Seeking value primarily in the non-US developed markets
The International Value Select portfolio is constructed from an equity universe composed of companies with market capitalizations typically greater than $5 billion located in non-US developed and emerging market countries. The strategy uses our international value equity strategy with two distinctions: the select portfolio has greater liquidity (by way of investing in larger capitalization companies) and fewer holdings. We believe that concentrating the holdings can compensate for the loss of small/mid cap exposure. The investment process comprises three stages: quantitative screening and initial analysis, fundamental research, and portfolio construction.
- Benchmark
- MSCI EAFE
- Inception
- March 31, 2005
Portfolio managers
Brian Cho
Mr. Cho is a fundamental portfolio manager at Causeway. He joined the firm in September 2013 and has been a portfolio manager since January 2021. His current responsibilities include coverage of companies in the technology and communication services sectors.
From 2011 to 2013, Mr. Cho was a vice president at BofA-ML Equity Research, covering the IT hardware and supply chain sector. From 2007 to 2011, he worked as an associate at Goldman Sachs Equity Research covering the same sector. From 2006 to 2007, he worked as an analyst at Morgan Stanley Equity Research covering the internet and interactive software sector. Prior to that, he worked as an analyst at PA Consulting Group in the financial services practice.
Mr. Cho earned a BSc in management science from Massachusetts Institute of Technology.
Read our interview with Brian about value investing in the technology sector.
Jonathan Eng
Mr. Eng is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global consumer discretionary, industrials, and energy sectors. He joined the firm in July 2001 and has been a portfolio manager since February 2002.
From 1997 to 2001, Mr. Eng was an equity research associate for the Hotchkis and Wiley division of Merrill Lynch Investment Managers (HW-MLIM). In 1996, Mr. Eng worked as a summer research associate for Hotchkis and Wiley, performing U.K. and European equity research. From 1993 to 1995, Mr. Eng analyzed merger and acquisition candidates at Slusser Associates. From 1990 to 1993, Mr. Eng worked as a middle market corporate lender for Bank of Boston.
Mr. Eng earned a BA in history and economics from Brandeis University and an MBA from the UCLA Anderson Graduate School of Management
Harry Hartford
Head of Fundamental Research
Fundamental Portfolio Manager
Mr. Hartford is the president at Causeway, fundamental portfolio manager, and head of fundamental research. Mr. Hartford co-founded the firm in June 2001 and is a member of the operating committee.
From 1996 to June 2001, Mr. Hartford was a managing director for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM) and co-head of the firm's HW-MLIM international and global value team. From 1994 to 1996, Mr. Hartford was a portfolio manager for Hotchkis and Wiley. From 1984 to 1994, Mr. Hartford was with The Investment Bank of Ireland, where he gained ten years’ experience in both international and global equity management. During this time, Mr. Hartford also managed the Irish Investment Fund, a closed-end country fund quoted on the NYSE. Before entering the investment business, Mr. Hartford lectured in micro and macroeconomics at Oklahoma State University.
Mr. Hartford earned a BA, with honors, in economics from the University of Dublin, Trinity College, an MSc in economics from Oklahoma State University, and is a Phi Kappa Phi member. Mr. Hartford is a member of The Ireland Funds America Board of Directors and serves as chair of the Los Angeles Regional Board.
Sarah Ketterer
Fundamental Portfolio Manager
Ms. Ketterer is the chief executive officer at Causeway, fundamental portfolio manager, and is responsible for investment research across all sectors. Ms. Ketterer co-founded the firm in June 2001 and is a member of the operating committee.
From 1996 to 2001, Ms. Ketterer worked for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM). At HW-MLIM, she was a managing director and co-head of the firm's HW-MLIM International and Global Value team. From 1990 to 1996, Ms. Ketterer was a portfolio manager at Hotchkis & Wiley, where she founded the International Equity product.
Ms. Ketterer earned a BA in economics and political science from Stanford University and an MBA from the Tuck School, Dartmouth College. Ms. Ketterer serves on the Stanford University Board of Trustees and the Girls Who Invest President’s Council and is on the advisory board of Portal Schools. She previously served as a board member and chair of the Los Angeles World Affairs Council and Town Hall and chair of the investment committee of the Music Center Foundation.
