Combining our time-tested abilities in developed and emerging international markets

The Causeway International Opportunities strategy is a blend of Causeway’s best skills, combining our international value (bottom-up, fundamental, developed international markets, excluding the US) and emerging markets (quantitatively managed with a targeted tracking error of 5%) equity strategies. Tracking error is a measurement of dispersion from a benchmark index. Our quantitative research team developed a proprietary multi-factor model that measures the relative attractiveness of emerging markets, and guides the portfolio managers in tactically allocating between the developed and emerging portfolio segments.

Benchmark
MSCI ACWI ex US
Inception
June 30, 2007

Strategy overview

The portfolio managers discuss our International Opportunities strategy.

Portfolio managers

Chief Executive Officer
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.0%6.4%-9.8%5.9%1.0%8.0%2.9%
Strategy (net) -4.1%6.2%-10.1%5.6%0.6%7.6%2.5%
MSCI ACWI ex US -2.7%7.5%-5.8%7.2%1.8%6.3%1.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.0%6.4%-9.8%5.9%1.0%8.0%2.9%
Strategy (net) -4.1%6.2%-10.1%5.6%0.6%7.6%2.5%
MSCI ACWI ex US -2.7%7.5%-5.8%7.2%1.8%6.3%1.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 10.8%10.8%-6.9%8.1%2.4%11.4%3.3%
Strategy (net) 10.7%10.7%-7.3%7.8%2.0%11.0%2.9%
MSCI ACWI ex US 10.4%10.4%-3.7%8.6%3.0%9.3%1.9%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 10.8%10.8%-6.9%8.1%2.4%11.4%3.3%
Strategy (net) 10.7%10.7%-7.3%7.8%2.0%11.0%2.9%
MSCI ACWI ex US 10.4%10.4%-3.7%8.6%3.0%9.3%1.9%
Fund 20182017201620152014201320122011
Strategy (gross) -18.0%31.8%2.2%-4.3%-4.1%21.7%25.9%-11.9%
Strategy (net) -18.7%30.8%1.4%-5.1%-4.8%20.8%24.9%-12.6%
MSCI ACWI ex US -13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%
Strategy (gross)
Strategy (net)
MSCI ACWI ex US
20182017201620152014201320122011
-18.0%31.8%2.2%-4.3%-4.1%21.7%25.9%-11.9%
-18.7%30.8%1.4%-5.1%-4.8%20.8%24.9%-12.6%
-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%

Portfolio (as of May 31, 2019)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 93.6%
Cash 6.4%
Strategy Characteristics
Strategy Benchmark
No. of holdings 203 2210
Weighted avg. market cap (US $MM) $49,595 $48,514
FY2 price/earnings 9.3 11.9
Price/book value 1.2 1.6
Dividend yield (%) 4.0 3.3
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 3.8%
Takeda Pharmaceutical Co., Ltd. Japan 3.1%
Linde Plc Germany 2.9%
UniCredit S.p.A. Italy 2.7%
KDDI Corp. Japan 2.6%
Prudential Plc United Kingdom 2.4%
ABB Ltd. Switzerland 2.4%
BASF SE Germany 2.3%
British American Tobacco plc United Kingdom 2.2%
AstraZeneca Plc United Kingdom 2.2%

A “weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. The FY2 P/E ratio is a forward P/E ratio using a next-twenty-four months EPS estimate in the denominator.

Holdings are subject to change.

SECTOR WEIGHTS
Sector Strategy Benchmark
Financials 20.6% 22.0%
Industrials 14.8% 11.8%
Materials 9.8% 7.5%
Health Care 9.2% 8.2%
Energy 9.2% 7.3%
Consumer Discretionary 8.5% 11.0%
Information Technology 7.4% 8.4%
Communication Services 6.2% 7.0%
Consumer Staples 5.0% 10.1%
Utilities 2.1% 3.3%
Real Estate 0.8% 3.3%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 27.1% 11.5%
Germany 11.9% 5.8%
Japan 11.8% 16.1%
China 7.6% 8.6%
Switzerland 7.4% 6.0%
Canada 5.3% 6.8%
South Korea 3.8% 3.4%
France 3.5% 7.6%
India 3.0% 2.4%
Italy 3.0% 1.6%
Regional Allocation
  • Europe – other 51.1%
  • Emerging Asia 17.5%
  • Pacific 12.3%
  • North America 7.1%
  • Emerging Latin America 3.0%
  • Emerging Europe, Middle East, Africa 2.7%

Commentary (As of April 30, 2019)

Highlights

  • Increasingly dovish commentary from the US Federal Reserve and the European Central Bank, along with progress on US-China trade negotiations, supported equity markets in March.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, banks, telecommunication services, materials, and automobiles & components industry groups detracted from relative performance. Holdings in the pharmaceuticals & biotechnology, food, beverage & tobacco, software & services, and media & entertainment industry groups, as well as an underweight position in the diversified financials industry group, offset some of the underperformance. The largest detractor was automobile manufacturer, Volkswagen AG (Germany). Additional notable detractors included banking & financial services company, UniCredit S.p.A. (Italy), banking & financial services company, Barclays PLC (United Kingdom), telecommunication services provider, KDDI Corp. (Japan), and jet engine manufacturer, Rolls-Royce Holdings plc (United Kingdom). The top contributor to return was British American Tobacco plc (United Kingdom). Other notable contributors included pharmaceutical & consumer healthcare products producer, Novartis AG (Switzerland), Takeda Pharmaceutical Co., Ltd. (Japan), business software & services provider, SAP SE (Germany), and mail, express & logistics services provider, Deutsche Post AG (Germany).

Investment outlook

With abundant liquidity underpinning the demand for investable assets, long duration equities responded favorably to the dovish policy indications from the Fed. Investors appear indifferent to valuation, focusing instead on growth and the promise of earnings and cash flow further into the future. Money remains cheap, facilitating more public and private sector financial leverage. As investors are willing to pay sizable valuation multiples for growth, companies that must restructure operationally to expand earnings are having a tough time attracting investor interest. We are most interested in undervalued stocks, often in cyclical industries, with managements committed to streamlining operations. We prefer companies that reward shareholders with generous dividend payments and/or share buybacks. We believe these efforts to boost profitability through cost savings and revenue enhancements should position these companies well in times of leaner global growth. We recognize style investing is cyclical and believe the value characteristics currently embedded in client portfolios should prove effective if growth does not meet lofty market expectations.

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the portfolio holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. The securities identified and described above do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Past performance does not guarantee future results. For a description of our performance attribution methodology, or to obtain a list showing every holding's contribution to the overall account's performance during the quarter, please contact our product manager, Kevin Moutes, at 310-231-6116 or moutes@causewaycap.com.