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

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) 23.7%6.5%6.5%2.6%7.7%6.2%4.1%
Strategy (net) 23.6%6.1%6.1%2.2%7.3%5.8%3.8%
MSCI ACWI ex US 17.1%11.1%11.1%5.4%9.4%5.4%3.2%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 23.7%6.5%6.5%2.6%7.7%6.2%4.1%
Strategy (net) 23.6%6.1%6.1%2.2%7.3%5.8%3.8%
MSCI ACWI ex US 17.1%11.1%11.1%5.4%9.4%5.4%3.2%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 23.7%6.5%6.5%2.6%7.7%6.2%4.1%
Strategy (net) 23.6%6.1%6.1%2.2%7.3%5.8%3.8%
MSCI ACWI ex US 17.1%11.1%11.1%5.4%9.4%5.4%3.2%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 23.7%6.5%6.5%2.6%7.7%6.2%4.1%
Strategy (net) 23.6%6.1%6.1%2.2%7.3%5.8%3.8%
MSCI ACWI ex US 17.1%11.1%11.1%5.4%9.4%5.4%3.2%
Fund 2020201920182017201620152014201320122011
Strategy (gross) 6.5%23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
Strategy (net) 6.1%22.9%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
MSCI ACWI ex US 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
2020201920182017201620152014201320122011
6.5%23.4%-17.9%31.8%1.9%-4.0%-3.9%22.2%26.0%-11.7%
6.1%22.9%-18.2%31.3%1.5%-4.4%-4.2%21.7%25.5%-12.0%
11.1%22.1%-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%

Portfolio (as of December 31, 2020)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 98.9%
Cash 1.1%
Strategy Characteristics
Strategy Benchmark
No. of holdings 167 2360
Weighted avg. market cap (US $MM) $86,188 $79,005
FY2 price/earnings 12.6 16.0
Price/book value 1.4 1.8
Dividend yield (%) 2.6 2.3
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 3.3%
Rolls-Royce Holdings Plc United Kingdom 3.0%
BASF SE Germany 2.6%
UniCredit S.p.A. Italy 2.4%
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR Taiwan 2.3%
Novartis AG Switzerland 2.2%
Samsung Electronics Co., Ltd. South Korea 2.2%
Tencent Holdings Ltd. China 2.2%
Takeda Pharmaceutical Co., Ltd. Japan 2.1%
ING Groep NV Netherlands 2.1%

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
Financials 21.4% 18.0%
Industrials 17.3% 11.6%
Information Technology 14.4% 12.7%
Consumer Discretionary 11.7% 13.8%
Health Care 9.5% 9.6%
Materials 7.5% 8.1%
Consumer Staples 6.6% 8.9%
Communication Services 3.9% 7.1%
Energy 3.6% 4.3%
Utilities 2.5% 3.3%
Real Estate 0.5% 2.6%
TOP 10 COUNTRIES
Country Strategy Benchmark
Germany 12.7% 5.9%
France 12.6% 6.9%
China 11.3% 12.2%
United Kingdom 10.4% 8.8%
Switzerland 8.8% 6.0%
Japan 7.1% 15.8%
South Korea 5.6% 4.2%
Spain 5.5% 1.5%
Taiwan 5.2% 4.0%
Netherlands 3.7% 2.4%
Regional Allocation
  • Europe – other 59.6%
  • Emerging Asia 26.2%
  • Pacific 7.1%
  • Emerging Europe, Middle East, Africa 2.4%
  • Emerging Latin America 2.3%
  • North America 1.3%

Commentary (As of December 31, 2020)

Highlights

  • Bolstered by optimism for an end to the COVID-19 pandemic as several countries began rolling out vaccines, global equity markets rose in December to close out the year. Emerging markets equities outpad their developed market counterparts.
  • We believe that as vaccine rollout efforts ramp up, beleaguered economies will begin to return to normality before year end. In order to bridge the economic gap, central banks and governments have continued to provide monetary and fiscal support, creating demand.
  • We believe the consequences of record high levels of fiscal and monetary stimulus will, at some stage, feed into the real economy. A value-focused portfolio remains, in our view, one of the few ways to hedge higher interest rates and/or inflation.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the banks, pharmaceuticals & biotechnology, transportation, food beverage & tobacco, and utilities industry groups detracted from relative performance. Holdings in the automobiles & components and media & entertainment industry groups, as well as an underweight position in the household & personal products, telecommunication services, and real estate industry groups, offset some of the underperformance compared to the Index. The largest detractor was banking & financial services company, UniCredit S.p.A. (Italy). Additional notable detractors included financial services provider, ING Groep NV (Netherlands), pharmaceutical giant, Sanofi (France), airline, AIR Canada (Canada), and bank, China Construction Bank Corp. (Hong Kong). The top contributor to return was electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea). Other notable contributors included automobile manufacturer, Volkswagen AG (Germany), integrated circuit manufacturer, Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan), diversified chemicals manufacturer, BASF SE (Germany), and internet services provider, Baidu - ADR (China).

Investment outlook

As economies return to normal in 2021, we expect the narrow concentration of performance in global indices—as well as the value-growth spread—to reverse. We believe that the rally in economically sensitive stocks should continue in 2021, amplified by those companies who have used this crisis to eliminate excess cost and boost efficiency, resulting in increased profitability as revenues recover. In our fundamental research process, we have deliberately emphasized these companies engaging in operational restructuring. As profitability recovers, so should free cash flow. We are optimistic that companies will return surplus cash to shareholders in the form of dividends and share buybacks in 2021, an important component of total return. We believe the consequences of record high levels of fiscal and monetary stimulus will, at some stage, feed into the real economy. A value-focused portfolio remains, in our view, one of the few ways to hedge higher interest rates and/or inflation.

In the EM portion of the Portfolio, we continue to emphasize value factors in our process. After underperforming in 2019, the MSCI Emerging Markets Value Index again lagged the MSCI Emerging Markets Growth Index in 2020. The MSCI Emerging Markets Value Index is trading near record low valuations based on both price-to-earnings and price-to-book value ratios. Looking forward, we believe that EM value stocks are poised to rebound given the valuation discount and the anticipated resumption of global growth in 2021.

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].