International Opportunity Fund Commentary – Q4 2024
We hope you had a wonderful end to 2024 and wish all our readers a very Happy New Year. Reflecting on the past twelve months, we are proud to celebrate a period of remarkable growth and success—not only for Hood River as a firm but also for the International Opportunity Fund.
One of the standout achievements of 2024 came at the close of the third quarter when our fund reached its critical three-year milestone. This milestone is essential for attracting new investors, and true to Hood River’s standards, we exceeded expectations. The fund’s institutional share class achieved top-percentile performance, among 128 funds in the Morningstar Foreign Small/Mid Growth category based on total returns for the calendar year ending 12/31/24. While we took a moment to celebrate this success, our team quickly refocused, delivering equally strong performance in the fourth quarter. This momentum underscores our unwavering commitment to navigating the dynamic landscape of international small and mid-cap markets.
At the end of the fourth quarter, the Hood River International Opportunity Fund institutional share class outperformed its MSCI All Country World ex USA Small Cap Index by an impressive +9.56%, achieving a return of +1.90% compared to the benchmark’s -7.66% for the quarter. Stock selection played a pivotal role, contributing +884 basis points (“bps”) to relative returns for the quarter and +2,183bps over the past year. The top-performing sectors during the quarter included consumer discretionary (+1.98%), industrials (+1.38%), and financials (+1.29%). While no sectors detracted from relative performance this quarter, materials, industrials, and consumer staples modestly impacted total returns over the last three months. Strong contributions from both developed and emerging markets further bolstered relative performance, with developed countries adding +758bps and emerging markets contributing +218bps.
Our approach remains centered on identifying opportunities through rigorous bottom-up analysis and proprietary research. At the same time, we closely monitor broader market trends, risks, and valuation shifts that influence our investment landscape. Looking ahead to 2025, we anticipate a year shaped by shifting dynamics and a mix of challenges and opportunities.
In the eurozone, slow economic growth persists, led by Germany’s stagnation, fiscal challenges in France, and potential U.S. tariff impacts. While a weaker euro and higher borrowing costs present hurdles, attractive valuations and potential European Central Bank support offer opportunities for selective stock pickers. In the UK, issues such as low productivity, labor shortages, and stubborn inflation limit the Bank of England’s flexibility, though the region is less affected by U.S. tariffs compared to the eurozone. Meanwhile, Japan’s economy continues to show resilience, with inflation near the Bank of Japan’s 2% target and gradual policy adjustments underway. Japanese equities remain attractive after a brief stumble later in the year, additionally, the undervalued yen may be poised to gain strength as global interest rate spreads narrow.
Emerging markets continue to present a wealth of opportunities, maintaining a strong presence in our portfolio. China’s positive momentum has bolstered Indian equities, even amid recent local challenges in manufacturing and consumer spending. Key industries such as financials, consumers, and automotive are particularly well positioned to capitalize on forthcoming policy changes and technological advancements. We see regulatory reforms, fiscal shifts, and trade agreements driving significant growth potential across these industries. Lastly, valuations within emerging markets remain highly attractive, reflecting a strengthened position relative to the US market compared to years past.
We consistently seek to identify opportunities that align with our deep fundamental research on similar domestic names, leveraging our expertise to uncover value in niche markets. Just Group PLC (JUST LN) is one such opportunity, a UK-based life insurance company specializing in the retirement income market and catering to both retail and corporate clientele. The company has carved out a strong presence in the lower to mid-tier segments, addressing specific market needs with tailored solutions. By continuing to win new business and expand its asset base, Just Group drives robust revenue growth and profitability, solidifying its position as a key player in this specialized market.
Artificial intelligence (“AI”) remains a key focus in our portfolio, with success driven by investments in critical infrastructure supporting its growth and adoption, such as data centers, natural gas, gas turbines, and grid infrastructure. Nebius (NBIS) is a direct AI datacenter play, based in the Netherlands. It follows a model similar to Coreweave in the U.S., providing global AI producers with essential resources, including an AI-centric cloud platform, large-scale GPU (graphic processing unit) clusters, cloud services, and developer tools, while also supporting areas like data for AI development, education and re-skilling for tech careers, and autonomous driving technology. After initiating a position in the business, we were pleased to see Nvidia invest in early December, further reinforcing our thesis and validating the company’s promising trajectory.
