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

QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)6.9%17.8%11.2%9.4%3.9%6.8%3.6%
Strategy (net)6.8%17.4%10.7%9.0%3.5%6.5%3.2%
MSCI ACWI ex US4.4%17.0%11.8%9.8%4.3%5.2%2.3%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)6.9%17.8%11.2%9.4%3.9%6.8%3.6%
Strategy (net)6.8%17.4%10.7%9.0%3.5%6.5%3.2%
MSCI ACWI ex US4.4%17.0%11.8%9.8%4.3%5.2%2.3%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-2.1%10.2%-4.5%6.3%2.5%6.3%3.1%
Strategy (net)-2.2%9.9%-4.8%5.9%2.1%5.9%2.7%
MSCI ACWI ex US-1.7%12.1%-0.7%6.8%3.4%4.9%1.9%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-2.1%10.2%-4.5%6.3%2.5%6.3%3.1%
Strategy (net)-2.2%9.9%-4.8%5.9%2.1%5.9%2.7%
MSCI ACWI ex US-1.7%12.1%-0.7%6.8%3.4%4.9%1.9%
Fund20182017201620152014201320122011
Strategy (gross)-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
Strategy (net)-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
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
-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%

Portfolio (as of November 30, 2019)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks99.0%
Cash1.0%
Strategy Characteristics
StrategyBenchmark
No. of holdings 200 2419
Weighted avg. market cap (US $MM)$60,048$54,906
FY2 price/earnings10.613.6
Price/book value1.31.7
Dividend yield (%)3.83.1
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AGGermany3.7%
Takeda Pharmaceutical Co., Ltd.Japan3.1%
BASF SEGermany3.1%
UniCredit S.p.A.Italy3.0%
FANUC Corp.Japan2.6%
British American Tobacco plcUnited Kingdom2.5%
Siemens AGGermany2.4%
ABB Ltd.Switzerland2.4%
Barclays PlcUnited Kingdom2.4%
Linde PlcGermany2.1%

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
Financials22.9%21.4%
Industrials17.2%12.1%
Health Care9.7%8.9%
Information Technology9.3%9.2%
Materials9.1%7.3%
Energy8.7%6.4%
Consumer Discretionary7.5%11.8%
Consumer Staples6.6%9.6%
Communication Services5.3%6.6%
Utilities1.6%3.4%
Real Estate0.8%3.2%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom22.5%10.8%
Germany16.6%5.8%
Japan11.6%16.5%
China9.0%9.1%
France6.4%7.6%
Switzerland5.9%6.1%
Taiwan4.0%3.1%
South Korea3.5%3.1%
Italy3.0%1.6%
Brazil2.6%1.9%
Regional Allocation
  • Europe – other 59.0%
  • Emerging Asia 19.9%
  • Pacific 11.6%
  • North America 2.3%
  • Emerging Latin America 3.2%
  • Emerging Europe, Middle East, Africa 3.0%

Commentary (As of November 30, 2019)

Highlights

  • Developed market equities largely continued to rally in November as suggestions of a potential trade deal between the US and China may have buoyed investor sentiment. Emerging markets (“EM”) equities, however, posted muted returns in November amid slowing growth in many EM countries.
  • New European Central Bank President Christine Lagarde has addressed geopolitical risks in recent speeches and indicated steps governments can take to boost the effectiveness of monetary policy. We believe fiscal stimulus is the logical next step for European economies, with low-to-no borrowing costs and aging populations struggling to save sufficiently for retirement.
  • Without the specter of major economic slowing to weigh on revenue growth, cyclical stocks have fared well from late summer. We focus our research efforts on companies improving free cash flows and returning capital to shareholders via dividends and share buybacks, paying shareholders to wait for enhanced earnings from operational restructuring.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Holdings in the banks, food beverage & tobacco, pharmaceuticals & biotechnology, and transportation industry groups, as well as an underweight position in the utilities industry group, contributed to performance compared to the Index. Portfolio holdings in the food & staples retailing and technology hardware & equipment industry groups, along with an overweight position in the energy industry group and an underweight position in the health care equipment & services and consumer durables & apparel industry groups, detracted from relative performance. The top contributor to return was Takeda Pharmaceutical Co., Ltd. (Japan). Other notable contributors included banking & financial services company, UniCredit S.p.A. (Italy), British American Tobacco plc (United Kingdom), industrial conglomerate, Siemens AG (Germany), and internet commerce company, Alibaba Group Holding - ADR (China). The largest detractor was robotics manufacturer, FANUC Corp. (Japan). Additional notable detractors included specialty chemicals producer, Johnson Matthey Plc (United Kingdom), financial & industrial holdings company, Investimentos Itau (Brazil), insurance company, Aviva Plc (United Kingdom), and diversified chemicals manufacturer, BASF SE (Germany).

Investment outlook

Since the end of August 2019, the portfolio has generally enjoyed a re-rating upward in valuation coincident with the upswing in global sovereign bond yields from their 2019 lows. This change in sentiment by bond markets indicates a waning demand for risk-free bonds. With central governments globally using monetary and fiscal tools to forestall recession (and economic cycles), bond prices have fallen and yields have risen. Without the specter of major economic slowing to weigh on revenue growth, cyclical stocks have fared well from late summer. We focus our research efforts on companies improving free cash flows and returning capital to shareholders via dividends and share buybacks, paying shareholders to wait for enhanced earnings from operational restructuring. As investors continue to crowd into defensive trades, we strive to identify companies that can execute on restructuring plans and position themselves for an improvement in performance.

The MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index by 1.1% in November, further widening the discount for EM value stocks. In contrast, our value factor was positive during the month. This disconnect is primarily attributable to two factors. First, the strong performance of a few large cap growth stocks buoyed the Growth Index. While the Index is capitalization-weighted, we use equally-weighted returns for our value factor in order to avoid assigning a handful of stocks a disproportionate weight. Secondly, our value factor has a sector-relative component while MSCI’s style classification schemes do not include sector adjustments.

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.