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International Opportunities

Strategy Profile

The Causeway International Opportunities strategy is a blend of Causeway’s best skills, combining our international value (bottom-up, fundamental, developed international markets) 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 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.

Inception Date30 June 2007
Benchmark MSCI ACWI ex US

Performance

Fund Quarter to Date Year to Date 1 Year3 Year5 Year10 Year Since Inception
Gross % 7.9%7.9%-15.6%8.8%2.8%11.0%3.1%
Net % 7.8%7.8%-15.9%8.4%2.5%10.6%2.7%
MSCI ACWI ex US 7.6%7.6%-12.1%10.1%3.6%8.8%1.7%

Portfolio

Asset Allocation as of 31 Jan 2019

Stocks 98.1%
Cash 1.9%

Characteristics as of 31 Jan 2019

Causeway MSCI ACWI ex US
No. of Holdings 191 2135
Wtd. Avg. Market Cap (Mn $US)$49,320$48,558
FY2 Price/Earnings9.812.3
Price/Book Value1.21.6
Dividend Yield (%)3.93.3

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.

SECTOR WEIGHTS as of 31 Jan 2019

Financials23.65%
Industrials14.55%
Materials11.78%
Health Care9.44%
Consumer Discretionary9.31%
Energy8.70%
Information Technology7.40%
Communication Services5.75%
Consumer Staples3.74%
Utilities2.86%
Real Estate0.86%

(VS. Benchmark)

Financials22.14%
Industrials11.67%
Materials7.65%
Health Care8.20%
Consumer Discretionary10.71%
Energy7.44%
Information Technology8.13%
Communication Services7.64%
Consumer Staples9.62%
Utilities3.37%
Real Estate3.43%
Financials
Industrials
Materials
Health Care
Consumer Discretionary
Energy
Information Technology
Communication Services
Consumer Staples
Utilities
Real Estate
Other

TOP 10 COUNTRIES as of 31 Jan 2019

United Kingdom27.29%
Germany12.11%
Japan12.05%
Switzerland8.01%
China7.07%
Canada5.62%
South Korea4.84%
India2.83%
Taiwan2.81%
Netherlands2.61%
Italy2.60%
Brazil2.10%
France1.83%
Russia1.43%
Thailand1.41%
Spain0.78%
South Africa0.58%
Turkey0.48%
Peru0.40%
Mexico0.31%
Malaysia0.29%
Poland0.21%
Qatar0.14%
United Arab Emirates0.12%
Czech Republic0.10%
Indonesia0.05%
New Zealand0.00%
Singapore0.00%
Egypt0.00%
Greece0.00%
Hungary0.00%
Pakistan0.00%
Philippines0.00%
Sweden0.00%
Norway0.00%
Portugal0.00%
Australia0.00%
Hong Kong0.00%
Ireland0.00%
Israel0.00%
Austria0.00%
Belgium0.00%
Denmark0.00%
Finland0.00%
Chile0.00%
Colombia0.00%

(VS. Benchmark)

United Kingdom11.37%
Germany5.89%
Japan16.51%
Switzerland5.77%
China8.16%
Canada6.78%
South Korea3.67%
India2.22%
Taiwan2.80%
Netherlands2.30%
Italy1.53%
Brazil2.11%
France7.38%
Russia1.02%
Thailand0.64%
Spain2.07%
South Africa1.69%
Turkey0.18%
Peru0.11%
Mexico0.74%
Malaysia0.60%
Poland0.32%
Qatar0.27%
United Arab Emirates0.19%
Czech Republic0.04%
Indonesia0.61%
New Zealand0.15%
Singapore0.91%
Egypt0.03%
Greece0.06%
Hungary0.08%
Pakistan0.01%
Philippines0.29%
Sweden1.80%
Norway0.49%
Portugal0.10%
Australia4.64%
Hong Kong2.64%
Ireland0.36%
Israel0.38%
Austria0.16%
Belgium0.65%
Denmark1.14%
Finland0.71%
Chile0.29%
Colombia0.11%
United Kingdom
Germany
Japan
Switzerland
China
Canada
South Korea
India
Taiwan
Netherlands
Italy
Brazil
France
Russia
Thailand
Spain
South Africa
Turkey
Peru
Mexico
Malaysia
Poland
Qatar
United Arab Emirates
Czech Republic
Indonesia
New Zealand
Singapore
Egypt
Greece
Hungary
Pakistan
Philippines
Sweden
Norway
Portugal
Australia
Hong Kong
Ireland
Israel
Austria
Belgium
Denmark
Finland
Chile
Colombia
Other

