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.

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) 9.1%-23.8%-17.3%-3.2%-1.8%3.8%1.7%
Strategy (net) 9.0%-23.9%-17.6%-3.6%-2.2%3.4%1.3%
MSCI ACWI ex US 7.6%-17.4%-11.1%0.2%0.3%3.4%1.0%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 9.1%-23.8%-17.3%-3.2%-1.8%3.8%1.7%
Strategy (net) 9.0%-23.9%-17.6%-3.6%-2.2%3.4%1.3%
MSCI ACWI ex US 7.6%-17.4%-11.1%0.2%0.3%3.4%1.0%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -30.1%-30.1%-22.2%-5.1%-2.5%3.0%1.0%
Strategy (net) -30.2%-30.2%-22.5%-5.5%-2.9%2.6%0.6%
MSCI ACWI ex US -23.3%-23.3%-15.1%-1.5%-0.2%2.5%0.4%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -30.1%-30.1%-22.2%-5.1%-2.5%3.0%1.0%
Strategy (net) -30.2%-30.2%-22.5%-5.5%-2.9%2.6%0.6%
MSCI ACWI ex US -23.3%-23.3%-15.1%-1.5%-0.2%2.5%0.4%
Fund 201920182017201620152014201320122011
Strategy (gross) 23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
Strategy (net) 23.0%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
MSCI ACWI ex US 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
201920182017201620152014201320122011
23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
23.0%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
22.1%-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%

Portfolio (as of April 30, 2020)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 99.7%
Cash 0.3%
Strategy Characteristics
Strategy Benchmark
No. of holdings 189 2407
Weighted avg. market cap (US $MM) $61,950 $59,846
FY2 price/earnings 10.2 12.9
Price/book value 1.0 1.4
Dividend yield (%) 3.2 3.0
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 3.5%
FANUC Corp. Japan 3.0%
BASF SE Germany 3.0%
Takeda Pharmaceutical Co., Ltd. Japan 2.9%
UniCredit S.p.A. Italy 2.7%
ABB Ltd. Switzerland 2.5%
British American Tobacco plc United Kingdom 2.4%
Siemens AG Germany 2.4%
Novartis AG Switzerland 2.2%
Barclays 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 20.5% 18.7%
Industrials 19.0% 11.4%
Information Technology 12.4% 10.5%
Consumer Discretionary 10.8% 12.0%
Health Care 10.5% 10.7%
Materials 9.4% 7.3%
Consumer Staples 7.0% 10.3%
Communication Services 4.9% 7.4%
Energy 3.2% 5.2%
Utilities 1.3% 3.6%
Real Estate 0.8% 3.0%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 20.1% 10.2%
Germany 16.8% 5.6%
China 10.8% 10.1%
Japan 10.2% 16.1%
Switzerland 7.5% 6.4%
France 6.3% 7.4%
Taiwan 4.2% 3.4%
South Korea 3.9% 3.2%
Brazil 2.8% 1.9%
Italy 2.7% 1.6%
Regional Allocation
  • Europe – other 59.7%
  • Emerging Asia 24.4%
  • Pacific 10.0%
  • Emerging Europe, Middle East, Africa 2.5%
  • Emerging Latin America 2.4%
  • North America 0.7%

Commentary (As of April 30, 2020)

Highlights

  • After the severe shock of the COVID-19 pandemic in March and the subsequent emergency relief measures provided by monetary and fiscal authorities worldwide, global equities rebounded in April.
  • Market participants have typically anticipated the benefits (and liquidity surge) of monetary and fiscal stimulus. Equity markets’ sharp rebound in April suggests the short-term bottom of the current crisis was around March 23, when governments and central banks around the world enacted massive stimulus programs.
  • We have used the market weakness—especially the punishing of economically sensitive stocks—to buy in our view some of the developed markets' best placed and best managed companies in sectors that historically recovered the fastest from bear markets.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, pharmaceuticals & biotechnology, automobiles & components, food beverage & tobacco, and semiconductors & semi equipment industry groups contributed to relative performance. Holdings in the materials, energy, food & staples retailing, retailing, and software & services industry groups detracted from performance compared to the Index. The top contributor to return was automobile manufacturer, Volkswagen AG (Germany). Other notable contributors included robotics manufacturer, FANUC Corp. (Japan), Takeda Pharmaceutical Co., Ltd. (Japan), semiconductor company, Infineon Technologies AG (Germany), and British American Tobacco plc (United Kingdom). The largest detractor was integrated oil & gas company, Total (France). Additional notable detractors included insurance company, Aviva Plc (United Kingdom), consumer retailer, Carrefour SA (France), passenger & cargo airline company, Air France-KLM SA (France), and crude oil & natural gas company, BP Plc (United Kingdom).

Investment outlook

In past crises (such as the 1997 Asian financial crisis, the 2008-2009 Global Financial Crisis, and the 2011 European debt crisis), markets reached the bottom, and subsequently began their recovery many months before the recovery became evident in the economic data. Market participants have typically anticipated the benefits (and liquidity surge) of monetary and fiscal stimulus. Equity markets’ sharp rebound in April suggests the short-term bottom of the current crisis was around March 23, when governments and central banks around the world enacted massive stimulus programs. This crisis differs from prior periods of economic contraction in its origin: a global pandemic and government-mandated closures. For consumers and businesses alike, a sustained recovery in confidence will require effective therapies to mitigate the severity of COVID-19. Our healthcare research indicates that the development of such therapies this year is possible, with the potential for mass produced vaccines by mid- to late-2021.


We have used the market weakness—especially the punishing of economically sensitive stocks—to buy, in our view, some of the developed markets’ best placed and best managed companies in sectors that historically recovered the fastest from bear markets. We have funded this buying by reducing the portfolio’s developed market exposure to stocks in the telecommunications and consumer staples sectors, and reinvesting in companies in the industrials, financials, and information technology sectors. Investors appear to have no patience to wait for recoveries in some of these companies most negatively affected by the shutdowns, such as those in the aerospace and aviation industries, and those exposed to the travel & leisure industry. We believe that buying these stocks at such low prices relative to their normalized earnings potential will benefit the portfolio 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].