The International Growth fund returned -4.1% in February, compared with the benchmark index which rose +1.8%.

Developed market equities rose 0.8% in February, with Europe +3.7% and Japan +10.4%, as performance continued to broaden beyond the US. The US S&P 500 fell 0.9%, despite a strong US earnings season. The US saw 73% of companies beat profit expectations and earnings growth accelerating to 14%, marking a fifth consecutive quarter of double-digit growth. Despite this, AI remained a key source of volatility in US equities. Investors are weighing the returns on AI investments against the risk that AI tools could disrupt a range of sectors. Software was particularly impacted amid concerns about the durability of “software-as-a-service” business models. Wealth management came under pressure, and concerns about private credit managers’ software exposure added to broader weakness in the financial sector. Capital rotated into asset-heavy sectors expected to benefit from the AI infrastructure build-out, with materials, utilities and energy emerging as the top performers.

After three months of negotiations, Netflix (+15%) announced it would withdraw its bid to acquire Warner Brothers Discovery. While Warner Brothers possesses irreplaceable titles such as Harry Potter and Friends, the deal would have required Netflix to take on additional debt and navigate cultural and administrative challenges in the merger. Without the acquisition, Netflix can now invest its strong cash flow into growth areas like foreign-language content, live events, and gaming.

Icon’s (-40%) shares declined as the market reacted to AI disruption concerns for clinical research organisations and an internal investigation into accounting practices from 2023–2024 under the previous management. While the financial impact of the investigation is estimated at less than 2% of revenues, the announcement, plus the withdrawal of 2025 earnings guidance led to a sharp 30% single-day drop. This is particularly disappointing given we have held Icon in the portfolio since 2008, during which time the company grew revenue and profits ninefold. In response, we have halved our position pending further clarity. Despite the current cloud over the stock, Icon remains well-positioned to benefit from a recovery in biopharma clinical trial spending, supported by several new customer partnerships secured in recent years. We believe the investor reaction is disproportionate to the size of the revenue restatement. This has created a compelling opportunity, and the stock has since recovered 35% from its lows.