TOP 10 HOLDINGS as of 31 Jan 2019

Security Country Industry % of Total
Volkswagen AG Germany Automobiles & Components 3.6
Takeda Pharmaceutical Co., Ltd. Japan Pharmaceuticals & Biotechnology 3.3
Linde Plc United States Materials 3.0
Prudential Plc United Kingdom Insurance 2.9
UniCredit S.p.A. Italy Banks 2.6
BASF SE Germany Materials 2.6
British American Tobacco plc United Kingdom Food Beverage & Tobacco 2.3
Barclays Plc United Kingdom Banks 2.3
ABB Ltd. Switzerland Capital Goods 2.3
Manulife Financial Canada Insurance 2.1

Holdings are subject to change.

Approach

The Causeway International Opportunities strategy is a blend of Causeway’s best skills, combining our international value (bottom-up, fundamental, developed international markets) 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 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.

Our developed markets exposure aims to add value through intensive fundamental research implemented via a disciplined value approach.

Our emerging markets exposure is the result of a quantitative strategy tailored to the unique growth, momentum, and risk characteristics of developing markets. Our proprietary tactical allocation model is designed to add additional value.

The Causeway International Opportunities portfolio is a fully invested, typically 120-200 stock portfolio. Allocation between developed and emerging markets can range from 0-2x the allocation of the MSCI All Country World Index ex-US, but is scalable to clients’ desired parameters.

Commentary

PERFORMANCE REVIEW for the month ended 31 Jan 2019


Developed and emerging equity markets rebounded in January, boosted by more dovish signals from the US Federal Reserve on future interest rate hikes and improving rhetoric on US-China trade tensions. The top performing markets in our investable universe were Turkey, Brazil, Pakistan, Russia, and Colombia. The worst performing markets were India, Saudi Arabia, Malaysia, Taiwan, and the United Arab Emirates. The best performing sectors in the MSCI ACWI ex US Index (“Index”) were real estate, energy, and information technology. The worst performing sectors were consumer staples, health care, and communication services. Every major currency except the Swiss franc appreciated versus the US dollar during the period, thus amplifying overall returns on overseas assets for US dollar-based investors.

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the insurance, pharmaceuticals & biotechnology, utilities, and food beverage & tobacco industry groups, as well as an underweight position in the household & personal products industry group, contributed to relative performance. Holdings in the materials, transportation, software & services, and telecommunication services industry groups, along with an underweight position in the real estate industry group, offset some of the outperformance. The top contributor to return was Takeda Pharmaceutical Co., Ltd. (Japan). Other notable contributors included automobile manufacturer, Volkswagen AG (Germany), global life insurer, Manulife Financial (Canada), utilities provider, SSE Plc (United Kingdom), and life insurer, Prudential Plc (United Kingdom). The largest detractor was telecommunication services provider, Vodafone Group (United Kingdom). Additional notable detractors included pharmaceutical company, AstraZeneca Plc (United Kingdom), print & publishing company, RELX NV (United Kingdom), baked goods food producer, Aryzta AG (Switzerland), and pharmaceutical & consumer healthcare company, GlaxoSmithKline Plc (United Kingdom).*

*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 moutes@causewaycap.com.

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