Ellen Lee
Ms. Lee is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global consumer and utilities sectors. Prior to the current role, she also covered transportation and autos. She joined the firm in August 2007 and has been a portfolio manager since January 2015.
During the summer of 2006, Ms. Lee interned at Tiger Asia, a long short equity hedge fund focused on China, Japan, and Korea. From 2001 to 2004, Ms. Lee was an associate in the mergers and acquisitions division of Credit Suisse First Boston in Seoul, where she advised Korean corporates and multinational corporations. From 1999 to 2000, she was an analyst in the mergers and acquisitions division of Credit Suisse First Boston in Hong Kong.
Ms. Lee earned a BA in business administration from Seoul National University and an MBA from the Stanford Graduate School of Business. She currently serves on the audit and investment committee at the Center for Early Education in West Hollywood.
Conor Muldoon, CFA
Mr. Muldoon is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global financials and materials sectors. He joined the firm in August 2003 and has been a portfolio manager since September 2010. He is also a member of the operating committee.
From 1995 to 2003, Mr. Muldoon was an investment consultant for Fidelity Investments where he served as a liaison between institutional clients and investment managers within Fidelity. He was responsible for communicating current information on the financial markets, the economy and investment performance.
Mr. Muldoon earned a BSc and an MA from the University of Dublin, Trinity College and an MBA, with high honors, from the University of Chicago. Mr. Muldoon was inducted into the Beta Gamma Sigma honors society and is also a CFA charterholder.
Steven Nguyen, CFA
Mr. Nguyen is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the industrials, energy, utilities, and healthcare sectors. He joined the firm in April 2012 and has been a portfolio manager since January 2019.
From 2006 to 2012, Mr. Nguyen was a senior credit analyst at Bradford & Marzec covering high yield and investment grade companies in the telecommunication services, cable, media, gaming, insurance, and REIT industries. From 2003 to 2006, Mr. Nguyen was a credit analyst/portfolio manager in the corporate bond department of Allegiance Capital.
Mr. Nguyen earned a BA in business economics from Brown University and an MBA, with honors, from the UCLA Anderson School of Management. Mr. Nguyen was the president of the Anderson Student Asset Management association. Mr. Nguyen is a CFA charterholder.
Alessandro Valentini, CFA
Mr. Valentini is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global healthcare, financials, and materials sectors. He joined the firm in July 2006 and has been a portfolio manager since April 2013.
During the summer of 2005, Mr. Valentini worked as a research analyst at Thornburg Investment Management, where he conducted fundamental research for the International Value Fund and the Value Fund, focusing on the European telecommunication and Canadian oil sectors. From 2000 to 2004, Mr. Valentini worked as a financial analyst at Goldman Sachs in the European equities research-sales division in New York.
Mr. Valentini earned an MBA from Columbia Business School, with honors, an MA in economics from Georgetown University and a BS, magna cum laude, from Georgetown University. Mr. Valentini was inducted into the Beta Gamma Sigma honors society, is a Phi Beta Kappa member, and is a CFA charterholder.
Performance
Account returns for the Causeway International Value Select Composite ("International Value Select Composite") are calculated daily. Monthly account returns are calculated by geometrically linking the daily returns. The return of the International Value Select Composite is calculated monthly by weighting monthly account returns by the beginning market values. Valuations and returns are computed and stated in US dollars. Returns include the reinvestment of interest, dividends and any capital gains. Returns are calculated gross of withholding taxes on dividends, interest income, and capital gains. Past performance is no guarantee of future performance. Gross-of-fees returns are presented before management, performance and custody fees but after trading expenses. Net-of-fees returns are presented after the deduction of actual management fees, performance-based fees, and all trading expenses, but before custody fees. Causeway’s basic management fee schedules are described in its firm brochure pursuant to Part 2 of Form ADV. A complete list and description of firm composites is available upon request. This information supplements the composite presentation at Composite Performance. MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products. Investing involves risk including loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification does not prevent all investment losses.
