Combining our time-tested abilities in developed and emerging international markets

The Fund invests primarily in companies both in developed markets excluding the United States (the “international value portfolio”) and in emerging markets (the “emerging markets portfolio”). Causeway allocates substantially all of the Fund’s assets between the international value portfolio and the emerging markets portfolio using a proprietary asset allocation model.

International Value Portfolio: The international value portfolio consists primarily of common stocks of companies located in developed countries outside the US. Normally, the majority of this portfolio invests in companies that pay dividends or repurchase their shares. The international value portfolio may also invest in companies located in emerging (less developed) markets.

Emerging Markets Portfolio: The emerging markets portfolio is normally invested in equity securities of companies located in emerging (less developed) markets and other investments that are tied economically to emerging markets. Generally, these investments include common stock, preferred and preference stock, American Depositary Receipts, European Depositary Receipts, Global Depositary Receipts, and exchange-traded funds that invest in emerging markets securities.

YTD Return*
+11.32%
Nav*
$12.88, +0.17
Inception
December 31, 2009
Cusip
14949Q107
Benchmark
MSCI ACWI ex US
Minimum Investment
$1,000,000
Sales Charge
None
Total Expense Ratio
1.05%
*As of September 13, 2019

Strategy overview

The portfolio managers discuss our International Opportunities strategy.

Portfolio managers

Chief Executive Officer
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Fundamental Portfolio Manager

Performance

QTDYTD1 year3 years5 yearsSince inception
Fund-6.1%4.8%-8.5%3.8%-0.2%4.4%
MSCI ACWI ex US-4.2%9.2%-2.8%6.4%1.8%4.4%
QTDYTD1 year3 years5 yearsSince inception
Fund-6.1%4.8%-8.5%3.8%-0.2%4.4%
MSCI ACWI ex US-4.2%9.2%-2.8%6.4%1.8%4.4%
QTDYTD1 year3 years5 yearsSince inception
Fund1.3%11.7%-3.2%8.1%1.0%5.2%
MSCI ACWI ex US3.2%14.0%1.8%9.9%2.6%5.0%
QTDYTD1 year3 years5 yearsSince inception
Fund1.3%11.7%-3.2%8.1%1.0%5.2%
MSCI ACWI ex US3.2%14.0%1.8%9.9%2.6%5.0%
201820172016201520142013201220112010
Fund-18.4%29.6%2.0%-6.1%-3.7%17.8%24.6%-12.6%15.4%
MSCI ACWI ex US-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%11.6%
Fund
MSCI ACWI ex US
201820172016201520142013201220112010
-18.4%29.6%2.0%-6.1%-3.7%17.8%24.6%-12.6%15.4%
-13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%11.6%

Portfolio (as of August 31, 2019)

Benchmark: MSCI ACWI ex US
Asset Allocation
Fund
Stocks97.6%
Cash2.4%
Fund Characteristics
FundBenchmark
No. of holdings 200 2214
Weighted avg. market cap (US $MM)$50,602$51,234
FY2 price/earnings9.512.5
Price/book value1.11.6
Net assets$186,137,802-
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AGGermany3.4
BASF SEGermany3.1
Takeda Pharmaceutical Co., Ltd.Japan3.0
UniCredit S.p.A.Italy2.9
KDDI Corp.Japan2.7
ABB Ltd.Switzerland2.6
Linde PlcGermany2.5
British American Tobacco plcUnited Kingdom2.4
Prudential PlcUnited Kingdom2.3
Barclays PlcUnited Kingdom2.2

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 Fund Benchmark
Financials22.0%21.1%
Industrials16.3%11.9%
Materials10.1%7.3%
Health Care9.8%8.7%
Energy9.0%6.6%
Consumer Discretionary7.7%11.5%
Information Technology7.7%8.7%
Communication Services6.6%7.0%
Consumer Staples5.7%10.4%
Utilities1.9%3.5%
Real Estate0.8%3.2%
TOP 10 COUNTRIES
Country Fund Benchmark
United Kingdom24.5%10.8%
Germany14.7%5.7%
Japan12.3%16.3%
China8.0%8.5%
Switzerland5.7%6.4%
France5.4%7.6%
Canada4.0%7.0%
Taiwan3.5%2.9%
South Korea3.0%3.0%
Italy2.9%1.6%
Regional Allocation
  • Europe – other 57.8%
  • Emerging Asia 18.0%
  • Pacific 12.3%
  • North America 4.0%
  • Emerging Latin America 2.8%
  • Emerging Europe, Middle East, Africa 2.8%

Commentary (As of August 31, 2019)

Highlights

  • Developed and emerging equity markets contracted in August in a global “risk off” wave, exacerbated by increased trade tensions, recessionary fears, and sinking global bond yields.
  • With approximately one third of global bonds (European and Japanese sovereign, corporate, and mortgage) trading at negative yields, the bond market appears to be signaling an excess of savings versus available low/no risk assets. Fiscal spending, as an anti-recessionary tool, will likely lead to considerably more sovereign debt issuance, driving interest rates back into positive territory.
  • According to our estimates, many of the cheap stocks we find most compelling have a recession (trade war, disorderly Brexit, etc.) already discounted in their share prices. Faced with an actual recession, we believe share prices for these cheap cyclical stocks with superior financial strength will likely start to anticipate and discount a subsequent economic recovery.

