HL Select Global Growth Fund - Q3 2025 Review

Gareth Campbell - Fund Manager

4 December 2025

Market review

Global equities extended their gains in the third quarter of 2025, supported by resilient growth, easing trade tensions, and early signs of interest rate cuts. Fears of a deeper tariff-driven slowdown faded as the impact of new trade measures proved less damaging than expected. The US struck revised trade agreements with several partners, including the EU and Japan, which further boosted sentiment.

Stronger corporate earnings and continued growth in AI-related investment helped sustain equity market strength. The Federal Reserve’s first rate cut of the year in September, along with signals of further easing, reassured investors that policy support remains in place should growth slow further. Inflation pressures from tariffs were visible but contained, allowing the Fed to balance inflationary risks against emerging softness in employment.

Technology, AI, and other momentum-driven segments were among the best performers. Outside these areas, market strength was weak, and many quality or defensive companies underperformed despite solid fundamentals. For investors focused on intrinsic value and steady compounding, it was a difficult environment, as we found momentum and narrative rather than fundamentals continued to drive returns.

High-beta and risk-on assets remained in favour, even as gold surged to record highs, reflecting ongoing demand for protection against persistent inflation.

Debate has grown around a potential AI bubble, as circular investment activity and rising leverage echo early warning signs from past technology cycles. However, the scale, profitability, and strategic value of today’s leading companies are unprecedented, and we see no immediate reason to expect the pace of spending to slow.

Nonetheless, with macro conditions still uncertain, a US government shutdown, and elevated concerns about an AI bubble, we continue to believe diversification across growth drivers remains essential.

Our priority remains unchanged: to build a portfolio of high-quality global companies capable of delivering consistent compounding through a range of market and political environments.

Positive and negative contributors

During the quarter, the fund underperformed its benchmark by 5.16%.

The main drivers of underperformance were the Financials and Information Technology sectors. In Financials, an underweight position in banks combined with stock-specific issues across the rest of the sector. Information Technology weakness we see as primarily a result of AI impact as concerns that the barriers to entry that protect many software companies could be threatened, combined with narrow performance within the semiconductors industry.

We do not own Apple or Tesla, which together detracted -1.62% from performance. Given both companies’ minimal unit growth, we believe rallies back to peak valuation multiples are not justified.

Positive contributors

Alphabet saw a major shift in sentiment as the outcome of its antitrust court case proved less damaging than feared. This helped catapult it from an “AI loser” to an “AI winner,” with the PE multiple expanding rapidly through Q3.

TSMC had a strong quarter as results continue to show it is both a key beneficiary and enabler of AI.

Amphenol continued to beat earnings as it remains a key enabler of datacentre growth.

Vulcan Materials recovered after earlier weakness from weather and other issues, delivering more consistent results in Q3.

Idexx Laboratories reported better-than-expected results, leading to a sharp rise in share price. We remain confident in long-term growth as COVID-era pets age. Nevertheless, we trimmed the position after results, believing the market’s positive reaction was excessive as the stock had rerated to almost 50X P/E.

Negative contributors

Fiserv’s earnings multiple has halved in 2025 as weaker results in both the core business and its key growth driver Clover weighed on sentiment. Management have done a poor job in addressing these concerns and there is broad consensus that estimates are too high. With legacy payment peers trading at even lower multiples we underestimated how much the stock could underperform despite relatively stable results.

GoDaddy shifted from AI winner to loser as fears about no-code competition increased. We believe investors are overlooking that SMB-focused platforms like GoDaddy are less exposed, as these customers value simplicity and integrated solutions. GoDaddy’s strong brand also provides a key customer acquisition advantage, particularly important in a market with low average revenue per user.

LSE and other data-focused companies have been viewed as at risk from AI disruption. We think this view is overly simplistic and ignores LSE’s regulatory expertise and proprietary data assets.

Phreesia fell after announcing an acquisition. While management could have communicated the strategic value more clearly, we see it as an exciting expansion of the company’s addressable market. Given strong execution and rising profitability, we view the sell-off as an opportunity rather than a warning sign.

Dexcom struggled after a short report raised concerns about its latest glucose sensor. Our analysis suggests the issue is more nuanced, with far fewer patient complaints than claimed. However, we think management must improve how it manages public perception in the age of social media.

Elevance Health and UnitedHealth names had a weak start to the quarter after UnitedHealth’s analyst day left more questions than answers. Stocks later rallied as conditions stabilised and reports emerged that Warren Buffett had taken a position in UNH.

New positions

Cooper is a leader in the oligopolistic contact lens market. The industry benefits from strong barriers to entry and structural growth drivers; including favourable demographics, the global rise in myopia, and increasing adoption of daily and premium lenses.

Cooper has historically been a market share winner, supported by its manufacturing strength and successful private-label strategy, and we expect these share gains to continue.

Cooper has long been on our list of high-quality businesses we’d be keen to own, and recent concerns about cyclical slowing in consumer spending have provided the opportunity to invest at a valuation we believe offers highly attractive risk–reward.

Schneider Electric provides equipment and software for energy management and industrial automation.

Growing demand for AI, data centres, reshoring, renewable power, and electric vehicles is driving a global step-change in electricity needs. Schneider sits at the centre of this structural electrification theme.

The company’s broad electrification exposure, coupled with its high data centre and software revenues, should underpin industry-leading growth and improving pricing power and margins. In our view, these dynamics are transforming it from a very good business into an excellent one.

Novonesis uses biotechnology to improve the sustainability, quality, and efficiency of its customers’ end products.

Formed from the merger of Chr. Hansen and Novozymes, it develops industrial enzymes, functional proteins, and microorganisms used across food, health, agriculture, household, and energy industries.

Its market leadership, scale, and patented technologies give it a highly defensible position in fast-growing, sustainability-driven markets.

Sold positions

Adobe had been owned since the launch of Select, but while we see no immediate risks, uncertainty around the long-term impact of generative AI will likely persist for years, so we redeployed capital to more attractive opportunities.

Adyen is a leading payments platform with enviable technology. However, we see limited scope for further operating leverage and believe there are better opportunities at current valuations.