Portfolio (as of April 30, 2022)
Asset Allocation
| Strategy | |
|---|---|
| Stocks | 98.2% |
| Cash | 1.8% |
Strategy Characteristics
| Strategy | Benchmark | |
|---|---|---|
| No. of holdings | 58 | 825 |
| Weighted avg. market cap (US $MM) | $73,977 | $68,540 |
| FY2 price/earnings | 10.5 | 12.6 |
| Price/book value | 1.6 | 1.8 |
| Dividend yield (%) | 3.1 | 3.0 |
TOP 10 HOLDINGS
| Security | Country | Percent |
|---|---|---|
| Rolls-Royce Holdings Plc | United Kingdom | 3.5% |
| TotalEnergies SE | France | 3.3% |
| UniCredit S.p.A. | Italy | 3.2% |
| FANUC Corp. | Japan | 3.1% |
| Samsung Electronics Co., Ltd. | South Korea | 3.1% |
| Amadeus IT Group SA | Spain | 3.0% |
| Novartis AG | Switzerland | 3.0% |
| Enel SpA | Italy | 3.0% |
| SAP SE | Germany | 2.9% |
| Shell | United Kingdom | 2.7% |
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 | 19.5% | 17.5% |
| Industrials | 18.2% | 15.0% |
| Health Care | 16.2% | 13.5% |
| Information Technology | 11.4% | 8.2% |
| Consumer Staples | 10.1% | 10.7% |
| Energy | 8.4% | 4.3% |
| Utilities | 6.0% | 3.5% |
| Consumer Discretionary | 6.0% | 11.2% |
| Materials | 2.3% | 8.2% |
| Real Estate | 0.0% | 2.9% |
| Communication Services | 0.0% | 4.9% |
TOP 10 COUNTRIES
| Country | Strategy | Benchmark |
|---|---|---|
| United Kingdom | 27.2% | 15.7% |
| France | 16.1% | 11.4% |
| Switzerland | 8.6% | 10.5% |
| Germany | 8.1% | 8.1% |
| Spain | 7.9% | 2.4% |
| Japan | 7.7% | 21.8% |
| Italy | 6.1% | 2.3% |
| Netherlands | 4.2% | 4.2% |
| South Korea | 4.1% | 0.0% |
| Canada | 2.4% | 0.0% |
Regional Allocation
- Europe – other 81.5%
- Pacific 13.5%
- North America 2.4%
- Emerging Asia 0.8%
Commentary (As of March 31, 2022)
Highlights
Portfolio attribution
The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the banks, materials, capital goods, utilities, and household & personal products industry groups detracted from relative performance. Holdings in the insurance and food & staples retailing industry groups, as well as an overweight position in the pharmaceuticals & biotechnology industry group and an underweight position in the retailing and consumer durables & apparel 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 diversified chemicals manufacturer, BASF SE (Germany), banking & financial services company, Barclays Plc (United Kingdom), electric, gas & renewables power generation & distribution company, Enel SpA (Italy), and automobile manufacturer, Volkswagen AG (Germany). The top contributor to return was pharmaceuticals & chemicals company, Bayer AG (Germany). Other notable contributors included pharmaceutical company, AstraZeneca Plc (United Kingdom), insurer, AXA SA (France), financial services company, Zurich Insurance Group (Switzerland), and pharmaceuticals & biotechnology company, Roche Holding AG (Switzerland).
Investment outlook
After a very strong start to the year, equity markets’ reactions to Russia’s invasion of Ukraine weighed heavily on portfolio performance in the second half of the quarter. The Russian attack triggered sell-offs in what we see as high-quality portfolio companies, presenting us with a chance to lower average costs. The subsequent “risk-off” sentiment led to the selling of cyclical stocks, notably those in the Covid recovery category, such as travel, aerospace, leisure, and hospitality. We believe markets are pricing in a second-order effect that assumes that the additional inflation caused by the invasion will be met by severe monetary tightening and negative real gross domestic product growth in most non-commodity exporting countries. In our view, even if Europe tumbles into recession, many of its financial and industrial sector stocks (the most cyclical) increasingly discount such an outcome. Traditionally, buying cyclical stocks into a recession has often proven fruitful given their sizable outperformance as markets look forward and anticipate economic recovery. After such an enormous flood of global monetary expansion, capped by the pandemic period, many market participants appear to have forgotten about cycles. We remember them vividly and have started positioning client portfolios to potentially take advantage of the future recovery.
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].