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) 4.7%9.1%22.1%5.1%10.1%5.4%4.9%
Strategy (net) 4.6%8.9%21.6%4.7%9.6%5.0%4.6%
MSCI ACWI ex US 1.2%6.1%17.3%0.8%7.3%4.5%3.3%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 4.7%9.1%22.1%5.1%10.1%5.4%4.9%
Strategy (net) 4.6%8.9%21.6%4.7%9.6%5.0%4.6%
MSCI ACWI ex US 1.2%6.1%17.3%0.8%7.3%4.5%3.3%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 4.2%4.2%16.0%5.4%8.2%5.2%4.7%
Strategy (net) 4.1%4.1%15.5%5.0%7.7%4.8%4.3%
MSCI ACWI ex US 4.8%4.8%13.8%2.4%6.5%4.7%3.2%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 4.2%4.2%16.0%5.4%8.2%5.2%4.7%
Strategy (net) 4.1%4.1%15.5%5.0%7.7%4.8%4.3%
MSCI ACWI ex US 4.8%4.8%13.8%2.4%6.5%4.7%3.2%
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 May 31, 2024)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 97.3%
Cash 2.7%
Strategy Characteristics
Strategy Benchmark
No. of holdings 248 2226
Weighted avg. market cap (US $MM) $68,364 $86,260
FY2 price/earnings 10.4 12.6
Price/book value 1.6 1.9
Dividend yield (%) 3.2 2.9
TOP 10 HOLDINGS
Security Country Percent
Rolls-Royce Holdings Plc United Kingdom 3.8%
Barclays PLC United Kingdom 2.9%
Alstom SA France 2.4%
Roche Holding AG Switzerland 2.2%
AstraZeneca PLC United Kingdom 2.1%
Reckitt Benckiser Group United Kingdom 2.0%
Prudential Plc United Kingdom 2.0%
Enel SpA Italy 2.0%
Kering SA France 2.0%
FANUC Corp. Japan 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 18.0% 21.6%
Industrials 17.7% 14.0%
Information Technology 13.9% 13.0%
Health Care 11.4% 9.3%
Consumer Staples 10.4% 7.4%
Consumer Discretionary 8.0% 11.0%
Materials 4.5% 7.5%
Communication Services 4.3% 5.4%
Utilities 4.1% 3.1%
Energy 2.4% 5.7%
Real Estate 1.2% 1.9%
Equity Funds 0.7% 0.0%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 24.2% 9.9%
France 12.4% 7.7%
Japan 7.9% 14.7%
China 7.1% 7.5%
Germany 7.0% 5.5%
Taiwan 5.2% 5.0%
India 5.2% 5.0%
Netherlands 5.0% 3.3%
South Korea 4.0% 3.2%
Italy 3.7% 1.8%
Regional Allocation
  • EURO 32.7%
  • OTHER EUROPE 28.0%
  • EMERGING ASIA 22.0%
  • PACIFIC RIM 9.2%
  • EMERGING LATIN AMERICA 1.8%
  • EMERGING EUROPE, MIDDLE EAST, AFRICA 1.6%
  • NORTH AMERICA 1.2%
  • MULTI REGION EMERGING 0.0%

Commentary (As of May 31, 2024)

Highlights

  • Global equities posted positive returns in May, with developed equity markets outpacing emerging markets.
  • European equities, on a sector-neutral basis, are trading at valuation discounts to the US not seen since sovereign debt concerns roiled the region in 2011. In the developed markets portion of the Portfolio, we are increasing exposure to well-vetted European-listed stocks across various sectors, including information technology, materials, industrials, and consumer discretionary.
  • 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 remains near the high end of the historical range.

Portfolio Attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, banks, and semiconductors & semi equipment industry groups contributed to relative performance. Holdings in the household & personal products and consumer staples distribution & retail industry groups, along with an underweight position in the financial services industry group, offset some of the outperformance compared to the Index. The top contributor to return was rolling stock, signaling, & services provider for the rail industry, Alstom SA (France). Other notable contributors included jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom), and banking & financial services company, Barclays PLC (United Kingdom). The largest detractor was robotics manufacturer, FANUC Corp. (Japan). Additional notable detractors included low-budget airline, Ryanair Holdings Plc (Ireland), and electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea).

Quarterly Investment Outlook

European equities, on a sector-neutral basis, are trading at valuation discounts to the US not seen since sovereign debt concerns roiled the region in 2011. We are increasing exposure to well-vetted European-listed stocks across various sectors, including information technology, materials, industrials, and consumer discretionary. Valuations in Japan have risen, catalyzed by earnings upgrades in certain export-related industries, capital inflows redirected away from Chinese markets, and optimism for improving corporate governance. Causeway's investment team remains focused on identifying long-term winners in Japan’s efforts to improve shareholder returns, conducting more than ten research trips there over the past three quarters. However, the long-term challenges persist, namely, delivering consistently improving returns on capital. Within the developed markets portion of the Portfolio, we continue to identify companies we believe are creating value in their businesses through operational restructuring. Conservative assumptions and our interactions with company managements build our conviction in the share price upside from strengthening underearning businesses, generating more cash flow, and increasing profitability. We aim to balance these restructuring holdings with competitively positioned companies, such as those operating in oligopolistic markets with sustained pricing power, trading at reasonable valuations. Given positive real interest rates in most regions, dividends and buybacks currently are an especially meaningful component of total return. Positive real interest rates should continue to support a value investment style underpinned by rigorous fundamental research.

Within EM, the recent Indian general election produced unexpected results that have significant implications for the country's political landscape. The Narendra Modi-led Bharatiya Janata party (“BJP”) underperformed in the Indian general election, despite exit polls forecasting a strong win. For Modi’s upcoming third term, economic reforms may be harder to implement as Modi will need alliance support, potentially leading to more populist measures like subsidies and cash handouts. We remain confident in our India exposure due to valuation support—the portfolio’s Indian stocks currently trade at significant price-to-earnings discounts versus the MSCI India Index. Market volatility may provide repositioning opportunities. Within EM more broadly, 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 remains near the high end of the historical range.

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].