Seeking value primarily in developed markets worldwide

The global value portfolio is constructed from an equity universe composed of companies with market capitalizations typically greater than $1 billion located throughout the global developed and emerging market countries. Through rigorous, bottom-up company analysis, we seek to identify undervalued stocks with upside potential. The investment process comprises three stages: quantitative screening and initial analysis, fundamental research and portfolio construction.

Benchmark
MSCI ACWI
Inception
September 30, 2001
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Strategy overview

The portfolio managers discuss our Global Value strategy.

Portfolio managers

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

Performance

QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.8%10.9%21.9%15.9%6.0%6.1%9.6%
Strategy (net) -4.8%10.6%21.4%15.4%5.5%5.6%9.0%
MSCI ACWI -3.0%7.2%11.1%7.2%8.0%7.4%7.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.8%10.9%21.9%15.9%6.0%6.1%9.6%
Strategy (net) -4.8%10.6%21.4%15.4%5.5%5.6%9.0%
MSCI ACWI -3.0%7.2%11.1%7.2%8.0%7.4%7.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -2.6%16.5%38.3%17.2%5.5%7.0%9.9%
Strategy (net) -2.7%16.2%37.7%16.6%5.0%6.5%9.3%
MSCI ACWI -3.3%10.5%21.4%7.4%7.0%8.1%7.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -2.6%16.5%38.3%17.2%5.5%7.0%9.9%
Strategy (net) -2.7%16.2%37.7%16.6%5.0%6.5%9.3%
MSCI ACWI -3.3%10.5%21.4%7.4%7.0%8.1%7.7%
Fund 20222021202020192018201720162015201420132012201120102009
Strategy (gross) -12.7%18.0%4.9%23.0%-10.0%18.8%8.7%-5.4%7.1%31.8%18.3%-0.2%19.8%41.7%
Strategy (net) -13.1%17.4%4.4%22.4%-10.4%18.3%8.2%-5.8%6.7%31.2%17.4%-1.1%18.8%40.5%
MSCI ACWI -18.0%19.0%16.8%27.3%-8.9%24.6%8.5%-1.8%4.7%23.4%16.8%-6.9%13.2%35.4%
Strategy (gross)
Strategy (net)
MSCI ACWI
20222021202020192018201720162015201420132012201120102009
-12.7%18.0%4.9%23.0%-10.0%18.8%8.7%-5.4%7.1%31.8%18.3%-0.2%19.8%41.7%
-13.1%17.4%4.4%22.4%-10.4%18.3%8.2%-5.8%6.7%31.2%17.4%-1.1%18.8%40.5%
-18.0%19.0%16.8%27.3%-8.9%24.6%8.5%-1.8%4.7%23.4%16.8%-6.9%13.2%35.4%

Portfolio (as of October 31, 2023)

Benchmark: MSCI ACWI
Asset Allocation
Strategy
Stocks 99.3%
Cash 0.7%
Strategy Characteristics
Strategy Benchmark
No. of holdings 55
Weighted avg. market cap (US $MM) $91,913 $0
FY2 price/earnings 11.3 0.0
Price/book value 1.6 0.0
Dividend yield (%) 2.3 0.0
TOP 10 HOLDINGS
Security Country Percent
Rolls-Royce Holdings Plc United Kingdom 5.1%
Samsung Electronics Co., Ltd. South Korea 4.2%
The Walt Disney Co. United States 3.0%
Alphabet, Inc. United States 2.9%
Fiserv, Inc. United States 2.5%
Genpact Ltd. United States 2.5%
Shell United Kingdom 2.4%
SAP SE Germany 2.4%
Murata Manufacturing Co. Ltd. Japan 2.4%
Barclays PLC United Kingdom 2.4%

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
Information Technology 22.9% 22.1%
Health Care 13.7% 11.7%
Industrials 11.5% 10.3%
Financials 11.5% 15.7%
Consumer Staples 8.9% 7.2%
Communication Services 8.6% 7.5%
Materials 6.5% 4.5%
Energy 6.1% 5.2%
Utilities 4.5% 2.7%
Consumer Discretionary 3.5% 11.0%
Real Estate 1.6% 2.3%
TOP 10 COUNTRIES
Country Strategy Benchmark
United States 45.6% 62.6%
United Kingdom 19.4% 3.7%
France 8.7% 2.9%
South Korea 5.7% 1.3%
Japan 4.3% 5.5%
Italy 3.7% 0.6%
Netherlands 3.5% 1.1%
Germany 3.3% 2.0%
Switzerland 2.2% 2.4%
Spain 1.3% 0.6%
Regional Allocation
  • North America 45.5%
  • Europe – other 42.0%
  • Pacific 10.1%
  • Emerging Asia 1.1%
  • Emerging Latin America 0.6%

