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) 2.9%9.8%40.8%7.9%11.0%6.4%4.7%
Strategy (net) 2.8%9.6%40.2%7.5%10.6%6.0%4.3%
MSCI ACWI ex US 5.6%9.4%36.3%9.9%11.6%5.9%3.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 2.9%9.8%40.8%7.9%11.0%6.4%4.7%
Strategy (net) 2.8%9.6%40.2%7.5%10.6%6.0%4.3%
MSCI ACWI ex US 5.6%9.4%36.3%9.9%11.6%5.9%3.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 2.9%9.8%40.8%7.9%11.0%6.4%4.7%
Strategy (net) 2.8%9.6%40.2%7.5%10.6%6.0%4.3%
MSCI ACWI ex US 5.6%9.4%36.3%9.9%11.6%5.9%3.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 2.9%9.8%40.8%7.9%11.0%6.4%4.7%
Strategy (net) 2.8%9.6%40.2%7.5%10.6%6.0%4.3%
MSCI ACWI ex US 5.6%9.4%36.3%9.9%11.6%5.9%3.7%
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 June 30, 2021)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 97.1%
Cash 2.9%
Strategy Characteristics
Strategy Benchmark
No. of holdings 149 2348
Weighted avg. market cap (US $MM) $93,166 $80,524
FY2 price/earnings 11.8 14.4
Price/book value 1.6 2.0
Dividend yield (%) 2.5 2.2
TOP 10 HOLDINGS
Security Country Percent
Novartis AG Switzerland 2.7%
Rolls-Royce Holdings Plc United Kingdom 2.6%
UniCredit S.p.A. Italy 2.6%
Roche Holding AG Switzerland 2.5%
Sanofi France 2.4%
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR Taiwan 2.4%
Amadeus IT Group SA Spain 2.4%
Takeda Pharmaceutical Co., Ltd. Japan 2.3%
SAP SE Germany 2.3%
Tencent Holdings Ltd. China 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 19.6% 18.6%
Industrials 15.9% 11.8%
Information Technology 14.9% 12.9%
Health Care 12.3% 9.3%
Materials 7.2% 8.3%
Consumer Staples 7.2% 8.5%
Consumer Discretionary 7.1% 13.8%
Energy 5.4% 4.5%
Utilities 3.7% 3.0%
Communication Services 3.5% 6.7%
Real Estate 0.2% 2.5%
TOP 10 COUNTRIES
Country Strategy Benchmark
France 13.3% 7.1%
United Kingdom 12.7% 8.9%
Switzerland 10.2% 6.0%
China 10.2% 11.7%
Germany 8.5% 5.8%
Japan 7.5% 14.3%
Spain 6.0% 1.5%
South Korea 5.4% 4.1%
Taiwan 5.3% 4.4%
Italy 4.5% 1.5%
Regional Allocation
  • Europe – other 58.6%
  • Emerging Asia 25.1%
  • Pacific 7.5%
  • Emerging Europe, Middle East, Africa 2.3%
  • Emerging Latin America 2.2%
  • North America 1.3%

Commentary (As of June 30, 2021)

Highlights

  • Developed market equities largely delivered positive returns in local currency terms during the month of June as vaccination campaigns facilitated further easing of Covid-19-related economic restrictions. Emerging markets also posted positive returns. Despite the progress, the Delta variant of the virus and differing vaccination rates across geographies have resulted in an uneven recovery.
  • In order to rebuild inventories, we expect business capital expenditures to increase this year. Combined with massive fiscal spending, this should propel further economic gains.
  • With delayed and uneven opening of economies globally, several of the, in our view, high quality developed market aerospace, aviation, travel, and hospitality-oriented stocks have only partially reflected the recovery ahead.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, transportation, software & services, banks, and insurance industry groups detracted from relative performance. Holdings in the consumer durables & apparel and food beverage & tobacco industry groups, as well as an overweight position in the pharmaceuticals & biotechnology industry group and an underweight position in the consumer services and telecommunication services industry groups, offset some of the underperformance compared to the Index. The largest detractor was jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom). Additional notable detractors included banking & financial services company, UniCredit S.p.A. (Italy), travel & tourism information technology provider, Amadeus IT Group SA (Spain), life insurer, Prudential Plc (United Kingdom), and airline, AIR Canada (Canada). The top contributor to return was pharmaceuticals & biotechnology company, Roche Holding AG (Switzerland). Other notable contributors included pharmaceutical producer, Novartis AG (Switzerland), internet commerce company, Alibaba Group Holding Ltd. (Hong Kong), Kakao Corp. (South Korea), and technology services & consulting company, Infosys Ltd. (India).

Investment outlook

Despite the past 15-month surge in equity markets, amplified by the recovery in cyclical stocks from November 2020 vaccine announcements, we believe attractive valuations remain. With delayed and uneven opening of economies globally, several of the, in our view, high quality developed market aerospace, aviation, travel, and hospitality-oriented stocks have only partially reflected the recovery ahead. We observe significant pent up demand for such services, yet travelers still face uncertainty in certain locations and face burdensome Covid-19-related protocols. As vaccinations proliferate, we believe even the most cautious of governments will likely open their respective borders, compelled by economic necessity. In addition to late-stage pandemic stocks, we are also finding what we believe is market underpricing in developed market companies undergoing operational restructuring and in some traditionally defensive sectors such as utilities (those in transition to renewable energy) and healthcare (European pharmaceutical giants with potentially valuable drug pipelines). Companies in the defensive categories tend to generate cash flows surplus to their operating and investment needs (free cash flow), and thus can pay shareholders to wait for prices to reflect what we estimate will be good news. We believe companies less dependent on earnings realization far out in the future should provide a natural hedge in the portfolio to the prospect of rising interest rates, a function of bond markets reflecting economic growth and inflation. If history is any guide, the side effect of higher discount rates and bond market competition should translate into compression of the most speculative of market multiples.

In the EM portion of the Portfolio, we continue to emphasize value factors in our multi-factor investment process. The largest potential headwind for EM value stocks relates to Covid-19 vaccine distribution challenges or efficacy issues against developing virus variants. However, with the MSCI EM Value Index trading at a 52% discount to the MSCI EM Growth Index on a next-twelve-month price-to-earnings basis, we believe that value stocks offer compelling risk-adjusted return potential.

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].