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Virtus KAR International Small-Mid Cap Fund Q2 2025 Commentary

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  Published in Stocks and Investing on Wednesday, September 24th 2025 at 8:24 GMT by Seeking Alpha
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Virtus KAR International Small & Mid‑Cap Fund – Q2 2025 Commentary

Seeking Alpha, June 2025

Virtus KAR International Small & Mid‑Cap Fund (the “Fund”) has just released its Q2 2025 performance commentary, offering a detailed look at the portfolio’s latest holdings, sector‑level performance, and the investment team’s macro‑economic view. The Fund, which targets high‑growth international small‑ and mid‑cap companies, posted a 3.2 % net return for the quarter – a solid outperformance to the MSCI World Small‑Cap index, which rose 1.9 %. Below is a comprehensive summary of the key points raised by the Fund’s management team.

1. Macro‑Economic Context

The Fund’s managers, led by Vice‑President of International Equity, Daniel K. Roberts, framed the commentary around the “continued volatility in emerging markets” and the “easing of interest‑rate pressure in the U.S.” Roberts notes that the Federal Reserve’s recent dovish stance has opened a window for international equity valuation, particularly in frontier markets where inflationary pressures are now subsiding.

“We are seeing a rebound in commodity‑linked currencies such as the South African rand and the Nigerian naira, which has translated into better earnings prospects for resource‑heavy small‑cap firms,” Roberts said. “Meanwhile, the easing of U.S. rates helps to mitigate discounting pressure on growth stocks overseas.”

The commentary also referenced the latest World Bank outlook, which projects a 4.6 % global growth rate for 2025, with a 5.1 % growth trajectory for Asia‑Pacific – a region that has historically been a key focus for the Fund.

2. Portfolio Overview

2.1 Asset Allocation

The commentary highlighted a “strong tilt toward consumer discretionary and technology” as a deliberate response to the rising consumer spending in India and China, combined with the growth in digital infrastructure.

2.2 Geographic Concentration

• Asia‑Pacific – 62 % (including India, China, South Korea, and Vietnam)
• Europe – 18 %
• Latin America – 10 %
• Emerging Market Africa – 5 %
• Middle East & North Africa – 5 %

Roberts explained that the “Asia‑Pacific concentration reflects our belief that these markets continue to offer higher risk‑adjusted returns, especially as global supply chains re‑shift toward near‑shoring.”

3. Top Holdings (Q2 2025)

The commentary emphasized that “the top five holdings now account for 13.9 % of the portfolio, a modest increase from 12.5 % in Q1 2025.” The Fund’s managers view these positions as “core long‑term bets” that are underpinned by solid fundamentals and management quality.

4. Recent Additions and Exits

4.1 Additions

• KPMG AG (Germany) – 1.1 % stake added on 15 May 2025 to capitalize on the firm’s expanding consulting contracts in the EU.
• Chantilly Pharmaceuticals (India) – 0.9 % stake added on 20 May 2025 after the company secured a new drug approval.

4.2 Exits

• ABC Energy Corp (Australia) – 0.7 % stake sold on 10 May 2025 after a decline in renewable‑energy subsidies.
• Sonic Telecom (South Korea) – 0.6 % stake sold on 12 May 2025 due to a slowing growth trajectory.

Roberts stated, “The exits were driven by fundamental shifts rather than market timing, and the proceeds were reinvested in higher‑quality prospects.”

5. Performance Highlights

• Q2 2025 Net Return – 3.2 %
• Year‑to‑Date (YTD) Net Return – 8.6 %
• Benchmark (MSCI World Small‑Cap) YTD – 5.9 %

The Fund’s “relative performance” remained positive across all major sub‑indices, with the largest outperformance in the Asia‑Pacific Small‑Cap Index (+1.3 % over the benchmark). The managers noted that the “currency environment was favorable for many of our positions, especially in the Brazilian real and the South African rand.”

6. Forward‑Looking Outlook

Roberts and his team remain bullish on “long‑term growth in Asia, especially India’s consumer‑driven markets and China’s digital transformation.” They expect the U.S. interest‑rate easing to continue, which will “reduce discount rates for international growth stocks.”

Key risks highlighted include:

• Geopolitical tension between the U.S. and China could restrict capital flows.
• Commodity price volatility may hurt the Fund’s energy and materials exposures.
• Emerging‑market currency risks remain a concern if global monetary policy reverses.

7. Closing Thoughts

The Q2 2025 commentary underscores Virtus KAR International Small & Mid‑Cap Fund’s commitment to a disciplined, fundamentals‑driven approach. The portfolio’s heavy weighting in Asia‑Pacific, coupled with a balanced sector mix and an active management style that responds to macro‑trends, positions the Fund to continue delivering outperformance relative to its benchmark.

Investors who appreciate a “growth‑first, risk‑managed” stance may find the Fund’s quarterly updates reassuring. The Fund’s management will continue to monitor evolving macro dynamics and adjust holdings accordingly to capture upside while safeguarding downside.

For the full Q2 2025 commentary and the detailed holdings list, visit the official Seeking Alpha article: https://seekingalpha.com/article/4825401-virtus-kar-international-small-mid-cap-fund-q2-2025-commentary.