Harding Loevner's International Small Companies fund underperforms in Q1. The composite fell 4.0% gross of fees in the first quarter, significantly underperforming the MSCI ACWI ex US Small Cap Index's 0.4% decline. Software and services holdings drove most of the underperformance, accounting for over three-quarters of the lag. The firm exited positions in France's Alten and Argentina's Globant due to AI risks threatening IT-services businesses reliant on time-and-materials contracts. Energy emerged as the strongest performer, surging 25% following geopolitical tensions and crude oil price spikes. Harding Loevner added Ferreycorp, a Peru-based Caterpillar equipment distributor, providing indirect metals industry exposure through industrials. The broader market faced headwinds from Iran conflict concerns despite early corporate earnings strength.
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