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By Kathryn Spica, CFA | 10-12-2012 11:00 AM

Ketterer: We're Taking Risk Down

Following stocks' year-to-date run, the Causeway manager says there's no reason to stick one's neck out.

Kathryn Spica: I'm Kathryn Spica, mutual fund analyst at Morningstar. I am here today with Sarah Ketterer of Causeway Funds, and we're going to talk about the Causeway International Value Fund.

Sarah, thanks so much for being with me.

Sarah Ketterer: Thanks for having me.

Spica: So just to start off, could you give us an introduction to the fund and tell us about how your fund differs from other international value funds.

Ketterer: Gladly. Causeway International Value Fund, we launched it in 2001. It's a carryover from what our team has done since 1990. So we have tons of experience.

We are predominantly a developed market international fund with a very distinct value approach, and at Causeway we blend both fundamental investing, serious in-depth research, with quantitative risk control, and the two combined lead to the outcome of our fund returns that are risk-modulated.

Spica: Could you talk a little bit about how those teams come together, the fundamental research and the quantitative sides?

Ketterer: Well, we are not big on star system at Causeway. We prefer to have a collaborative team of portfolio managers. There are six fundamental portfolio managers at Causeway working closely with two quantitative portfolio managers, and we meet every week where the fundamental side produces stocks with significant upside potential. My quantitative colleagues, they have both built a multifactor risk model for us and through that model, determined the marginal or that extra amount of risk each stock will add to our portfolio. So our international portfolio, our attempt is, and that's our fund, to maximize return and minimize risk, to achieve the largest Sharpe ratio we can at all times.

Spica: That sounds like risk, as you mentioned, is a really integral part of the process. Could you go a little deeper into how you look at risk, and why that's an important part of your approach?

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