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
Download Profile Sheet Download Flash Report Download Quarterly Review
Contact Us

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) 0.6%8.5%38.3%10.2%9.4%7.7%4.5%
Strategy (net) 0.6%8.2%37.8%9.8%9.0%7.4%4.1%
MSCI ACWI ex US 2.4%8.9%30.2%12.5%10.3%7.2%3.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 0.6%8.5%38.3%10.2%9.4%7.7%4.5%
Strategy (net) 0.6%8.2%37.8%9.8%9.0%7.4%4.1%
MSCI ACWI ex US 2.4%8.9%30.2%12.5%10.3%7.2%3.6%
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 October 31, 2021)

Benchmark: MSCI ACWI ex US
Asset Allocation
Strategy
Stocks 98.5%
Cash 1.5%
Strategy Characteristics
Strategy Benchmark
No. of holdings 165 2350
Weighted avg. market cap (US $MM) $81,963 $77,372
FY2 price/earnings 11.0 13.9
Price/book value 1.6 2.0
Dividend yield (%) 2.8 2.4
TOP 10 HOLDINGS
Security Country Percent
Rolls-Royce Holdings Plc United Kingdom 3.5%
UniCredit S.p.A. Italy 2.5%
BP Plc United Kingdom 2.5%
TotalEnergies SE France 2.5%
Sanofi France 2.5%
Amadeus IT Group SA Spain 2.4%
FANUC Corp. Japan 2.4%
SAP SE Germany 2.4%
Novartis AG Switzerland 2.3%
Takeda Pharmaceutical Co., Ltd. Japan 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 20.9% 19.5%
Industrials 16.7% 12.1%
Information Technology 13.4% 13.1%
Health Care 12.0% 9.4%
Energy 8.4% 5.0%
Consumer Discretionary 7.9% 13.0%
Consumer Staples 6.6% 8.5%
Materials 6.5% 7.9%
Utilities 3.6% 3.0%
Communication Services 2.5% 6.2%
Real Estate 0.0% 2.4%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 17.5% 9.2%
France 13.8% 7.3%
Germany 9.3% 5.7%
China 8.4% 10.1%
Switzerland 8.1% 6.3%
Japan 7.5% 14.5%
Spain 5.9% 1.5%
Taiwan 5.1% 4.3%
Italy 4.5% 1.6%
South Korea 4.4% 3.6%
Regional Allocation
  • Europe – other 62.9%
  • Emerging Asia 22.1%
  • Pacific 7.5%
  • Emerging Europe, Middle East, Africa 2.5%
  • Emerging Latin America 2.3%
  • North America 1.2%

Commentary (As of October 31, 2021)

Highlights

  • Global equities regained momentum in October as progress in vaccination campaigns appeared to have assuaged investor concerns over new mobility restrictions. Emerging markets (“EM”) equities posted modestly positive returns during the month but trailed developed market stocks.
  • Though the company management teams we speak with are generally reporting higher input costs, we believe many supply chain issues should be resolved by mid-2022. In our view, if labor retains bargaining power, this may raise unit labor costs. We believe that the level at which inflation expectations get anchored should have the biggest impact on whether inflation is transitory or more permanent.
  • For many of our developed market portfolio companies, we believe the earnings growth outlook is underpinned by pent up demand, strong balance sheets, and structurally lower costs than those prior to the pandemic.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, banks, pharmaceutical & biotechnology, technology hardware & equipment, and food beverage & tobacco industry groups detracted from performance relative to the Index. Holdings in the utilities, insurance, and software & services industry groups, as well as an underweight position in the telecommunication services and health care equipment & services industry groups, offset a portion of the underperformance. The largest detractor from absolute performance was Takeda Pharmaceutical Co., Ltd. (Japan). Additional top detractors included electronic components manufacturer, Murata Manufacturing Co., Ltd. (Japan), robotics manufacturer, FANUC Corp. (Japan), jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom), and diversified chemicals manufacturer, BASF SE (Germany). The top contributor to return was luxury goods manufacturer & retailers, Compagnie Financiere Richemont (Switzerland). Additional top contributors included electric, gas & renewables power generation & distribution company, Enel SpA (Italy), business software & services provider, SAP SE (Germany), electric utility provider, RWE AG (Germany), and internet commerce company, Alibaba Group Holding (China).

Investment outlook

Although developed equity markets reached new highs during the month, we continue to find plenty of opportunities in undervalued stocks. From a fundamental research perspective, we aim to identify companies poised to deliver improved earnings that can potentially rerate upwards as investors recognize the positive transformation these management teams have delivered. As central banks embark on a monetary tightening cycle to combat inflationary pressures, we expect rising discount rates to act as a headwind for the high-flying valuations of long-duration growth stocks. This should translate into an attractive environment for fundamental, value-oriented research. We have positioned our clients’ portfolios to take advantage of what is, in our view, mispricing in stocks heavily exposed to Covid (e.g., travel, leisure, aerospace, and aviation), balanced with companies in more defensive and cash flow generative industries such as pharmaceutical and utilities. In recent months, we have also increased the portfolio’s energy exposure. Many European integrated oil companies have rationed capital expenditures, diverting investments away from exploration and production towards renewables, leading to a dearth of supply amid the current surging demand. We, therefore, expect oil and gas prices to remain elevated and potentially rise further this winter. For many of our developed market portfolio companies, we believe the earnings growth outlook is underpinned by pent up demand, strong balance sheets, and structurally lower costs than those prior to the pandemic. With many companies resuming dividend payments and share buybacks, we believe income should bolster the total return profile of portfolio holdings in the remainder of 2021 and into 2022.

Within the EM portion of the Portfolio, the major countries with the strongest net earnings upgrades were Taiwan, Qatar, and Poland. The countries with the weakest earnings revisions include China and South Korea. A lack of monetary stimulus, leverage in the real estate sector, and regulatory scrutiny have weighed on Chinese stocks. In South Korea, the information technology sector has experienced downgrades due to weakness in memory pricing. We continue to emphasize valuation in our multi-factor investment process. With several companies offering attractive dividend yields and trading near historically low valuations, on both a next-twelve-month price-to-earnings and price-to-book value basis, we believe select EM value stocks are poised to outperform.

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].