In 2024, several companies in our Comgest Pan Europe Equity portfolio encountered challenges due to weak consumer spending in China. Despite this headwind, growth drivers, including healthcare, digitalisation and artificial intelligence provided significant tailwinds for our strategy. By focusing on resilient performance in the face of macroeconomic uncertainties, our investment approach aims to harness these underlying growth trends.

The US stock market has become increasingly dominated by just a handful of stocks, driven by the rapid rise of artificial intelligence. This concentration raises questions about diversification and whether this narrow collection of companies can continue to outperform in the future. At Comgest, we go beyond index performance to offer investors exposure to leading quality growth companies that benefit from long-term growth trends.

In 2011, it was revealed that Olympus, the Japanese optics manufacturer, was involved in a $1.7 billion fraud, one of the largest and longest in corporate history. The company's CEO, Michael Woodford, was among the first to raise the alarm and was dismissed after just two weeks in the role. Although Comgest did not hold Olympus in 2011, we believe the lessons learned from this scandal can guide future investment decisions.

Around the world, people are living longer. As societies age, the demand for healthcare services is likely to grow. That’s why we view European medical devices, pharmaceutical products and healthcare technology as promising long-term investment opportunities.

Smaller companies have underperformed in recent years as large-cap companies have recorded outsized returns. Despite this trend, we believe that there are several examples of smaller companies in Europe that possess the right mix of quality characteristics and growth drivers to potentially deliver substantial returns over the long run. At Comgest, we aim to build our portfolios with quality companies with enduring competitive advantages, irrespective of their size or market capitalisation.

At Comgest, we see the parallels between surfing and our own quality growth investment approach. Just as experienced surfers may wait hours before paddling out into the water and selecting a wave, we typically conduct years of fundamental research to determine whether a company meets our quality growth criteria. Liudmila Strakodonskaya, ESG Analyst, and Xing Xu, ESG Analyst / Portfolio Manager, detail how environmental, social and governance (ESG) factors fit into our research, investment selection and portfolio management process, spanning from India to the United States.