor ASA, both energy companies, had stood to benefit from higher oil prices and supply dislocation at the start of the Iran conflict; as the ceasefire progressed and oil prices normalized, their share prices moved lower. We continue to hold both, as our longer-term investment cases were not affected by what we view as a transient dislocation. Toho, a Japanese movie and television producer, struggled with subdued earnings and was exited during the quarter. Saab AB, a Swedish defense company, underperformed after a strong prior run left expectations elevated, though we continue to hold the position as our long-term thesis was not affected by what we view as near-term volatility.

What Portfolio Activity Took Place During the Quarter?

During the quarter, we initiated positions in ASPEED Technology, Ryohin Keikaku, Mitsubishi UFJ Financial Group, Tokio Marine Holdings, AstraZeneca, Nokia, Rentokil, RWE AG, and Technoprobe. We exited positions in Toho, Aviva, Celestica, LifeCo, and Rheinmetall.

The additions broaden the Portfolio's exposure across the semiconductor testing and server component supply chain (ASPEED Technology, Technoprobe), Japanese financials and consumer businesses (Ryohin Keikaku, Mitsubishi UFJ Financial Group, Tokio Marine Holdings), and European healthcare, telecommunications, and utilities (AstraZeneca, Nokia, Rentokil, RWE AG).

What Is the Team's Outlook?

We remain focused on bottom-up stock selection and identifying companies undergoing what we believe are sustainable positive fundamental inflections, where we see improving earnings power, returns, or competitive positioning that are not yet fully reflected in market expectations. In our view, the growing importance of durable earnings growth as a differentiator — in an environment of what we believe are stretched valuations and hawkish central banks — supports this approach heading into the second half of the year.

Past performance does not guarantee future results. The commentary is not intended as a guarantee of profitable outcomes. Please see Important Disclosures in the full commentary.