Dealing with today’s low-interest-rate environment is tough.

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“Correlation between equity prices has been very high over the last 18 months,” says Foster Corwith, a portfolio manager with Causeway Capital Management in Los Angeles. He manages the Renaissance Global Markets Fund.

“If we were to see a drawdown in the market, that would be very good for stock pickers,” he adds. But, “what you’ve seen in the U.S. over the last [couple] months with interest-rate policy is the market is proving very difficult to manage.”

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Still, there are several areas of the market that offer opportunities, says Corwith. He currently favours consumer staples, utilities, real estate stocks and high-yield businesses. These perform well in a low-rate environment, he explains, which is why “you’ve seen a lot of money shift from credit markets toward equity markets.”

Read: $6 trillion in bonds trading in negative yield

Further, he says, “In our portfolio today, financials are a great example: businesses [including] Barclay’s in the U.K., KBC in Belgium, Sumitomo Mitsui in Japan […] have really been impacted by the [threat] of negative interest rates.”

Read: Canada could adapt to negative rates: BoC

While financial companies appear to be struggling, Corwith adds, “there’s a lot more happening below the surface once you dig into their fundamentals; you’re finding businesses that are restructuring, improving their balance sheets and pushing return on equities toward historical highs. But [these businesses] still trade well below book value.”

Corwith’s also focusing on “businesses that are capable of borrowing at reasonable levels and using that capital to invest in creative ways.”

Read: Where should value investors be looking?

One example is PVH Corp., which is the parent company of brands such as Calvin Klein and Tommy Hilfiger. “[PVH] has been using low-debt costs to roll up competitors [and] consolidate the market in a way that should be very beneficial to shareholders. We see a lot of opportunity.”


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