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) -1.0%-1.0%12.1%6.2%7.7%5.2%4.4%
Strategy (net) -1.0%-1.0%11.6%5.8%7.2%4.8%4.1%
MSCI ACWI ex US -1.0%-1.0%6.4%1.6%5.8%4.7%2.9%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -1.0%-1.0%12.1%6.2%7.7%5.2%4.4%
Strategy (net) -1.0%-1.0%11.6%5.8%7.2%4.8%4.1%
MSCI ACWI ex US -1.0%-1.0%6.4%1.6%5.8%4.7%2.9%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 8.8%24.8%24.8%6.2%9.5%4.8%4.5%
Strategy (net) 8.6%24.3%24.3%5.8%9.1%4.4%4.1%
MSCI ACWI ex US 9.8%16.2%16.2%2.0%7.6%4.3%3.0%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 8.8%24.8%24.8%6.2%9.5%4.8%4.5%
Strategy (net) 8.6%24.3%24.3%5.8%9.1%4.4%4.1%
MSCI ACWI ex US 9.8%16.2%16.2%2.0%7.6%4.3%3.0%
Fund 2023202220212020201920182017201620152014201320122011
Strategy (gross) 24.8%-11.1%8.0%6.5%23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
Strategy (net) 24.3%-11.4%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 16.2%-15.6%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
2023202220212020201920182017201620152014201320122011
24.8%-11.1%8.0%6.5%23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
24.3%-11.4%7.6%6.1%22.9%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
16.2%-15.6%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 January 31, 2024)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 98.7%
Cash 1.3%
Strategy Characteristics
Strategy Benchmark
No. of holdings 246 2311
Weighted avg. market cap (US $MM) $63,028 $76,079
FY2 price/earnings 10.4 12.6
Price/book value 1.5 1.8
Dividend yield (%) 3.4 3.0
TOP 10 HOLDINGS
Security Country Percent
Rolls-Royce Holdings Plc United Kingdom 3.8%
Reckitt Benckiser Group United Kingdom 2.3%
Roche Holding AG Switzerland 2.3%
Barclays PLC United Kingdom 2.1%
Prudential Plc United Kingdom 2.1%
Deutsche Telekom AG Germany 2.0%
Diageo Plc United Kingdom 1.9%
GSK Plc United Kingdom 1.9%
AstraZeneca PLC United Kingdom 1.8%
Enel SpA Italy 1.8%

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 18.4% 21.3%
Industrials 15.6% 13.6%
Consumer Staples 13.1% 8.0%
Health Care 12.7% 9.5%
Information Technology 10.9% 12.8%
Consumer Discretionary 9.8% 11.2%
Materials 4.7% 7.6%
Communication Services 4.2% 5.4%
Utilities 4.1% 3.2%
Energy 2.9% 5.6%
Real Estate 1.2% 2.0%
Equity Funds 0.9% 0.0%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 25.4% 9.6%
France 10.9% 7.8%
Germany 7.7% 5.5%
China 5.8% 5.8%
India 5.8% 4.9%
Japan 5.8% 15.3%
Taiwan 5.2% 4.5%
Switzerland 5.0% 6.5%
Netherlands 4.4% 3.2%
South Korea 4.1% 3.3%
Regional Allocation
  • EURO 31.6%
  • OTHER EUROPE 31.0%
  • EMERGING ASIA 21.6%
  • PACIFIC RIM 8.4%
  • EMERGING LATIN AMERICA 2.2%
  • NORTH AMERICA 1.9%
  • EMERGING EUROPE, MIDDLE EAST, AFRICA 1.6%
  • MULTI REGION EMERGING 0.0%

Commentary (As of January 31, 2024)

Highlights

  • In January, a surge in US and European technology stocks boosted developed equity markets, while a sell-off in Chinese technology drove emerging equity markets into negative territory.
  • Within the developed markets portion of the Portfolio, we continue to focus on the long-term rewards from operational restructuring. In our experience, capable and motivated management teams of underearning companies can—and often do—boost returns to shareholders. Importantly, we aim to identify and buy these stocks many months before markets perceive positive catalysts. Many of the global and international portfolio holdings we expect to outperform in 2024 add, in our view, operational restructuring upside potential to the portfolio across a range of sectors, such as consumer discretionary, industrials, consumer staples and information technology.
  • Within EM, we continue to identify, in our view, attractive investment opportunities in small cap companies. Historically, our investment process has uncovered EM small cap stocks with alpha potential. The Portfolio's allocation to small cap stocks was near the high end of the historical range at quarter-end.

Portfolio Attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the financial services, household & personal products, and energy industry groups contributed to relative performance. Holdings in the semiconductors & semi equipment, utilities, and consumer discretionary distribution & retail industry groups offset some of the outperformance compared to the Index. The top contributor to return was business software & services provider, SAP SE (Germany). Other notable contributors included banking & financial services company, UniCredit S.p.A. (Italy), and pharmaceutical & consumer healthcare company, GSK Plc (United Kingdom). The largest detractor was electric utility provider, RWE AG (Germany). Additional notable detractors included Asian life insurer, Prudential Plc (United Kingdom), and healthcare equipment & services provider, Koninklijke Philips NV (Netherlands).

Quarterly Investment Outlook

The valuation discounts of non-US developed equity markets versus the US are, in our view, only partially attributable to sector differences and greater capital efficiency (higher returns on invested capital). We are skeptical that the upward valuation re-rating the US market experienced in 2023 can persist in 2024, largely due to shrinking global monetary liquidity. US money supply, as measured by M2*, continues to decrease as savings decline and major central banks reduce their balance sheets via quantitative tightening. A slow interest rate cutting cycle leaves plenty of room for successful stock selection, as economic uncertainty generally creates price volatility, especially in cyclical sectors. Given the fear of re-igniting inflation, we believe major central banks must keep real interest rates positive in this cycle and aim for an equilibrium rate to maximize economic growth at a stable approximately 2% inflation rate. Positive real interest rates typically bode well for the value investment style, especially when coupled with intensive fundamental research.

Within the developed markets portion of the Portfolio, we continue to focus on the long-term rewards from operational restructuring. In our experience, capable and motivated management teams of underearning companies can—and often do—boost returns to shareholders. Importantly, we aim to identify and buy these stocks many months before markets perceive positive catalysts. Many of the global and international portfolio holdings we expect to outperform in 2024 add, in our view, operational restructuring upside potential to the portfolio across a range of sectors, such as consumer discretionary, industrials, consumer staples and information technology. Within EM, we continue to identify, in our view, attractive investment opportunities in small cap companies. Historically, our investment process has uncovered EM small cap stocks with alpha potential. The Portfolio's allocation to small cap stocks was near the high end of the historical range at quarter-end.

*M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers' checks) plus savings deposits (including money market deposit accounts), small time deposits under$100,000, and shares in retail money market mutual funds.

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].