Our global opportunities strategy is a blend of Causeway’s best skill sets, combining our global value (bottom-up, fundamental, developed markets) and emerging markets (quantitatively managed with a targeted tracking error of 5%) equity strategies. Our quantitative research team developed a multi-factor model that gauges the relative attractiveness of emerging markets, and guides the portfolio managers in tactically allocating between the developed and emerging portfolio segments.

Our developed markets exposure aims to add value through intensive fundamental research implemented via a disciplined value approach. Our emerging markets exposure is the result of a quantitative strategy tailored to the unique growth, momentum, and risk characteristics of developing markets. Our proprietary tactical allocation model is designed to add additional value.

The Causeway Global Opportunities portfolio is a fully invested, 105-175 stock portfolio. Allocation between developed and emerging markets is typically within +/-5 percentage points of the allocation of the MSCI All Country World Index, but is scalable to clients’ desired parameters.

Inception Date 02/28/2011

Fuelled by additional doses of quantitative easing, the first two months of calendar 2012 proved to be a complete reversal of the latter half of 2011 (especially the July through October 2011 period). The euphoria waned in March, however, as investors rotated out of cyclical stocks to more economically-defensive holdings. Despite these shifts, and due primarily to superior stock selection, the Portfolio outperformed the MSCI All Country World Index (ACWI) this quarter. The top performing markets in ACWI included Egypt, Turkey, Hungary, Philippines, and Thailand. The biggest laggards included Spain, Portugal, Morocco, Canada, and the United Kingdom. Top performing sectors in ACWI included the following economically cyclical sectors: information technology, financials, consumer discretionary, industrials, and materials, while four of the five biggest laggards were traditional defensives: telecommunication services, utilities, consumer staples and health care as well as energy. Relative performance was strengthened by portfolio holdings in the transportation, health care equipment & services, energy, commercial & professional services, and banks industry groups. Meanwhile, holdings in the consumer services, software & services, and consumer durables & apparel industry groups as well as an underweight to diversified financials and technology hardware & equipment industry groups detracted from relative performance.

Equity investors returned to emerging markets in the first quarter of 2012. Easing liquidity conditions by central banks globally drove the rally, strongest in January and February. Every emerging market posted positive returns for the period, led by the Middle East and Eastern Europe. Egypt was the top performing market, rebounding over 40% after losing nearly half of its value in 2011 amid political turmoil. Indonesia was among the weakest performers for the period. Investors likely are recognizing the economy’s rising inflationary pressures. The information technology and industrials sectors delivered the greatest gains for the quarter, as production cycles showed signs of recovery. Telecommunications stocks failed to keep pace, dragged down by Asian-domiciled integrated operators. Largely due to stock selection, Causeway Emerging Markets Composite outperformed the MSCI Emerging Markets Index (the “Index”) for the quarter.

We use a quantitative investment process to select stocks for the Fund, analyzing both “bottom-up” and “top-down” factors. Our bottom-up criteria, currently 75% of our model weight, place considerable emphasis on a company’s specific valuation characteristics and factors indicating superior earning growth. Our top-down criteria evaluate a company’s country, sector, and macroeconomic factors. Outperformance for the first quarter 2012 was driven by positive performance from our bottom-up valuation factors, as well as by a positive contribution from our top-down country and sector factors. Our top-down macroeconomic factors partially offset this relative outperformance. 

Gains from stock selection in Taiwan, South Africa, and China boosted relative performance for the period, partially offset by negative stock selection in South Korea, Russia, and Turkey. From an industry group perspective, relative outperformance was driven by stock selection in the materials, telecommunication services, and automobiles & components industry groups, partially offset by weak relative performance from portfolio holdings in the diversified financials industry group, and underweights to the food beverage & tobacco and household & personal products industry groups. *

*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.