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
Portfolio managers
Brian Cho
Mr. Cho is a fundamental portfolio manager at Causeway. He joined the firm in September 2013 and has been a portfolio manager since January 2021. His current responsibilities include coverage of companies in the technology and communication services sectors.
From 2011 to 2013, Mr. Cho was a vice president at BofA-ML Equity Research, covering the IT hardware and supply chain sector. From 2007 to 2011, he worked as an associate at Goldman Sachs Equity Research covering the same sector. From 2006 to 2007, he worked as an analyst at Morgan Stanley Equity Research covering the internet and interactive software sector. Prior to that, he worked as an analyst at PA Consulting Group in the financial services practice.
Mr. Cho earned a BSc in management science from Massachusetts Institute of Technology.
Read our interview with Brian about value investing in the technology sector.
Jonathan Eng
Mr. Eng is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global consumer discretionary, industrials, and energy sectors. He joined the firm in July 2001 and has been a portfolio manager since February 2002.
From 1997 to 2001, Mr. Eng was an equity research associate for the Hotchkis and Wiley division of Merrill Lynch Investment Managers (HW-MLIM). In 1996, Mr. Eng worked as a summer research associate for Hotchkis and Wiley, performing U.K. and European equity research. From 1993 to 1995, Mr. Eng analyzed merger and acquisition candidates at Slusser Associates. From 1990 to 1993, Mr. Eng worked as a middle market corporate lender for Bank of Boston.
Mr. Eng earned a BA in history and economics from Brandeis University and an MBA from the UCLA Anderson Graduate School of Management
Joe Gubler, CFA
Mr. Gubler is a quantitative portfolio manager at Causeway. He joined the firm in 2005 and has been a portfolio manager since January 2014. In addition to managing quantitative portfolios and conducting alpha research, Mr. Gubler also leads the efforts to maintain and enhance Causeway’s proprietary risk models. He is also a member of the operating committee.
From 1999 to 2005, Mr. Gubler worked as a software engineer, with employers ranging from startups to established businesses such as Monster.com. From 1998 to 1999, Mr. Gubler worked as a staff scientist for News Corporation, conducting studies on the RF propagation of broadcast signals. While studying astrophysics at UC San Diego, Mr. Gubler worked as a graduate research assistant in the Jet Propulsion Laboratory's stellar interferometry group.
Mr. Gubler earned a BS, cum laude, in physics from UC Irvine, an MS in physics from UC San Diego, and an MBA from the UCLA Anderson Graduate School of Management. Mr. Gubler is a CFA charterholder.
Harry Hartford
Head of Fundamental Research
Fundamental Portfolio Manager
Mr. Hartford is the president at Causeway, fundamental portfolio manager, and head of fundamental research. Mr. Hartford co-founded the firm in June 2001 and is a member of the operating committee.
From 1996 to June 2001, Mr. Hartford was a managing director for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM) and co-head of the firm's HW-MLIM international and global value team. From 1994 to 1996, Mr. Hartford was a portfolio manager for Hotchkis and Wiley. From 1984 to 1994, Mr. Hartford was with The Investment Bank of Ireland, where he gained ten years’ experience in both international and global equity management. During this time, Mr. Hartford also managed the Irish Investment Fund, a closed-end country fund quoted on the NYSE. Before entering the investment business, Mr. Hartford lectured in micro and macroeconomics at Oklahoma State University.
Mr. Hartford earned a BA, with honors, in economics from the University of Dublin, Trinity College, an MSc in economics from Oklahoma State University, and is a Phi Kappa Phi member. Mr. Hartford is a member of The Ireland Funds America Board of Directors and serves as chair of the Los Angeles Regional Board.
Arjun Jayaraman, PhD, CFA
Quantitative Portfolio Manager
Dr. Jayaraman is a director, quantitative portfolio manager and head of the quantitative research at Causeway and has been with the firm since January 2006. Dr. Jayaraman’s responsibilities and research include stock selection, asset allocation, risk model development, and portfolio construction.
From 2004 to 2005, Dr. Jayaraman was a portfolio manager at PanAgora Asset Management. He was the lead portfolio manager on the non-U.S. large cap core equity portfolios and was the co-portfolio manager on the global large cap core equity portfolios. From 2000 to 2004, Dr. Jayaraman managed the same portfolios at Putnam Investments, in addition to working closely with the teams that managed Putnam's traditional non-U.S. strategies. From 1998 to 2000, Dr. Jayaraman worked as a quantitative analyst at Harborview Trading Associates.
