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) -1.8%7.8%33.4%7.1%9.1%8.9%4.5%
Strategy (net) -1.9%7.5%32.9%6.7%8.7%8.5%4.1%
MSCI ACWI ex US -2.9%6.3%24.4%8.5%9.4%8.0%3.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -1.8%7.8%33.4%7.1%9.1%8.9%4.5%
Strategy (net) -1.9%7.5%32.9%6.7%8.7%8.5%4.1%
MSCI ACWI ex US -2.9%6.3%24.4%8.5%9.4%8.0%3.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -1.8%7.8%33.4%7.1%9.1%8.9%4.5%
Strategy (net) -1.9%7.5%32.9%6.7%8.7%8.5%4.1%
MSCI ACWI ex US -2.9%6.3%24.4%8.5%9.4%8.0%3.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -1.8%7.8%33.4%7.1%9.1%8.9%4.5%
Strategy (net) -1.9%7.5%32.9%6.7%8.7%8.5%4.1%
MSCI ACWI ex US -2.9%6.3%24.4%8.5%9.4%8.0%3.5%
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 September 30, 2021)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 98.6%
Cash 1.4%
Strategy Characteristics
Strategy Benchmark
No. of holdings 160 2354
Weighted avg. market cap (US $MM) $79,857 $72,892
FY2 price/earnings 11.0 13.7
Price/book value 1.6 1.9
Dividend yield (%) 2.8 2.4
TOP 10 HOLDINGS
Security Country Percent
Rolls-Royce Holdings Plc United Kingdom 3.7%
UniCredit S.p.A. Italy 2.8%
Takeda Pharmaceutical Co., Ltd. Japan 2.5%
TotalEnergies SE France 2.4%
Amadeus IT Group SA Spain 2.4%
BP Plc United Kingdom 2.4%
Sanofi France 2.4%
Novartis AG Switzerland 2.3%
SAP SE Germany 2.3%
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR Taiwan 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 21.3% 19.3%
Industrials 16.8% 12.2%
Information Technology 13.7% 13.2%
Health Care 12.2% 9.5%
Energy 7.5% 4.9%
Consumer Discretionary 7.4% 12.7%
Materials 6.7% 8.0%
Consumer Staples 6.6% 8.5%
Utilities 3.8% 3.0%
Communication Services 2.5% 6.3%
Real Estate 0.1% 2.5%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 17.1% 9.1%
France 13.9% 7.1%
Germany 9.1% 5.8%
Switzerland 8.0% 6.0%
China 8.0% 10.1%
Japan 7.9% 15.3%
Spain 6.1% 1.5%
Taiwan 5.3% 4.4%
Italy 4.8% 1.6%
South Korea 4.6% 3.7%
Regional Allocation
  • Europe – other 63.0%
  • Emerging Asia 22.1%
  • Pacific 7.9%
  • Emerging Europe, Middle East, Africa 2.3%
  • Emerging Latin America 2.1%
  • North America 1.2%

Commentary (As of September 30, 2021)

Highlights

  • Equities declined in September amid concerns over a moderation in economic growth rates, supply chain disruptions, and rising inflation.
  • Global economic data in September revealed a modest loss of momentum in the recovery, including headwinds from China. Virtually all companies we queried reported rising input costs across geographies as supply chain disruptions exacerbated inflationary pressures.
  • We believe that many of the, in our view, world class companies in aviation, travel, leisure, and hospitality that we added to our clients’ portfolios in prior months should continue to outperform markets. With a turnaround in cash flows, many of these companies should be well positioned for a return to normalcy.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, banks, software & services, and technology hardware & equipment industry groups, as well as an overweight position in the energy industry group, contributed to performance relative to the Index. Holdings in the utilities, consumer durables & apparel, and health care equipment & services industry groups, along with an overweight position in the pharmaceuticals & biotechnology industry group and an underweight position in the telecommunication services industry group, offset a portion of the outperformance. The top contributor to return was jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom). Additional top contributors included crude oil & natural gas company, BP Plc (United Kingdom), integrated oil & gas company, Total (France), travel & tourism information technology provider, Amadeus IT Group SA (Spain), and banking & financial services company, UniCredit S.p.A. (Italy). The largest detractor from absolute performance was electric, gas & renewables power generation & distribution company, Enel SpA (Italy). Additional top detractors included pharmaceutical producer, Novartis AG (Switzerland), business software & services provider, SAP SE (Germany), pharmaceuticals & biotechnology company, Roche Holding AG (Switzerland), and pharmaceutical giant, Sanofi (France).

Investment outlook

As the global economy recovers from the pandemic, stocks in Covid-impacted industries performed well in September. We believe that many of the, in our view, world class developed market companies in aviation, travel, leisure, and hospitality that we added to our clients’ portfolios in prior months should continue to outperform markets. With a turnaround in cash flows, many of these companies should be well positioned for a return to normalcy. We believe improvements to their cost structures, balance sheets, and competitive position (as weaker competitors lost market share) suggest that future levels of profitability should exceed pre-pandemic levels, even at lower volumes. After pausing dividends and share buybacks for much of the Covid era, key regulators in our investable universe have approved banks to resume capital returns in the fourth quarter. Many of these developed market companies held in our client portfolios have accrued dividends throughout the pandemic, which we believe should result in not only normal dividend payments but also the return of excess capital. With dividend income constituting an important component of total return, we eagerly anticipate the normalization of dividend policy for developed market portfolio companies that have maintained strong capital positions over the last year and a half. Finally, the prospect of global bond yields rising further—even to levels that are still low versus historical yields—should favor undervaluation and exposure to economic recovery.

Within EM, the MSCI EM Value Index outperformed the MSCI EM Growth Index in the third quarter and YTD. While our valuation factor performed well during the quarter, our exposure to stocks in the metals and mining industry detracted from relative performance. These stocks are attractive on most valuation metrics, but they were negatively impacted by weak commodity prices related to the slowdown in China. Our value-orientation is also reflected in our positioning in South Korea. While the Fed’s tapering program could pose a challenge for EM currencies, we believe the Korean won should fare relatively well due to the country’s current account surplus, low inflation, and strong fiscal situation.

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].