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
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Strategy overview

The portfolio managers discuss our International Opportunities strategy.

Portfolio managers

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

Performance

QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.7%-10.0%-10.5%4.0%4.3%5.9%3.6%
Strategy (net) -4.7%-10.1%-10.9%3.6%3.9%5.5%3.2%
MSCI ACWI ex US -6.2%-11.2%-9.9%4.8%5.4%5.5%2.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.7%-10.0%-10.5%4.0%4.3%5.9%3.6%
Strategy (net) -4.7%-10.1%-10.9%3.6%3.9%5.5%3.2%
MSCI ACWI ex US -6.2%-11.2%-9.9%4.8%5.4%5.5%2.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -5.6%-5.6%-4.5%6.5%5.8%6.1%3.9%
Strategy (net) -5.6%-5.6%-4.8%6.1%5.4%5.7%3.6%
MSCI ACWI ex US -5.3%-5.3%-1.0%8.0%7.3%6.0%3.1%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -5.6%-5.6%-4.5%6.5%5.8%6.1%3.9%
Strategy (net) -5.6%-5.6%-4.8%6.1%5.4%5.7%3.6%
MSCI ACWI ex US -5.3%-5.3%-1.0%8.0%7.3%6.0%3.1%
Fund 20212020201920182017201620152014201320122011
Strategy (gross) 8.0%6.5%23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
Strategy (net) 7.6%6.1%22.9%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
MSCI ACWI ex US 8.3%11.1%22.1%-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%
Strategy (gross)
Strategy (net)
MSCI ACWI ex US
20212020201920182017201620152014201320122011
8.0%6.5%23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
7.6%6.1%22.9%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
8.3%11.1%22.1%-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%

Portfolio (as of April 30, 2022)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 98.8%
Cash 1.2%
Strategy Characteristics
Strategy Benchmark
No. of holdings 190 2311
Weighted avg. market cap (US $MM) $70,878 $69,234
FY2 price/earnings 9.2 12.0
Price/book value 1.4 1.8
Dividend yield (%) 3.3 2.9
TOP 10 HOLDINGS
Security Country Percent
Rolls-Royce Holdings Plc United Kingdom 2.6%
Novartis AG Switzerland 2.5%
TotalEnergies SE France 2.4%
UniCredit S.p.A. Italy 2.4%
Amadeus IT Group SA Spain 2.4%
FANUC Corp. Japan 2.3%
Enel SpA Italy 2.3%
SAP SE Germany 2.1%
AstraZeneca Plc United Kingdom 2.1%
Shell United Kingdom 2.0%

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 21.1% 20.4%
Industrials 15.8% 12.0%
Health Care 13.3% 9.6%
Information Technology 12.5% 11.5%
Consumer Staples 9.3% 8.8%
Energy 8.5% 5.7%
Consumer Discretionary 5.9% 11.0%
Materials 5.1% 8.8%
Utilities 4.6% 3.3%
Communication Services 1.5% 6.3%
Equity Funds 1.1% 0.0%
Real Estate 0.0% 2.5%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 21.8% 9.9%
France 12.3% 7.2%
China 7.9% 8.8%
Switzerland 6.5% 6.6%
Spain 6.0% 1.5%
Germany 6.0% 5.1%
Japan 5.9% 13.7%
Taiwan 5.0% 4.5%
Italy 4.7% 1.5%
South Korea 4.6% 3.6%
Regional Allocation
  • Europe – other 63.0%
  • Emerging Asia 22.9%
  • Pacific 5.9%
  • Emerging Europe, Middle East, Africa 3.0%
  • Emerging Latin America 2.1%
  • North America 1.8%

Commentary (As of April 30, 2022)

Highlights

  • Global equities fell in April as the prospect of tighter global monetary policy, the war in Ukraine, and additional Covid-related lockdowns in China all weighed on sentiment. As market participants anticipate higher interest rates, growth stocks—those with the loftiest valuations—have seen greater losses relative to value peers in the year-to-date period.
  • Except for China, central banks globally are aiming to tighten monetary policy amid inflation that is substantially above-target without tipping their respective economies into recession. However, continuing supply chain bottlenecks, energy and labor shortages, and elevated consumer demand may make inflation difficult to contain in the short term.
  • We seek to add, in our view, high-quality, competitively well-positioned, cash-generative companies to our client portfolios, including those that we believe will benefit from a complete re-opening of the global economy, investment in energy independence in Europe, and the building of onshore manufacturing in many developed markets to mitigate supply chain vulnerabilities.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the pharmaceuticals & biotechnology, banks, household & personal products, and materials industry groups, as well as an underweight position in the semiconductors & semi equipment industry group, contributed to relative performance. Holdings in the capital goods and insurance industry groups, along with an overweight position in the transportation industry group and an underweight position in the telecommunication services and real estate industry groups, offset some of the outperformance compared to the Index. The top contributor to return was health food & beverage producer, Danone (France). Other notable contributors included pharmaceutical giant, Sanofi (France), household & personal care products company, Reckitt Benckiser Group (United Kingdom), banking & financial services provider, Swedbank AB (Sweden), and consumer staples giant, Unilever (United Kingdom). The largest detractor was jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom). Additional notable detractors included robotics manufacturer, FANUC Corp. (Japan), life insurer, Prudential Plc (United Kingdom), integrated circuit manufacturer, Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan), and banking & financial services company, UniCredit S.p.A. (Italy).

Investment outlook

More than a decade of intense global central bank quantitative easing (culminating in an explosion of monetary stimulus during Covid) pushed asset prices higher as too much money chased too few opportunities. That 10-year money geyser resulted in very low, and in some regions, negative, interest rates and developed market equity valuation multiples that rose sharply, often outpacing earnings (or the prospect of earnings at some future date). We believe a new monetary policy regime has begun—one that will likely lead to the opposite result with earnings and multiples under pressure as investors once again focus on valuation. From a fundamental perspective, we are most interested in identifying companies with strong balance sheets and pricing power combined with effective cost-cutting measures that can protect their profit margins. We seek to add, in our view, high-quality, competitively well-positioned, cash-generative companies to our client portfolios, including those that we believe will benefit from a complete re-opening of the global economy, investment in energy independence in Europe, and the building of onshore manufacturing in many developed markets to mitigate supply chain vulnerabilities. We typically look for dividend income and share buybacks as an indication of management’s resolve to reward shareholders and maintain efficient capital structures. We want that dividend income compounding, providing an important component of total return for our clients.

Regarding the EM portion of the Portfolio, earnings growth upgrades for EM equities continue to lag those in developed markets. EM sectors with the weakest earnings upgrades were communication services, consumer discretionary, and real estate. All three of these sectors are dominated by Chinese stocks, which were impacted by the Covid lockdowns. The sectors with the strongest earnings upgrades were energy, information technology, and financials. Energy benefitted from strong oil prices and information technology benefitted from positive revisions for a few larger capitalization stocks. Financials benefitted from rising interest rates. The countries with the weakest net upgrades include China, India, and Thailand. While Covid containment policies have weighed on Chinese stocks, rising commodity prices have dampened the growth outlook for Indian equities. The countries with the strongest net upgrades include Taiwan, Turkey, and Mexico. Positive revisions for larger capitalization companies drove strength in Taiwan. Mexican stocks have benefitted from economic linkages with the US. While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. With a balance of favorable valuation, growth, and price momentum characteristics relative to the Index, we believe the portfolio provides outperformance potential looking forward.

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].