Dr. Jayaraman earned a PhD from New York University at the Stern School of Business and a BA in economics from Columbia University. Dr. Jayaraman is a CFA charterholder.
Sarah Ketterer
Fundamental Portfolio Manager
Ms. Ketterer is the chief executive officer at Causeway, fundamental portfolio manager, and is responsible for investment research across all sectors. Ms. Ketterer co-founded the firm in June 2001 and is a member of the operating committee.
From 1996 to 2001, Ms. Ketterer worked for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM). At HW-MLIM, she was a managing director and co-head of the firm's HW-MLIM International and Global Value team. From 1990 to 1996, Ms. Ketterer was a portfolio manager at Hotchkis & Wiley, where she founded the International Equity product.
Ms. Ketterer earned a BA in economics and political science from Stanford University and an MBA from the Tuck School, Dartmouth College. Ms. Ketterer serves on the Stanford University Board of Trustees, is on the advisory board of Portal Schools, and is a supporter of Girls Who Invest. She previously served as a board member and chair of the Los Angeles World Affairs Council and Town Hall and chair of the investment committee of the Music Center Foundation.
MacDuff Kuhnert, CFA
Mr. Kuhnert is a director and a quantitative portfolio manager at Causeway and has been with the firm since its inception in June 2001. Mr. Kuhnert’s responsibilities and research include stock selection, asset allocation, risk model development, and portfolio construction.
From 1996 to 2001, Mr. Kuhnert worked for the international team of the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM) as a quantitative research associate. During his tenure at HW-MLIM, Mr. Kuhnert created and developed advanced quantitative models used in the international value investment process. He also helped develop the team’s first equity risk model.
Mr. Kuhnert earned a BA in chemistry from Dartmouth College. He is a CFA charterholder, a member of the CFA Society of Los Angeles, and a member of the Chicago Quantitative Alliance.
Ellen Lee
Ms. Lee is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global consumer and utilities sectors. Prior to the current role, she also covered transportation and autos. She joined the firm in August 2007 and has been a portfolio manager since January 2015.
During the summer of 2006, Ms. Lee interned at Tiger Asia, a long short equity hedge fund focused on China, Japan, and Korea. From 2001 to 2004, Ms. Lee was an associate in the mergers and acquisitions division of Credit Suisse First Boston in Seoul, where she advised Korean corporates and multinational corporations. From 1999 to 2000, she was an analyst in the mergers and acquisitions division of Credit Suisse First Boston in Hong Kong.
Ms. Lee earned a BA in business administration from Seoul National University and an MBA from the Stanford Graduate School of Business. She currently serves on the audit and investment committee at the Center for Early Education in West Hollywood.
Read our profile of Ellen .
Conor Muldoon, CFA
Mr. Muldoon is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global financials and materials sectors. He joined the firm in August 2003 and has been a portfolio manager since September 2010. He is also a member of the operating committee.
From 1995 to 2003, Mr. Muldoon was an investment consultant for Fidelity Investments where he served as a liaison between institutional clients and investment managers within Fidelity. He was responsible for communicating current information on the financial markets, the economy and investment performance.
Mr. Muldoon earned a BSc and an MA from the University of Dublin, Trinity College and an MBA, with high honors, from the University of Chicago. Mr. Muldoon was inducted into the Beta Gamma Sigma honors society and is also a CFA charterholder.
Ryan Myers
Mr. Myers is a quantitative portfolio manager at Causeway. He joined the firm in June 2013 and has been a portfolio manager since January 2021. His responsibilities include alpha research, stock selection, and portfolio construction.
From 2010 to 2012, Mr. Myers served as chief investment officer of Iron Castle Asset Management, an investment partnership focused on mid-cap U.S. equities. From 2007 to 2008, Mr. Myers worked as an analyst at Canyon Partners, where he covered the cable, media, telecom and satellite sectors. From 2005 to 2007, Mr. Myers was an associate for Oaktree Capital Management in the distressed opportunities group. Mr. Myers began his professional career in 2003 as an investment banking analyst at Goldman Sachs in the technology, media and telecom group.
Mr. Myers earned a BA, magna cum laude, in economics from Harvard University, where he was elected to Phi Beta Kappa. He earned an MBA from the Stanford Graduate School of Business, where he was an Arjay Miller Scholar. Mr. Myers currently serves on the Board of Trustees of the Yosemite Conservancy, an organization dedicated to supporting projects and programs that preserve Yosemite National Park and enrich the visitor experience.