Commentary (As of October 31, 2023)

Highlights

  • Global equities retreated for the 3rd consecutive month in October as investors digested the “higher for longer” interest rate backdrop.
  • Excluding Australia, major Developed Market central banks, including the US Federal Reserve Bank, The Bank of England, The European Central Bank and The Bank of Japan, voted to leave rates unchanged at their most recent meetings.
  • Our investment teams’ demands of company management—holding managements accountable to improve earnings and cash flow—should help drive portfolio ROE higher in the years ahead.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, technology hardware & equipment, and software & services industry groups detracted from relative performance. Holdings in the energy and utilities industry groups, as well as an underweight position in the automobiles & components industry group, offset some of the underperformance compared to the Index. The largest detractor was rolling stock, signaling, & services provider for the rail industry, Alstom SA (France). Additional notable detractors included banking & financial services company, Barclays PLC (United Kingdom), and pharmaceutical products & services company, Avantor, Inc.(United States). The top contributor to return was property & casualty insurer, The Allstate Corp. (United States). Other notable contributors included health food & beverage producer, Danone (France), and clinical laboratory, Quest Diagnostics, Inc. (United States).

Economic outlook

Excluding Australia, major Developed Market central banks, including the US Federal Reserve Bank, The Bank of England, The European Central Bank and The Bank of Japan, voted to leave rates unchanged at their most recent meetings. The global manufacturing output PMI slipped 0.9 points to 48.9 last month, a level consistent with a 0.5% annual rate contraction in factory output. The standout positive in the October PMIs was the US, with a rise in both the output (+0.5 points) and new orders (+1.4 points) indexes. However, China stepped down and the Euro area PMI remains stuck at a recessionary level.

According to JP Morgan, mainland China’s global PMI slipped to 48.8 likely reflecting the ongoing drags from the real estate sector and domestic demand weakness and raising questions about the resilience of the end-of-third quarter momentum.

Investment outlook

The era of cheap money is behind us, and at a minimum we are entering uncharted territory of public sector deficits and rising debt to GDP. We are careful to avoid making investment decisions based on the interest rate regime of the past 15-20 years. We expect an era of higher long term interest rates, even if global economic activity falters. Large budget deficits an overall public sector debt levels, the capital demands required to fund the transition to a low carbon global economy, along with the costs of ongoing armed conflict and aging demographics in the developed countries plus China, suggest that structurally higher long term interest rates will be required to attract capital.

The "higher for longer" theme, coupled with uncertainty about the path of economic activity, will likely result in continued volatility in global equity markets. Causeway's commitment to detailed and disciplined fundamental research aims to position the team well to identify mispriced securities in this dynamic environment on behalf of our clients.As central banks continue their efforts to control inflation, this will likely lead to an environment of greater equity volatility than in the past 10-15 years. We believe that active management produces superior performance versus passive management in volatile markets. And a greater focus on valuation now that money is not free should favor managers employing a disciplined, value oriented, long term investment approach. Though US stocks—with their overall higher returns on capital—generally deserve to trade at a premium to their non-US peers, the current valuation gaps far exceed long term averages.

Also, the major US indices have become relatively concentrated in a small number of expensive mega-cap stocks. For a passive investor mimicking a market capitalization weighted US index, this creates a level of concentration risk that should be of concern. Using our measure of predicted volatility, broad-based developed market value indices are currently less volatile than growth indices. At a minimum, investors should demand a higher return for owning riskier growth stocks and this is occurring right at the point when long duration (growth) equities are under strain from higher long term interest rates. Relative to history, the portfolio’s valuation characteristics indicate upside potential that, in our view, more than justifies the risk. We anticipate the portfolio’s below benchmark return on equity (ROE) will continue to improve as the earnings of some of the bigger holdings progress through the end of 2024. Our investment teams’ demands of company management—holding managements accountable to improve earnings and cash flow—should help drive portfolio ROE higher in the years ahead.

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 [email protected].