Average Annual Total Returns for Period Ended 6/30/2024
Class |
Qtr (%) |
1 Year (%) |
3 Year (%) |
5 Year (%) |
10 Year (%) |
Since Inception (%) |
Inception Date |
Gross Expense Ratio (%) |
Investor |
-2.17 |
3.60 |
-3.62 |
5.45 |
4.12 |
7.05 |
5/9/91 |
1.26 |
I |
-2.19 |
3.84 |
-3.43 |
5.65 |
4.33 |
5.65 |
11/20/97 |
1.06 |
R5 |
-2.19 |
3.84 |
-3.43 |
5.66 |
4.33 |
6.69 |
4/10/17 |
1.06 |
R6 |
-2.11 |
3.99 |
-3.29 |
5.82 |
4.48 |
5.39 |
7/26/13 |
0.91 |
MSCI EAFE Index |
-0.42 |
11.54 |
2.89 |
6.46 |
4.33 |
– |
– |
– |
Historical performance for the R5 Class prior to its inception is based on the performance of I Class shares, which have the same expenses as the R5 Class. Expense ratio is as of the fund’s current prospectus. The I Class minimum investment amount is $5 million ($3 million for endowments and foundations) per fund. The R5 Share Class is available only to participants in group employer-sponsored retirement plans where a financial intermediary provides record-keeping services to plan participants. Periods greater than one year have been annualized. |
Portfolio Review
Non-U.S. developed markets finished a volatile quarter slightly lower. The European Central Bank cut rates for the first time in five years. European and U.K. stocks advanced, while Japanese equities declined as bond rates of return rose and the country’s currency fell against the U.S. dollar. Defensive sectors led, while technology finished midpack as non-U.S. developed markets are not dominated by a few mega-cap names.
Steady growth, but signs of a potential slowdown emerged. Company earnings reported early in the quarter showed growth remained strong, with improved manufacturing volumes and steady services growth. Late in the quarter, signs of potential future slowing created a bifurcated growth picture. Cyclical areas of the economy began to show some weakness, but structural growth themes remained intact.
Financials positions weighed on performance. Underperformance in the sector compared with the benchmark was mostly due to positions in payments companies. Netherlands-based Adyen sold off after its quarterly earnings report showed a revenue miss. France-based Edenred faced regulatory concerns amid an investigation into tax exemptions for meal vouchers. Hong Kong-based insurer AIA Group and a lack of exposure to outperforming banks were also notable sources of weakness.
Materials sector holdings detracted. Construction materials positions, including James Hardie Industries and CRH, were a drag on performance compared with the benchmark. Chemicals industry holdings were also notable detractors, as Air Liquide and Shin-Etsu Chemical weighed most heavily on returns within the group.
Information technology positions helped relative performance. Semiconductors industry positioning was the key driver of outperformance in the sector compared with the benchmark. Notables included Taiwan Semiconductor Manufacturing Co., which gave a strong revenue report and announced a share buyback. ASML Holding also helped, as demand for the company’s lithography machines has been strong due to increased investment in artificial intelligence. Infineon Technologies also contributed.
Key Contributors
Novo Nordisk (NVO). Investors reacted positively after the pharmaceuticals company made two announcements, including a $4.1 billion investment in a new manufacturing facility in North Carolina and approval to launch its weight management injection, Wegovy, in China.
Toyota Motor (TM). The portfolio does not hold Toyota. Given the company’s position in the benchmark and its underperformance during the quarter, the lack of exposure was beneficial to relative performance.
Taiwan Semiconductor Manufacturing Co. (TSM). The semiconductor manufacturer’s stock rose after its May revenue report showed a year-over-year increase and the company launched a share buyback. The company also announced plans to raise prices for its 3 nanometer technology and advanced packaging products due to strong demand.
Key Detractors
Sartorius Stedim Biotech (OTCPK:SDMHF). The company’s reported first quarter results fell short of analysts’ expectations as demand in consumables picked up, but investment in hardware and systems remained muted, especially in China. Management noted its outlook uncertainties remain high due to the global political and economic situation.
Airbus (OTCPK:EADSF). The company faced challenges, including falsified documents related to titanium authenticity. Management lowered guidance for this year, and the stock was downgraded. The Boeing Co.’s acquisition of Spirit AeroSystems Holdings and ongoing supply chain issues also pose potential risks to Airbus’ competitive positioning.