Steven Nguyen, CFA
Mr. Nguyen is a director and fundamental portfolio manager at Causeway and is responsible for investment research in utilities & renewables, healthcare, and business services. He joined the firm in April 2012 and has been a portfolio manager since January 2019.
From 2006 to 2012, Mr. Nguyen was a senior credit analyst at Bradford & Marzec covering high yield and investment grade companies in the telecommunication services, cable, media, gaming, insurance, and REIT industries. From 2003 to 2006, Mr. Nguyen was a credit analyst/portfolio manager in the corporate bond department of Allegiance Capital.
Mr. Nguyen earned a BA in business economics from Brown University and an MBA, with honors, from the UCLA Anderson School of Management. Mr. Nguyen was the president of the Anderson Student Asset Management association. Mr. Nguyen is a CFA charterholder.
Alessandro Valentini, CFA
Mr. Valentini is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global healthcare, financials, and materials sectors. He joined the firm in July 2006 and has been a portfolio manager since April 2013.
During the summer of 2005, Mr. Valentini worked as a research analyst at Thornburg Investment Management, where he conducted fundamental research for the International Value Fund and the Value Fund, focusing on the European telecommunication and Canadian oil sectors. From 2000 to 2004, Mr. Valentini worked as a financial analyst at Goldman Sachs in the European equities research-sales division in New York.
Mr. Valentini earned an MBA from Columbia Business School, with honors, an MA in economics from Georgetown University and a BS, magna cum laude, from Georgetown University. Mr. Valentini was inducted into the Beta Gamma Sigma honors society, is a Phi Beta Kappa member, and is a CFA charterholder.
Performance
Account returns for the Causeway International Opportunities Composite (“International Opportunities Composite”) are calculated daily. Monthly account returns are calculated by geometrically linking the daily returns. The return of the International Opportunities Composite is calculated monthly by weighting monthly account returns by the beginning market values. Valuations and returns are computed and stated in US dollars. Returns include the reinvestment of interest, dividends and any capital gains. Returns are calculated gross of withholding taxes on dividends, interest income, and capital gains. Past performance is no guarantee of future performance. Gross-of-fees returns are presented before management, performance and custody fees but after trading expenses. Net-of-fees returns are presented after the deduction of actual management fees, performance-based fees, and all trading expenses, but before custody fees. Causeway’s basic management fee schedules are described in its firm brochure pursuant to Part 2 of Form ADV. A complete list and description of firm composites is available upon request. This information supplements the composite presentation at Composite Performance. Investing involves risk including loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification does not prevent all investment losses.
Portfolio (as of October 31, 2022)
Asset Allocation
| Strategy | |
|---|---|
| Stocks | 97.7% |
| Cash | 2.3% |
Strategy Characteristics
| Strategy | Benchmark | |
|---|---|---|
| No. of holdings | 242 | 2273 |
| Weighted avg. market cap (US $MM) | $50,498 | $55,606 |
| FY2 price/earnings | 9.4 | 11.0 |
| Price/book value | 1.5 | 1.6 |
| Dividend yield (%) | 3.8 | 3.4 |
TOP 10 HOLDINGS
| Security | Country | Percent |
|---|---|---|
| Rolls-Royce Holdings Plc | United Kingdom | 3.0% |
| UniCredit S.p.A. | Italy | 2.9% |
| SAP SE | Germany | 2.5% |
| Prudential Plc | United Kingdom | 2.4% |
| Enel SpA | Italy | 2.4% |
| Reckitt Benckiser Group | United Kingdom | 2.1% |
| FANUC Corp. | Japan | 2.1% |
| Amadeus IT Group SA | Spain | 2.1% |
| Sanofi | France | 1.9% |
| Unilever | United Kingdom | 1.9% |
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 | 18.6% | 20.9% |
| Industrials | 16.8% | 12.5% |
| Health Care | 12.7% | 10.1% |
| Consumer Staples | 11.1% | 9.0% |
| Information Technology | 10.4% | 10.9% |
| Consumer Discretionary | 7.6% | 10.7% |
| Materials | 6.7% | 8.1% |
| Utilities | 5.0% | 3.3% |
| Energy | 4.2% | 6.6% |
| Communication Services | 2.3% | 5.7% |
| Equity Funds | 1.3% | 0.0% |
| Real Estate | 0.2% | 2.2% |
TOP 10 COUNTRIES
| Country | Strategy | Benchmark |
|---|---|---|
| United Kingdom | 19.9% | 10.0% |
| France | 13.5% | 7.5% |
| Germany | 7.0% | 5.1% |
| China | 6.8% | 7.5% |
| Japan | 6.3% | 14.1% |
| Spain | 5.5% | 1.6% |
| Italy | 5.2% | 1.5% |
| Switzerland | 5.0% | 6.7% |
| Netherlands | 4.3% | 2.6% |