While challenges remain—such as potential vulnerabilities tied to U.S. policies and tariffs later in 2025—our outlook remains optimistic. Promising earnings growth across regions and industries should allow us to capitalize on divergences between market expectations and our estimates. With U.S. valuations in the top historical decile, international markets offer compelling opportunities for active management, combining similar growth prospects with significantly lower costs.
At Hood River, we recognize that success requires constant evolution. The international market is always in motion, and so are we. As we enter 2025, our team remains deeply engaged, refining our portfolio and aiming to deliver the results our investors have come to expect. Here’s to building on our mutual success in the year ahead!
Rohan Kumar, Lance Cannon, Brian Smoluch & David Swank
International Opportunity Fund Performance as of 12/31/24 | 1 Year | 3 Year | Since Inception |
HR International Opportunity Fund (Inst) | 20.19% | 5.22% | 5.54% |
MSCI All Country World ex US Small Cap Index | 3.36% | -1.47% | -1.32% |
Institutional Share Class inception date: 9/28/21 |
|
|
|
Performance quoted represents past performance for the Fund’s institutional class shares and there is no guarantee of future results. The investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted above. Please call 800-497-2960 to obtain current and the most recent month-end performance data. The gross expense ratio: 5.49%; net expense ratio (contractual through 11/30/25): 1.23%. Performance for periods over one year are annualized. Performance would have been lower without limitations in effect.
Investment Considerations:
All investing includes risk, including the loss of principal. The Fund invests in small-cap securities which present a greater risk of loss than large-cap securities, and in growth companies which can be more sensitive to the company’s earnings and more volatile than the stock market in general. The Fund also invests in foreign securities which are subject to risks including currency fluctuations, economic and political change and differing accounting standards. The Fund may invest in derivatives and IPOs, which are highly volatile. Additional risk information may be found in the prospectus.
Fund holdings are subject to change at any time and are not recommendations to buy or sell any security. Click here for the funds top ten holdings. Current and future holdings are subject to risk. Earnings growth is not representative of the fund’s future performance. Basis point is defined as a unit of measurement used to describe a percentage change in a financial instrument’s value or rate. Spread is defined as the difference between two related values. All information in this report is as of December 31, 2024, unless otherwise indicated. The benchmark is the MSCI ACWI ex US Small-Cap Index, defined as a stock market index comprising of non-U.S. stocks from 22 of 23 developed markets and 26 emerging markets. The MSCI ACWI Ex-U.S. index is made up of 2,361 constituents, which is 85% of the global equity market aside from the U.S. Investors cannot directly invest in an index.
As of 12/31/24, the Hood River International Opportunity Fund, Institutional Shares, ranked in the top 1% among 128 Morningstar Foreign Small/Mid Growth category funds over 1 year, and the top 2% among 119 funds over 3 years, based on total returns. Rankings for other share classes may differ.
Morningstar Rankings represent a fund’s total return percentile rank relative to all funds in the same Morningstar Category for the same time period. The highest (or most favorable) percentile rank is 1%, and the lowest (or least favorable) percentile rank is 100%. It is based on Morningstar total return, which includes both income and capital gains or losses and is not adjusted for sales charges or redemption fees.
©2025 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Investors should carefully consider the Fund’s investment objective, risks, charges, and expenses before investing. For a prospectus, which contains this and other important information about the Fund, please call 800-497-2960. Please read the prospectus carefully before investing or sending money.
The Hood River International Opportunity Fund is distributed by Quasar Distributors, LLC. Hood River Capital Management LLC serves as the advisor to the Hood River International Opportunity Fund.
NOT FDIC INSURED-NO BANK GUARANTEE-MAY LOSE VALUE