In the fourth quarter of 2025, the Invesco International Small/Mid Company Fund navigated a dynamic global investment landscape. Despite its Class A shares not matching the performance of the MSCI ACWI ex-US SMID Index, the fund impressively outpaced the average of its Morningstar Foreign Small/Mid Growth peer group. This period saw the fund's management strategically capitalizing on market uncertainties, seizing opportunities to acquire attractively priced companies while divesting from those showing declining earnings quality or heightened regulatory risks. A notable move was the establishment of a position in Olympus, driven by what was perceived as an exceptionally appealing valuation. Furthermore, Knorr-Bremse demonstrated strong organic growth, contributing to a rise in its stock price, even as currency fluctuations impacted its top-line revenue figures.
Detailed Investment Performance and Strategy in Q4 2025
During the final quarter of 2025, the Invesco International Small/Mid Company Fund (OSMAX) actively managed its portfolio amidst global market shifts. The Class A shares recorded a return of -0.07%, which, while lagging the MSCI ACWI ex-US SMID Index's +3.13%, notably exceeded the Morningstar Foreign Small/Mid Growth peer group average of -0.83%. This performance reflects a deliberate strategy by the fund's management, who viewed the prevailing market underperformance, particularly outside the United States, as an opportune moment for strategic investments. The fund capitalized on market volatility to acquire stakes in companies with attractive valuations, exemplified by the initiation of a new position in Olympus (OCPNY). Conversely, five holdings were divested due to concerns over deteriorating earnings quality, inflated valuations, or increasing regulatory scrutiny. Knorr-Bremse experienced headwinds from currency volatility, causing its revenue figures to fall short of expectations, yet strong underlying organic growth propelled its stock price upward, underscoring the resilience of its business model.
This quarter's activities highlight the fund's proactive approach to portfolio management, emphasizing quality and long-term growth potential. The strategic entry into Olympus and the observed organic growth in Knorr-Bremse, despite external challenges, underscore a commitment to identifying and investing in companies that offer compelling value and robust fundamentals. This forward-looking strategy, focusing on high-quality, consistently profitable businesses, is expected to position the fund favorably as global economic conditions evolve and market valuations adjust to more normalized levels. The fund's continuous assessment of market dynamics and company-specific factors remains crucial for achieving its investment objectives in the coming periods.
