Global equity markets continue to be shaped by enthusiasm for artificial intelligence, even as compelling opportunities emerge beyond the most crowded areas of the market. In this letter, we discuss how we are balancing participation in AI-related growth with valuation discipline, highlight several recent investments in durable businesses, and provide an update on refinements to the Global Impact Fund’s investment framework.

Finding durable winners in the AI era.

Investors have a long history of narrowing their attention around a single powerful theme, driving a small group of stocks sharply higher while leaving much of the market behind. Railroads, automobiles, personal computers and the internet are but a few examples and in each case the innovation was real and had a material impact on society. From an investment standpoint, however, what we have since learned is that it took years to determine which companies would become lasting winners and which faded as the cycle matured. The most recent focus is, of course, AI, which in a relatively short period has gone from the world of science fiction to a reality that is resulting in unheard of amounts of capital spending.

Many of the perceived AI winners have already seen their share prices rise sharply, leaving valuations with little margin for disappointment. Over time, we expect hindsight will reveal that some of these businesses were too exposed to the initial AI build-out, either losing momentum as competition intensifies or seeing their valuations reset as lofty expectations prove difficult to meet. As investors, we are more interested in diversified companies with durable competitive positions, proven records of growing shareholder wealth, and meaningful but not excessive exposure to AI-related growth. These are the types of businesses that should continue to grow well beyond the current wave of capital spending. Two examples in the Global Equity Fund include:

  • Schneider Electric – a provider of electrical equipment, automation systems and software needed to electrify and improve the energy efficiency of buildings, factories, and electricity grids. Its products sit at the intersection of electrification and energy efficiency, enabling customers to manage energy systems while reducing their environmental footprint (more than 862 mm tonnes of CO2 saved or avoided since 2018). Demand for its products has accelerated recently as data centre investment has increased dramatically.
  • Diploma - a UK-based supplier of niche, high-margin technical components for industrial end markets. Several of its divisions are seeing stronger demand from AI-adjacent trends, including automation in advanced manufacturing and semiconductor packaging, both of which are important parts of the broader AI infrastructure build-out.

Rather than chasing any single AI technology or trying to find the next bottleneck in the AI supply chain, we want to invest in companies that will continue to compound its revenue no matter the outcome. Our AI exposure reflects our desire to participate in a technological transformation that is real, while remaining disciplined in our focus on high-quality companies trading at reasonable valuations.

Opportunities beyond the AI trade.

As investors concentrate on the AI trade, many high-quality companies continue to trade at attractive valuations. Some face legitimate disruption risks, but others have been overlooked because of near-term headwinds and/or limited AI exposure. Two recent additions to the Global Equity Fund illustrate these opportunities.

Intuitive Surgical - the global leader in robotic-assisted surgery it is best known for its da Vinci Surgical System, the leading platform for minimally invasive procedures. Rather than replacing surgeons, the system acts as an advanced set of surgical tools controlled by the surgeon, providing enhanced precision, dexterity, and visualization during complex operations. These capabilities can help reduce complications, shorten recovery times, and improve patient outcomes. 

Over more than two decades, Intuitive has built a powerful competitive position. As an early pioneer in robotic surgery, the company has installed thousands of systems worldwide, accumulated extensive clinical data, and developed deep relationships with hospitals and surgeons. Once a hospital adopts the platform and surgeons are trained to use it, switching to an alternative can be costly and disruptive. At the same time, every new system creates ongoing demand for instruments, accessories, and service contracts. Together, these factors help reinforce Intuitive's leadership position and create barriers that are difficult for competitors to overcome.

Recently, the stock has come under pressure as investors worry about a slowdown in procedure growth in the US. In our view, the market is placing too much emphasis on this near-term issue and losing sight of the company's long-term opportunity. The key drivers of the business remain firmly in place. Robotic-assisted surgery is still in the early stages of adoption, with most procedures worldwide continuing to be performed using traditional methods such as laparoscopy. As hospitals increasingly embrace robotic technology, Intuitive remains well positioned to benefit from this long runway for growth.

CRH Plc - the world’s largest building materials group and a leading supplier of the products needed to modernize infrastructure. Its portfolio includes aggregates (sand, gravel or crushed stone used to make concrete or asphalt) and cement-based materials used in roads, water & utility infrastructure products, and building solutions.  

CRH is a quality compounder positioned at the intersection of the most durable real-asset spending themes in our global portfolio - U.S. infrastructure renewal, aging water systems, and reindustrialization. The investment case rests on three durable pillars:  

(1) a structurally attractive aggregates industry where scale economics (due to the heavy nature and low cost of aggregates, moving it by truck is expensive resulting in a small radius of around 50 miles that each quarry can service before it becomes unprofitable) and stringent municipal zoning and environmental regulations create significant barriers to entry and support pricing power;  

(2) a vertically integrated business model, which delivers lower earnings volatility and superior return on capital; and  

(3) a disciplined capital allocation engine that has completed more than 320 acquisitions since 2015 while extending a twelfth consecutive year of margin expansion in 2025.

CRH also demonstrates robust ESG strengths by deeply integrating sustainability into its core business strategy. On the environmental front, the company excels in decarbonization and circularity, having successfully achieved its 2025 target to limit net CO2 emissions to 520 kg per tonne of cement-based product while generating 50% of its revenues from products with enhanced sustainability attributes.  

Impact Fund update.

This summer marked the second anniversary of the Global Impact Fund, providing an opportunity to reflect on its structure, direction, and how we can continue investing in solutions to some of the world's most pressing challenges.

We are proud of the fund's performance to date, but continuous improvement is essential to delivering the best outcomes for our clients. With that in mind, we undertook a comprehensive review of the themes and sub-themes that make up the Impact Fund and implemented several enhancements that will better position the portfolio to benefit from long-term trends aligned with the United Nations Sustainable Development Goals. The updated framework is as follows:

  • Sustainable Consumption & Product theme has been reorganized into Water Management and Resource Efficiency. Together, these subthemes address the critical changes needed in how society uses natural resources, manages water, and reduces waste.
  • Quality of Life theme now consists of three subthemes: Personal Health, Healthy Living Environments, and Resilient Communities & Essential Services. These subthemes represent key inputs into an individuals' standard of living and capture businesses that contribute to the quality of our daily lives.
  • Energy Transition theme is now divided into Low Carbon Energy and Grid Stability. These subthemes represent two of the most important pillars of decarbonization: expanding access to cleaner energy sources and ensuring the electricity grid can reliably support their growth.
  • Social Inclusion theme has been reorganized into Economic Empowerment and Accessibility & Participation. These subthemes focus on removing barriers that limit opportunity and ensuring broader access to economic participation, essential services, and community life.

These changes do not alter the fundamental purpose of the Fund's impact themes. Rather, they represent a reorganization designed to help our investment team better track key drivers of change, identify emerging opportunities, and invest in solutions that create value for society, the environment, and our clients over the long term.

Final thoughts.

Periods of rapid change can create compelling opportunities, but they also reinforce the importance of discipline. Whether assessing the long-term impact of AI, finding quality businesses overlooked by the market, or refining the Global Impact Fund’s framework, our focus remains on investing in durable companies with strong competitive positions, attractive growth prospects, and the ability to create lasting value. By looking beyond short-term narratives and maintaining a long-term perspective, we believe our funds are well positioned to navigate an evolving market.