The Lazard International Quality Growth Portfolio experienced a commendable 9.3% increase, net of fees, during the second quarter of 2025. This performance, while robust, slightly lagged behind key benchmarks, with the MSCI ACWI ex-US Index and the MSCI ACWI ex-US Growth Index recording gains of 12.0% and 13.7% respectively. A significant positive contributor to this performance was the strategic stock selection within the consumer discretionary sector, coupled with a lower-than-index exposure to this particular segment, which ultimately bolstered relative returns. However, certain holdings with a pronounced reliance on US-generated revenue acted as a drag on the portfolio’s overall showing. This period also saw international equity markets making notable advancements, outpacing the US market year-to-date, signaling a resilient corporate profit landscape globally despite ongoing geopolitical complexities.
During the April to June quarter of 2025, international equity markets exhibited strong upward momentum, further solidifying their lead over the US market since the beginning of the year. This upward trend underscored the enduring strength of corporate earnings outside the United States, even in the face of a dynamic and often unpredictable geopolitical environment. The Lazard International Quality Growth Portfolio's strategy, which emphasizes high-quality international companies, navigated this landscape with a focus on delivering value. The portfolio's nuanced approach to sector allocation, particularly its underweight position in consumer discretionary, proved beneficial. This selective strategy allowed the portfolio to mitigate some of the sector's underperformance, thereby enhancing its relative returns compared to the broader indices.
However, not all factors contributed positively. Companies within the portfolio that derived a larger portion of their revenue from the US market faced headwinds, impacting the portfolio's overall performance. This suggests a potential sensitivity to specific regional economic dynamics, which, despite the global nature of the portfolio, can still influence outcomes. The report's summary indicates that international currencies maintained a certain status, though further elaboration is needed to fully understand their role in the quarter's results. Nevertheless, the overall narrative points to a continued resilience and growth in international markets, validating a targeted investment approach.
In summary, the second quarter of 2025 presented a mixed but generally positive picture for the Lazard International Quality Growth Portfolio. Its strategic allocations and careful stock picking yielded solid returns, contributing positively to its standing. Despite slightly trailing major international growth benchmarks, the portfolio's performance highlights the sustained strength of international markets and the effectiveness of its investment philosophy, particularly in managing sector-specific risks and capitalizing on global corporate profitability.