Navigating Emerging Markets: First Eagle Overseas Fund's Q3 2025 Strategy Amid Global Macroeconomic Shifts

The third quarter of 2025 marked a pivotal moment for emerging markets, as the MSCI Emerging Markets Index (Net) surged 10.64%, driven by a confluence of factors including AI-driven demand, improved investor sentiment, and structural shifts in global supply chains, according to an Allspring commentary. For the First Eagle Overseas Fund, which allocates 17.38% of its portfolio to emerging markets as of September 30, 2025, this environment presented both opportunities and challenges. While direct performance data for the fund remains undisclosed, insights from peer funds and broader market dynamics offer a lens to assess its strategic positioning.

A Sectoral and Regional Breakdown

The Allspring Emerging Markets Equity Advantage Fund, a comparable vehicle, outperformed its benchmark in Q3 2025, with communication services, information technology (IT), and consumer discretionary sectors as key contributors, as noted in the Allspring commentary. These sectors align with the fund's broader international equity allocation of 65.09%, suggesting a strategic tilt toward high-growth industries. Conversely, utilities, real estate, and materials lagged, reflecting the fund's cautious stance on capital-intensive sectors amid rising interest rates.

Regionally, India, Taiwan, and China/Hong Kong bolstered returns for the Allspring fund, with China/Hong Kong benefiting from robust retail inflows and AI optimism. First Eagle's 17.38% emerging markets exposure likely mirrors these regional dynamics, though its diversified portfolio-spanning 65.09% international equities-may temper volatility compared to more concentrated strategies. The inclusion of ADNOC Logistics & Services in the MSCI Emerging Markets Index, effective November 25, 2025, could further enhance liquidity in the fund's emerging markets holdings, attracting over $200 million in passive capital, according to a Zawya report.

Macroeconomic Headwinds and Strategic Adjustments

Global macroeconomic shifts, including tariff-related costs and geopolitical tensions, have complicated emerging markets exposure. Axcelis Technologies, a semiconductor equipment provider, reported Q3 2025 revenue of $214 million, driven by AI demand but tempered by declining China revenue and anticipated tariff impacts in 2026, as outlined in the Axcelis earnings highlights. These trends underscore the dual-edged nature of emerging markets: while AI and technology transitions create growth opportunities, trade barriers and supply chain reconfigurations introduce risks.

First Eagle's strategy appears to balance these dynamics. Its 14.14% allocation to gold-related investments (per the fund's page) suggests a hedge against currency volatility and inflation, while its emphasis on international equities (65.09%) reflects confidence in long-term structural trends. The fund's underperformance relative to the MSCI Emerging Markets Index - illustrated by an Allspring equity fund 10.34% return versus the index's 10.64% - highlights the challenges of navigating a fragmented market landscape, as discussed in an Allspring equity fund commentary. Yet its 12-month outperformance indicates a focus on compounding gains from resilient sectors and regions.

Looking Ahead: A Nuanced Outlook

As the fund navigates Q4 2025, its positioning will likely hinge on three factors:
1. AI and Technology Momentum: Continued strength in China, South Korea, and Taiwan could drive returns, particularly if retail investor sentiment remains buoyant.
2. Tariff and Trade Dynamics: Companies like Axcelis, which are adapting to tariff pressures by optimizing global manufacturing footprints, may signal broader strategic shifts in emerging markets.
3. Index Rebalancing: The inclusion of ADNOC L&S in the MSCI Emerging Markets Index could enhance liquidity and diversification for funds with emerging markets exposure.

For investors, the First Eagle Overseas Fund's 17.38% emerging markets allocation represents a measured bet on a sector poised for both disruption and growth. While macroeconomic headwinds persist, the fund's diversified approach-spanning 65.09% international equities and 14.14% gold-related assets-positions it to weather volatility while capitalizing on long-term trends.