Invesco exited ARM, RELX, and eight other names in Q2 on AI disruption fears and risk/reward shifts. The fund beat peers but lagged the MSCI ACWI ex-US Growth Index.
Invesco International Growth Fund posted a positive return in the second quarter but lagged the MSCI ACWI ex-US Growth Index, according to the fund's quarterly commentary. The fund did outperform the Morningstar Foreign Large Growth peer group average.
Global equities rallied through the quarter as investors looked past inflation and geopolitical headlines, focusing instead on resilient earnings and artificial intelligence spending, the fund's managers wrote.
The fund's managers cut 10 positions entirely during the period, including ARM Holdings, RELX, and EPAM Systems. The exits reflected concerns about AI-related disruption to existing business models or a shift in the risk/reward calculus for those names, the commentary said.
ARM (ARM) left the portfolio on worries that its licensing-based model faces structural pressure as custom chip designs proliferate. ARM's Alpha Score sits at 37/100, labeled Mixed, according to AlphaScala data. The stock page for ARM can be found at /stocks/arm.
RELX (RELX) was sold on a deteriorating risk/reward profile, the fund said. RELX carries an Alpha Score of 41/100, also labeled Mixed, per AlphaScala. The stock page is /stocks/relx.
EPAM Systems exited as the fund's managers questioned whether the IT services firm can sustain margins in an environment where clients are deploying AI tools to automate legacy development work.
The fund maintained a significant overweight in semiconductor names tied to AI infrastructure, including TSMC and ASML, and added to positions in financials and materials where stock selection added value versus the benchmark.
The underperformance versus the MSCI ACWI ex-US Growth Index was concentrated in information technology and industrials, where both overweight positions and stock picks detracted, the commentary said.
MSCI Inc. (MSCI), the index provider, has an Alpha Score of 46/100, labeled Mixed, in the Financial Services sector. The stock page for MSCI is /stocks/msci.
The fund's managers said they continue to look for companies with pricing power, recurring revenue, and exposure to structural growth themes beyond AI, including healthcare innovation and industrial automation.
A full list of portfolio changes was included in the fund's quarterly filing with the SEC.
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