My most recent blog post discussed the amazing resurgence in international developed equity markets, including regions like Japan, the Eurozone, Canada, South Korea, and Australia. Through May 30, 2025, an index of equities domiciled in those countries (represented by the SCHF exchange-traded fund) generated year-to-date returns of +16.6% compared to +0.9% for the S&P 500 in the U.S. When we see something like this, we ask the question: What is driving this outperformance? Let’s examine some of the underlying factors worth considering.
This ETF is heavily weighted toward equities domiciled in Japan, the U.K., France, Canada, and other Eurozone countries, and is mostly allocated to the financial, industrial, and health care sectors. So, aside from a much lower allocation to the technology sector compared to the U.S. (9% versus 32%), this ETF is somewhat similar to U.S. exposures.
Just like the U.S. tech sector, with names like Microsoft, Amazon, Meta, and Nvidia driving equity markets over the past 5+ years, there are some notable individual stocks in this international space that have come alive over the past year.
The top 10 holdings of the ETF include SAP SE, a German software provider that is up +20% YTD; Nestlé, up 17%; Novartis, up +13%; Roche Holdings, up +9%; and HSBC, up +15%. Surprisingly, other large holdings—like ASML, Novo Nordisk, AstraZeneca, and Toyota—have delivered middling or negative performance this year, which has capped overall fund returns. Fortunately, this ETF is broadly diversified, so a few laggards only have a limited impact on total performance.
D&A is committed to globally diversified portfolio management, including exposure to international developed markets in most client portfolios. That said, we’re mindful of risk and prefer not to overweight these markets to the degree that some global benchmarks do. So, in years when international markets outperform significantly, D&A portfolios may lag slightly behind those naïve benchmarks—but that’s a tradeoff we accept in favor of balanced, risk-aware management.