Edenred (OTC:EDNMF). Shares of the payments company sold off through the quarter as investors weighed potential regulatory risks. The French government has opened a widening investigation into tax exemptions for meal vouchers, which now includes the country’s audit body.
Notable Trades
Nestle (OTCPK:NSRGF). We initiated a position in Nestle as we believe it is likely to see its sales volume accelerate in the second half of the year as destocking wanes. We also think its investments in facility modernization and additional capacity will start to drive growth inflection in 2024.
Unilever (UL). We initiated a position in the British multinational consumer products company. The new management team, installed by an activist investor, has demonstrated success as some of its strategic decisions have improved organic growth.
Arkema (OTCPK:ARKAF). We sold the position to reduce some near-term cyclical exposure in the portfolio. We see various data points suggesting a potential slowdown in manufacturing activity, and we expect Arkema’s volume growth to slow, possibly resulting in downward earnings revisions.
UBS Group (UBS). The bank faces a potential new regulatory requirement for significantly higher capital. This would meaningfully reduce the cash return we had originally expected; therefore, we decided to exit the position.
Portfolio Positioning
The portfolio continues to invest in companies we believe are strong and improving, but share price performance does not fully reflect these factors. Our process is based on individual security selection, but broad themes have emerged.
Energy transition and power demand are strong secular forces. As the world moves to rely less on fossil fuels, we are finding opportunities across sectors related to the transition. Increased demand for electric vehicles and large-scale renewable energy infrastructure projects creates inflection points for well-positioned businesses. Artificial intelligence investment is leading to a significant increase in demand for electricity to power data centers.
Developments in health care create growth opportunities. Obesity is an area that continues to generate a tremendous amount of growth and investment in the pharmaceuticals industry. Broadly, increased funding for research and development also benefits supporting product and service providers.
Governments have committed to major infrastructure investment. Fiscal stimulus programs enacted by governments in recent years have enabled large-scale infrastructure projects to begin. These offer long-term growth opportunities to companies involved in building, and adjacent products and services continue to see strong earnings.
Digital transformation supports information technology positions. The acceleration of digitalization and the growth of AI are benefiting the semiconductors industry and technology holdings exposed to cloud computing, automation, digital payments and IT services growth.
Consumer companies pivoting from pricing to volume growth. Opportunities emerge as food, fragrances and personal care companies have invested significantly in research and development to create sustainable volume growth for the future.
Top 10 Holdings (%) |
||
Novo Nordisk A/S |
6.29 |
|
ASML Holding NV (ASML) |
4.78 |
|
AstraZeneca PLC (AZN) |
3.08 |
|
SAP SE (SAP) |
2.64 |
|
Schneider Electric SE (OTCPK:SBGSF) |
2.33 |
|
Air Liquide SA (OTCPK:AIQUF) |
2.32 |
|
London Stock Exchange Group PLC (OTCPK:LDNXF) |
2.13 |
|
LVMH Moet Hennessy Louis Vuitton SE (OTCPK:LVMHF) |
2.04 |
|
RELX PLC (RELX) |
1.98 |
|
Keyence Corp (OTCPK:KYCCF) |
1.89 |
As of 6/30/2024 The holdings listed should not be considered recommendations to purchase or sell a particular security. Equity holdings are grouped to include common shares, depository receipts, rights and warrants issued by the same company. Fund holdings subject to change. |
Data presented reflects past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. To obtain performance data current to the most recent month end, please visit www.americancentury.com/performance. Investment return and share value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains. Returns for periods less than one year are not annualized. For information about other share classes available, please consult the prospectus. There is no guarantee that the investment objectives will be met. Dividends and yields represent past performance and there is no guarantee that they will continue to be paid. You should consider the fund’s investment objectives, risks, and charges and expenses carefully before you invest. The fund’s prospectus or summary prospectus, which can be obtained at American Century Investments® Home, contains this and other information about the fund, and should be read carefully before investing. The opinions expressed are those of the portfolio investment team and are no guarantee of the future performance of any American Century Investments portfolio. Statements regarding specific holdings represent personal views and compensation has not been received in connection with such views. This information is for an educational purpose only and is not intended to serve as investment advice. The information is not intended as a personalized recommendation or fiduciary advice and should not be relied upon for investment, accounting, legal or tax advice. International investing involves special risk considerations, including economic and political conditions, inflation rates and currency fluctuations. The Morgan Stanley EAFE (Europe, Australasia, Far East) Index is a widely followed group of stocks from 20 developed market countries. It is not an investment product available for purchase. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. |
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