In the second quarter of 2025, the Longleaf Partners International Fund demonstrated remarkable resilience and strategic acumen, achieving a robust 14.89% return. This impressive performance notably outpaced its benchmark index, which recorded a 12.63% return. This success is particularly significant given the quarter's challenging start, marked by a global market sell-off triggered by new US administrative tariffs and heightened geopolitical uncertainties.

Longleaf Partners International Fund's Strategic Triumph in a Turbulent Quarter

During the second quarter of 2025, the Longleaf Partners International Fund navigated a turbulent global economic landscape with impressive skill, recording a substantial 14.89% return. This performance, which notably exceeded the FTSE Developed ex North America Index's 12.63%, underscores the fund's robust investment philosophy amidst widespread market volatility. The quarter commenced with significant global jitters, primarily fueled by the United States’ imposition of unprecedented tariffs on its key trading partners. This decision sent shockwaves through equity and fixed income markets, concurrently weakening the US dollar to levels not seen in decades.

Despite these macro-economic headwinds, compounded by ongoing geopolitical tensions spanning regions from India and Pakistan to Israel and Iran, alongside the protracted Russia-Ukraine conflict, the fund's diversified portfolio demonstrated remarkable strength. The fund's success stemmed from its unwavering commitment to bottom-up, concentrated, and fundamental-driven investments. This approach allowed the fund to capitalize on specific company performance, rather than being swayed by broad market sentiment or fleeting thematic trends. The fund's management adeptly seized opportunities presented by market dislocations, initiating three new investments—two in burgeoning Asian markets and one in Europe—while strategically exiting positions in companies like Naver and Louis Hachette. This agility enabled the fund to shed underperforming assets and reinvest in more promising ventures.

Key contributors to this quarter's stellar performance included Glanbia, an Irish sports nutrition powerhouse, which rebounded significantly from a challenging first quarter. The market's initial overreaction to Glanbia's input costs proved temporary, with improved Q1 results and declining whey prices bolstering investor confidence. French laboratory testing giant Eurofins also played a crucial role, benefiting from a more rational market assessment and proactive self-help measures, including accelerated share buybacks. Another standout was Canal+, the French pay-TV operator, whose unique assets and strong operational management were increasingly recognized by the market, particularly as its strategic acquisition of MultiChoice Group progressed.

Furthermore, Melco Resorts, a Macau casino operator, showcased a strong comeback, marked by increased market share and strategic share buybacks. The UK-based sports betting and online casino firm, Entain, also contributed positively, having successfully navigated regulatory challenges and implemented a turnaround strategy that began yielding tangible results in its key markets. In line with its dynamic strategy, the fund initiated new positions in Koninklijke Philips, a Dutch medical equipment manufacturer, betting on its operational turnaround post-supply chain disruptions and regulatory challenges. It also invested in Treasury Wine Estates, an Australia-listed global wine leader, and Medley, Japan's premier online HR platform for medical staff, both identified as undervalued high-quality franchises.

The fund's strategic exits from Naver, the dominant South Korean search and e-commerce platform, and Louis Hachette, a Vivendi spin-off, demonstrate a disciplined approach to portfolio management, reallocating capital to opportunities with greater intrinsic value. The Longleaf Partners International Fund's proactive management and focus on fundamental value have positioned it strongly for future growth, regardless of broader market fluctuations.

This quarter's performance by the Longleaf Partners International Fund offers a compelling lesson for investors: in an increasingly interconnected yet volatile global economy, a disciplined, fundamentals-driven investment strategy can yield exceptional results. While macro-economic and geopolitical events can undoubtedly create short-term market disruptions, the true value of an investment lies in the underlying strength and resilience of individual businesses. This report highlights the importance of thorough due diligence and an unshakeable conviction in one's investment thesis, allowing fund managers to identify and capitalize on opportunities that others might overlook due to transient market noise. It serves as a reminder that patience and a long-term perspective are vital in navigating complex market cycles, ultimately leading to significant value creation for investors.