This report provides a detailed analysis of the Artisan International Small-Mid Fund's performance during the third quarter of 2025, identifying the primary factors that contributed to its relative underperformance against the benchmark index.
Navigating Market Currents: A Deep Dive into Portfolio Dynamics
Q3 2025 Performance Overview: Underperforming the Benchmark
During the third quarter of 2025, the Artisan International Small-Mid Fund experienced a period of underperformance when compared to its benchmark, the MSCI ACWI ex USA SMID Index. This deviation was largely influenced by specific investment decisions made within the portfolio. The selection of individual securities within the industrial sector proved to be a significant drag on returns. Furthermore, a concentrated allocation to the software industry, which falls under the broader information technology sector, also negatively impacted the fund's relative performance. These strategic choices, while potentially offering long-term benefits, presented challenges in the short term, leading to the observed underperformance.
Sectoral Impact: Healthcare's Continued Headwinds
The healthcare sector emerged as one of the three least robust performing sectors within the portfolio during the quarter. This continued a trend observed throughout the year, with healthcare investments being the most substantial detractor from the fund's overall year-to-date returns. The persistent weakness in this sector underscores the difficulties faced by the fund in navigating its complexities and identifying resilient opportunities. The underperformance in healthcare warrants further examination to understand the specific dynamics at play and to assess potential adjustments to the fund's strategy in this area.
Geographic Trends: International Markets Take the Lead
From a geographical perspective, international markets demonstrated a notable outperformance compared to domestic markets throughout the year. This trend is primarily attributed to the comparatively low valuations of international assets following a prolonged period of underperformance. The shift in market leadership suggests a potential rebalancing of global investment flows, with investors seeking opportunities in regions that were previously overlooked. This broader market dynamic provides a contextual backdrop for the fund's performance, as its focus on international small and mid-cap companies positions it to potentially benefit from this renewed interest in global equities.
