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.

June 30, 2007

Strategy overview

The portfolio managers discuss our International Opportunities strategy.

Portfolio managers

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


QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.0%6.4%-9.8%5.9%1.0%8.0%2.9%
Strategy (net) -4.1%6.2%-10.1%5.6%0.6%7.6%2.5%
MSCI ACWI ex US -2.7%7.5%-5.8%7.2%1.8%6.3%1.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -4.0%6.4%-9.8%5.9%1.0%8.0%2.9%
Strategy (net) -4.1%6.2%-10.1%5.6%0.6%7.6%2.5%
MSCI ACWI ex US -2.7%7.5%-5.8%7.2%1.8%6.3%1.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 10.8%10.8%-6.9%8.1%2.4%11.4%3.3%
Strategy (net) 10.7%10.7%-7.3%7.8%2.0%11.0%2.9%
MSCI ACWI ex US 10.4%10.4%-3.7%8.6%3.0%9.3%1.9%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 10.8%10.8%-6.9%8.1%2.4%11.4%3.3%
Strategy (net) 10.7%10.7%-7.3%7.8%2.0%11.0%2.9%
MSCI ACWI ex US 10.4%10.4%-3.7%8.6%3.0%9.3%1.9%
Fund 20182017201620152014201320122011
Strategy (gross) -18.0%31.8%2.2%-4.3%-4.1%21.7%25.9%-11.9%
Strategy (net) -18.7%30.8%1.4%-5.1%-4.8%20.8%24.9%-12.6%
MSCI ACWI ex US -13.8%27.8%5.0%-5.3%-3.4%15.8%17.4%-13.3%
Strategy (gross)
Strategy (net)

Portfolio (as of May 31, 2019)

Benchmark: MSCI ACWI ex US
Asset Allocation
Stocks 93.6%
Cash 6.4%
Strategy Characteristics
Strategy Benchmark
No. of holdings 203 2210
Weighted avg. market cap (US $MM) $49,595 $48,514
FY2 price/earnings 9.3 11.9
Price/book value 1.2 1.6
Dividend yield (%) 4.0 3.3
Net assets $0 -
Security Country Percent
Volkswagen AG Germany 3.8%
Takeda Pharmaceutical Co., Ltd. Japan 3.1%
Linde Plc Germany 2.9%
UniCredit S.p.A. Italy 2.7%
KDDI Corp. Japan 2.6%
Prudential Plc United Kingdom 2.4%
ABB Ltd. Switzerland 2.4%
BASF SE Germany 2.3%
British American Tobacco plc United Kingdom 2.2%
AstraZeneca Plc United Kingdom 2.2%

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 Strategy Benchmark
Financials 20.6% 22.0%
Industrials 14.8% 11.8%
Materials 9.8% 7.5%
Health Care 9.2% 8.2%
Energy 9.2% 7.3%
Consumer Discretionary 8.5% 11.0%
Information Technology 7.4% 8.4%
Communication Services 6.2% 7.0%
Consumer Staples 5.0% 10.1%
Utilities 2.1% 3.3%
Real Estate 0.8% 3.3%
Country Strategy Benchmark
United Kingdom 27.1% 11.5%
Germany 11.9% 5.8%
Japan 11.8% 16.1%
China 7.6% 8.6%
Switzerland 7.4% 6.0%
Canada 5.3% 6.8%
South Korea 3.8% 3.4%
France 3.5% 7.6%
India 3.0% 2.4%
Italy 3.0% 1.6%
Regional Allocation
  • Europe – other 53.9%
  • Emerging Asia 18.2%
  • Pacific 12.4%
  • North America 7.7%
  • Emerging Latin America 2.9%
  • Emerging Europe, Middle East, Africa 2.6%

Commentary (As of May 31, 2019)


  • Developed and emerging equity markets declined during the month as trade negotiations between the US and China deteriorated and import tariff rates increased. Stocks in industries sensitive to economic growth (cyclicals) suffered greatly during the month versus those in defensive industries.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the banks, energy, food beverage & tobacco, insurance, and utilities industry groups detracted from relative performance. Holdings in the telecommunication services and consumer durables & apparel industry groups, as well as an underweight position in the retailing, semiconductors & semi equipment, and media & entertainment industry groups, offset some of the underperformance. The largest detractor was banking & financial services company, UniCredit S.p.A.(Italy). Additional notable detractors included oil & natural gas producer, Encana (Canada), diversified chemicals manufacturer, BASF SE (Germany), life insurer, Prudential Plc (United Kingdom), and automobile manufacturer, Volkswagen AG (Germany). The top contributor to return was telecommunication services provider, KDDI Corp. (Japan). Other notable contributors included energy company, Gazprom PJSC - ADR (Russia), pharmaceutical & consumer healthcare products producer, Novartis AG (Switzerland), multinational food processing company, JBS SA (Brazil), and industrial gas company, Linde Plc (Germany).

Investment outlook

The anticipated “quality and safety” associated with economically defensive stocks attracted even more buying in May, stretching the valuation premium of defensive stocks compared to cyclical stocks to near historic highs. We believe the undervaluation in many of these cyclical industries such as US and European banks, global oil and gas, global industrials, consumer discretionary, and materials seems extreme, as our analysis indicates the valuations already discount recessionary economic conditions. In May, in particular, trade tensions have amplified risk aversion. And trade relief should do just the opposite, which would likely drive up bond yields and attract investors back to undervalued stocks. However, our price targets do not depend on economic recovery. To the degree managements of our developed market portfolio companies succeed in making significant operational improvements, their equity valuations should benefit and become less macroeconomic dependent. The value style does not rely on an economic environment; it tends to outperform growth when interest rates rise. Although we would welcome a value tailwind, we aim to build a portfolio that seeks to outperform even if investors crowd into long duration, growth equities. We have a preference for companies able to reward shareholder patience with dividends and share buybacks.

In the emerging markets portion of the Portfolio, our price momentum factor has rebounded in April and May after underperforming in recent quarters. Momentum's strong performance in May was primarily attributable to defensive positioning as lower volatility stocks outperformed amid global equity market turbulence. Our momentum factor has tended to underperform during periods of heightened uncertainty in financial markets. A lack of clarity surrounding trade tensions, Fed policy, and global growth have contributed to momentum’s underperformance over the past 12 months. While we are researching the factor’s efficacy, we are encouraged that momentum continues to provide a hedge against value, our largest factor exposure.

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