Whenever there is an abundance of cheap stocks, such as in 2009, the fund might invest in more volatile shares in exchange for potentially greater reward. More recently, however, even those stock prices in the value space have crept up, so the managers have been investing in somewhat more conservative fare and keeping the portfolio’s volatility more in line with its benchmark MSCI EAFE Index.

Hartford and Ketterer have been honing the fund’s value style since its launch in October 2001. A few months before that, they had left their positions as co-managers of Hotchkis & Wiley’s international value fund to found Causeway with their own seed capital and help from a few investors. When they left Hotchkis & Wiley, some 22 people, including the core international investment team, followed them out the door.

Today, Causeway Capital has carved out a solid niche in the international value space and has $56 billion in assets under management.

Both the firm and the fund have been known to follow their own paths by making significant geographic and sector breaks from their benchmarks. This independent streak means the fund’s performance can diverge from broad international developed market indexes, sometimes over fairly long periods. That has worked to Causeway’s advantage from the fund’s inception through October 31, 2017, when its annualized total return of 8.1% beat the MSCI EAFE Index return of 6.8%. But the fund underperformed about three-quarters of its Morningstar foreign large-cap value peers in 2016.

Hartford attributes at least some of the relative underperformance that year to an overweight position in U.K. stocks, which suffered after the Brexit vote. At the end of 2017’s third quarter, the fund had nearly 30% of its assets in the stocks of companies domiciled there, some 12 percentage points more than the MSCI EAFE Index had. He believes these stocks are a better value than those in many other parts of Europe, and remains confident that the benefit of these companies’ overseas sales will overcome domestic economic weakness in the U.K.

He cites Barclays as one example of a British holding that’s struggling through tough times but has the potential to eventually power through. Unlike other European financials, the bank hasn’t participated in the rally this year because of investors’ concerns about the Brexit and the increasing competition in investment banking. Yet Barclays trades at just 65% of book value and could increase its return on equity from 5% now to 10%. “If current management can’t accomplish that, new management will be brought in,” says Hartford.

By contrast, the fund’s 14% weighting in Japanese stocks falls well below the benchmark’s 24% allocation. With the exception of 2009, when the financial crisis drove stocks in that country to extraordinarily low levels, the fund has been underweight there.

“Japan is a bifurcated market, with some very good companies that know how to allocate capital but also some very bad ones that don’t,” he says. “The problem is the good ones often have inflated values. We will only invest in Japanese stocks when valuations are attractive, and those opportunities are few and far between.”

On a sector level, the fund was underweight relative to the benchmark in financials (16.2% versus 21%), and overweight energy (9.7% versus 5.2%) and telecommunications (8.8% versus 4.03%). Hartford says the overweight positions in the latter two sectors reflect the firm’s view that they represent good values on an absolute and relative basis and offer attractive dividend yields that are well supported by strong cash flow. On the other hand, many banking stocks in Europe have risen on expectations of higher interest rates. Those higher rates haven’t materialized, yet stock prices still have those expectations built in.

Royal Dutch Shell, the fund’s second-largest holding, was added to the portfolio in early 2016 after the energy sector’s long drought pushed the stock’s price down. At the time, the company’s dividend yield was nearly 10%. The stock has recovered since then, and while the energy sector remains a laggard, the oil and gas giant has a strong balance sheet; an attractive 6% dividend yield; and a long, unbroken history of paying dividends that dates back to the 1940s. The company is also beginning to reap cost-cutting synergies from its acquisition of BG Group in 2016.