| India | 4.2% | 4.5% |
Regional Allocation
- EURO 37.9%
- OTHER EUROPE 26.2%
- EMERGING ASIA 18.9%
- PACIFIC RIM 6.3%
- EMERGING EUROPE, MIDDLE EAST, AFRICA 3.5%
- NORTH AMERICA 2.3%
- EMERGING LATIN AMERICA 2.0%
- MULTI REGION EMERGING 0.0%
Commentary (As of October 31, 2022)
Highlights
Portfolio attribution
The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the banks, capital goods, software & services, transportation, and retailing industry groups contributed to relative performance. Holdings in the energy, health care equipment & services, semiconductors & semi equipment, insurance, and automobiles & components industry groups offset some of the outperformance compared to the Index. The top contributor to return was banking & financial services company, UniCredit S.p.A. (Italy). Other notable contributors included jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom), business software & services provider, SAP SE (Germany), rolling stock, signaling, & services provider for the rail industry, Alstom SA (France), and low-budget airline, Ryanair Holdings Plc (Ireland). The largest detractor was healthcare equipment & services provider, Koninklijke Philips NV (Netherlands). Additional notable detractors included life insurer, Prudential Plc (United Kingdom), online services company, Tencent Holdings Ltd. (China), integrated circuit manufacturer, Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan), and robotics manufacturer, FANUC Corp.(Japan).
Investment outlook
We believe that valuations for international equities, regardless of region, are increasingly promising for investors with a multi-year investment horizon. Currency slippage versus the US dollar should reverse, at least in part, as the interest rate differential between the US and Europe (for example) closes over the upcoming 12-18 months. Cyclical European equities incurred waves of selling after Russia’s invasion of Ukraine in February. That investor exodus has brought some, in our view, world-class developed market companies, in sectors such as materials, industrials, and consumer discretionary, into our buying range. We expect another area of meaningful alpha potential to come from developed markets stocks afflicted by China’s zero-Covid policy. We used the pessimism from delayed China reopening to gain exposure to, in our view, a broad array of competitively well-positioned companies that generate 10% or more of their respective revenues from the Chinese market. Typical of what Causeway seeks for its holdings, these companies have not wasted time while their China sales are weak; they have implemented operational restructuring to improve efficiency and lower costs in anticipation of a return to revenue expansion. Reopening, albeit gradual and without a precise timeframe, is inevitable in our view. Governments that asphyxiate their economies and cause social instability typically do not remain in power. We are convinced that China is no exception.
Within the EM portion of the Portfolio, we adjusted our earnings growth factor to, in our view, better reflect sentiment for commodity-related stocks. Based on our research, sell-side analyst earnings revisions for this cohort of stocks may be inconsistent with the price movement of the underlying commodities. In some cases, analysts are slow to update estimates, while in other cases, analysts base their forecasts on forward contracts, which adjust with a lag compared to spot prices. Additionally, extreme movements in commodity prices are often met with supply and demand responses, resulting in price reversals. For these reasons, we believe that adjusting our earnings growth factor for commodity-related stocks can potentially improve the Portfolio's risk-adjusted returns. Overall, earnings growth upgrades for EM equities continue to lag those in ex-US developed markets. The EM sectors with the weakest net upgrades were materials, communication services, and industrials. Slowing global growth has contributed to lower expectations for industrials, which reflect weakness in the shipping sector, and materials companies. Communication services is primarily driven by the Chinese internet and technology companies, which have been impacted by the country’s slowing growth. Sectors with positive net upgrades were financials and energy. Financials are benefitting from positive credit cycles in India and Brazil, countries where we are identifying attractive investment opportunities in banks. The energy sector has been buoyed by oil, coal, and natural gas prices, which remain relatively strong. 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 offers attractive risk-adjusted return 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].