The Oakmark International Fund has achieved notable success in the second quarter of 2025, surpassing the MSCI World ex USA Index, its chosen benchmark. This strong showing is attributed to savvy investment choices, particularly within the industrial and financial sectors, which were significant contributors to overall gains. The fund’s geographical allocations underscore a focus on European markets, excluding the U.K., complemented by strategic investments in the U.K. and Asia outside Japan. Furthermore, the quarter saw dynamic portfolio adjustments, with new acquisitions carefully selected for their long-term potential and several positions divested after reaching their valuation targets or due to evolving management perspectives. This disciplined approach underscores the fund's commitment to delivering superior returns through meticulous stock selection and active portfolio management.

Key to the fund's outperformance were strategic acquisitions of companies poised for growth, alongside timely exits from positions that had fulfilled their investment objectives. The addition of semiconductor equipment giant ASML, Dutch insurer ASR Nederland, and pneumatic equipment leader SMC reflects a forward-looking strategy. These new holdings align with themes of technological advancement, regulatory reform, and industrial automation, areas where the fund anticipates substantial value creation. Conversely, the fund systematically divested holdings such as Anheuser-Busch InBev and Brambles, primarily because their market prices had converged with their estimated true values. This active management, balancing promising new ventures with disciplined profit-taking and risk mitigation, exemplifies the fund's consistent philosophy of value investing and its ability to adapt to changing market dynamics while maintaining its core investment principles.

Exceptional Fund Performance and Sectoral Dominance

The Oakmark International Fund delivered an outstanding performance in the second quarter of 2025, exceeding the MSCI World ex USA Index. This significant outperformance underscores the fund's effective investment strategy and its capability to identify high-potential assets in global markets. The industrial and financial sectors were particularly instrumental in this success, demonstrating robust growth and strong returns that substantially boosted the fund's overall performance. These sectors, known for their cyclical sensitivity and potential for substantial rebound in favorable economic conditions, proved to be strategic choices for the fund during this period.

The fund's superior returns are a testament to its meticulous stock selection and a deep understanding of market trends. The strong performance of industrials can be linked to increasing global demand and industrial output, while financials benefited from a resilient economic environment and possibly favorable interest rate dynamics. The fund's ability to capitalize on these sector-specific strengths highlights its analytical prowess and a keen eye for value. This strategic emphasis on sectors with high growth potential, coupled with a disciplined investment approach, enabled the Oakmark International Fund to navigate market complexities successfully and deliver impressive results for its investors, establishing a solid foundation for future growth and continued outperformance.

Strategic Portfolio Evolution: New Buys and Disposals

The second quarter of 2025 was marked by significant strategic adjustments within the Oakmark International Fund's portfolio, reflecting a proactive and disciplined approach to investment management. The fund introduced three new positions: ASML, ASR Nederland, and SMC. These additions were carefully chosen based on their strong market positions, promising growth outlooks, and valuations that presented attractive entry points. ASML, a leader in semiconductor equipment, was acquired due to its critical role in advanced chip manufacturing and expected growth from AI proliferation, despite recent stock price declines. ASR Nederland, a Dutch insurer, was added for its cash-generative life insurance business and potential benefits from regulatory reforms and consolidation in other insurance segments. SMC, a dominant player in pneumatic equipment, was selected for its market share gains and anticipated growth driven by automation trends, despite recent industry headwinds. These new investments highlight the fund's commitment to long-term value creation through identifying high-quality companies with significant intrinsic value.

Concurrently, the fund systematically divested from six holdings, including prominent names like Anheuser-Busch InBev, Brambles, Compass Group, Holcim, and Schindler Holding. Five of these exits were primarily driven by their share prices converging with the fund's estimated intrinsic values, signaling that these investments had achieved their target returns. The decision to sell Henkel, however, was influenced by concerns regarding management's inability to drive volume improvement in its consumer business, indicating a focus on operational efficiency and a willingness to disengage from investments where management falters. This dual strategy of adding high-potential assets and exiting mature or underperforming ones demonstrates the fund's dynamic approach to portfolio management. It ensures capital is continuously reallocated to opportunities offering the most compelling risk-adjusted returns, reflecting a rigorous and value-driven investment philosophy aimed at optimizing long-term performance.