Portfolio attribution

Causeway International Opportunities Fund (“Fund”) underperformed the Index during the month, due primarily to stock selection. Fund holdings in the insurance, software & services, energy, and food & staples retailing industry groups, along with an underweight position in the household & personal products industry group, detracted from relative performance. Holdings in the telecommunication services, technology hardware & equipment, and utilities industry groups, as well as an overweight position in the pharmaceuticals & biotechnology and transportation industry groups, contributed to relative performance. The largest detractor was life insurer, Prudential Plc (United Kingdom). Additional notable detractors included enterprise infrastructure software company, Micro Focus International Plc (United Kingdom), energy supermajor, Royal Dutch Shell Plc (United Kingdom), jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom), and banking & financial services company, Barclays Plc (United Kingdom). The top contributor to return was pharmaceuticals & chemicals company, Bayer AG (Germany). Other notable contributors included pharmaceutical company, AstraZeneca Plc (United Kingdom), major passenger railway operator, East Japan Railway Co.(Japan), utilities provider, SSE Plc (United Kingdom), and liquor producer, Kweichow Moutai Co (China).

We use a proprietary quantitative equity allocation model that assists the portfolio managers in determining the weight of emerging versus developed markets in the Fund. Our allocation relative to the weight of emerging markets in the Index is currently underweight. We identify five primary factors as most indicative of the ideal allocation target: valuation, quality, earnings growth, macroeconomic, and risk aversion. Valuation is currently neutral for emerging markets in our model. Our quality metrics, which include such measures as profit margins and return on equity, are negative. Our earnings growth and macroeconomic factors are negative for emerging markets. Lastly, our risk aversion factor is positive in our model.

Investment outlook

August market performance indicates overwhelming risk aversion as investors (or market trading software programs) have crowded their buying into supposed growth and economically defensive stocks, especially those poised to benefit from ever-falling interest rates (real estate and utilities, for example). US stocks and the US dollar have attracted global capital flows, pushing the US equity market valuation premium relative to MSCI EAFE markets to a 20-year high. The selling pressure on economically cyclical stocks has placed what we believe is a fundamentally unjustifiable valuation discount on economic risk. According to our estimates, many of the cheap stocks we find most compelling have a recession (trade war, disorderly Brexit, etc.) already discounted in their share prices. Faced with an actual recession, we believe share prices for these cheap cyclical stocks with superior financial strength will likely start to anticipate and discount a subsequent economic recovery. From a risk factor perspective, the earnings yield spread (top minus bottom quintile) for value and cyclicality factors in both MSCI EAFE and MSCI ACWI markets has eclipsed all historical levels except for the 2008 GFC. Using earnings yield spreads in MSCI ACWI markets, growth factor “expensiveness” has surpassed historical levels, except during the late 1990s TMT bubble (technology-media-telecoms). We are a disciplined value manager and seek high quality managements able and willing to implement operational restructuring to enhance profitability and free cash flow.

In emerging markets, the momentum factor, which has become more growth-oriented, continued its resurgence in August. In contrast, value stocks in the asset class underperformed during the month and the year-to-date periods. In local currency terms, the MSCI Emerging Markets Value Index trailed the MSCI Emerging Markets Growth Index by 2.2%in August and is underperforming by 8.7% year-to-date. The MSCI Emerging Markets Value Index trades at a next-twelve-month price-to-earnings ratio of 8.8x and a price-to-book ratio of 1.1x, representing sizable discounts relative to the MSCI Emerging Markets Growth Index. We continue to emphasize value factors in our investment process, which should benefit the portfolio if/when value stocks rebound.

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 fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report 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. Diversification does not protect against market loss. Current and future holdings are subject to risk. Investing in ETFs is subject to the risks of the underlying funds. Investments in smaller companies typically exhibit higher volatility. Asset allocation may not protect against market risk. International and emerging markets investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets and smaller companies involve additional risks and higher volatility.

Distributions

DividendsShort-term capital gainsLong-term capital gains
2018$0.2904$0.0000$0.0327
2017$0.2145$0.0000$0.0000
2016$0.4494$0.0000$0.0000
2015$0.1623$0.0107$0.0199
2014$0.0000$0.0000$0.4943
2013$0.1266$0.0001$0.0739
2012$0.2451$0.0000$0.0190
2011$0.2756$0.0000$0.0303
2010$0.1858$0.0000$0.1712

Distributions are per share. Distribution amounts are based on gains and losses realized and income earned by the Fund through October 31 (or earlier under certain circumstances).

Documents

Fund information:

Forms: