Global Value Fund

Portfolio Attribution

The Causeway Global Value Fund (“Fund”), on a net asset value basis, outperformed the Index during the month, due primarily to stock selection. On a gross return basis, Fund holdings in the software & services, consumer services, and banks industry groups contributed to relative performance. Holdings in the consumer durables & apparel industry group, along with an overweight position in the media & entertainment industry group and an underweight position in the financial services industry group, offset some of the outperformance compared to the Index. The top contributor to return was rolling stock, signaling, & services provider for the rail industry, Alstom SA (France). Other notable contributors included airport & rail station concessionaire, SSP Group Plc (United Kingdom), and banking & financial services company, Barclays PLC (United Kingdom). The largest detractor was multinational luxury conglomerate, Kering SA (France). Additional notable detractors included semiconductor company, Renesas Electronics Corp. (Japan), and media & entertainment conglomerate, The Walt Disney Co. (United States).

Quarterly Investment Outlook

Monetary tightening in many of the world’s economies is slowing economic growth, albeit with long and variable lags. While central banks have largely tamed inflation, high absolute prices for goods and services are causing voter dissatisfaction in many countries. In the US, the much-anticipated reductions in interest rates have yet to materialize, and the prolonged period of elevated rates pose risks to leveraged sectors such as real estate. The European Central Bank has left open the possibility for additional rate cuts later this year. In China, property market restructuring and amplified trade sanctions are expected to encumber economic recovery.

Narrow, momentum-led markets and political risks are creating investment opportunities. As markets concentrate enthusiasm for generative AI in a cohort of chipmakers, we believe client fundamental portfolios have exposure to lesser-known beneficiaries of this technology cycle, across building, delivery, and deployment phases. Fading bullishness for the Japanese market has created potentially promising valuations. We also remain focused on long-term rewards from operational restructuring, aiming to invest in companies poised for earnings growth and shareholder returns ahead of market recognition.

International Small Cap Fund

Portfolio Attribution

The Causeway International Small Cap Fund (“Fund”), on a net asset value basis, underperformed the Index during the month. To evaluate stocks in our investable universe, our multi-factor quantitative model employs five bottom-up factor categories –valuation, sentiment, technical indicators, quality (formerly labelled competitive strength), and corporate events – and two top-down factor categories assessing macroeconomic and country aggregate characteristics. The strategy’s value factors delivered positive returns in July, and value remains the best-performing factor group over the last twelve months. Although our sentiment factors were flat for the month, returns over the last twelve months and YTD are positive. Our quality and technical factors also posted positive returns in the month, and the technical factor category has produced the highest returns year to date. Our Corporate Events factor, added at the end of February, was the best-performing category in July. Our macroeconomic factors delivered negative monthly returns as countries exhibiting more attractive characteristics (such as Taiwan and Korea) underperformed those with relatively weaker characteristics (such as India). However, returns to our country aggregate factors were positive. All factor groups remain positive on an inception to date basis.

Quarterly Investment Outlook

Following the release of disappointing U.S. economic data, August got off to a volatile start in equity markets. However, as global central banks begin to cut rates, improving liquidity should benefit small cap stocks, especially with small caps (ACWI ex USA Small Cap Index) trading at a rare discount to their larger-cap (ACWI ex USA Index) peers on a forward P/E basis. In addition to the attractive relative valuation of the asset class overall, Causeway’s International Small Cap portfolio continues to trade at a substantial discount to the Index while simultaneously exhibiting more favorable growth, quality, momentum, and positive estimate revisions than the Index. We believe that this highly attractive combination of characteristics better insulates our portfolio from future volatility.

International Opportunities Fund

Portfolio Attribution

The Causeway International Opportunities Fund (“Fund”) on a net asset value basis, outperformed the Index during the month. On a gross return basis, Fund holdings in the capital goods, banks, and pharmaceuticals & biotechnology industry groups contributed to relative performance. Holdings in the consumer durables & apparel, transportation, and technology hardware & equipment industry groups detracted from relative performance. The greatest individual contributors to absolute returns were signaling, & services provider for the rail industry, Alstom SA (France), pharmaceuticals & biotechnology company, Roche Holding AG (Switzerland), and banking & financial services company, Barclays PLC (United Kingdom). The largest individual detractors from absolute returns were multinational luxury conglomerate, Kering SA (France), semiconductor companies, Renesas Electronics Corp. (Japan), and Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan).

We use a proprietary quantitative equity allocation model that assists the portfolio managers in determining the weight of emerging versus developed markets in the Fund. Our allocation relative to the weight of emerging markets in the Index is currently neutral. We identify five primary factors as most indicative of the ideal allocation target: valuation, quality, earnings growth, macroeconomic, and risk aversion. Valuation and earnings growth are currently positive for emerging markets in our model. Our quality metrics, which include such measures as profit margins and return on equity, and our risk aversion factor are neutral. Our macroeconomic indicator is negative for emerging markets.

Quarterly Investment Outlook

Monetary tightening in many of the world’s economies is slowing economic growth, albeit with long and variable lags. While central banks have largely tamed inflation, high absolute prices for goods and services are causing voter dissatisfaction in many countries. In the US, the much-anticipated reductions in interest rates have yet to materialize, and the prolonged period of elevated rates pose risks to leveraged sectors such as real estate. The European Central Bank has left open the possibility for additional rate cuts later this year. In China, property market restructuring and amplified trade sanctions are expected to encumber economic recovery.

Narrow, momentum-led markets and political risks are creating investment opportunities. As markets concentrate enthusiasm for generative AI in a cohort of chipmakers, we believe client fundamental portfolios have exposure to lesser-known beneficiaries of this technology cycle, across building, delivery, and deployment phases in the developed markets portion of the Fund. Fading bullishness for the Japanese market has created potentially promising valuations. We also remain focused on long-term rewards from operational restructuring, aiming to invest in companies poised for earnings growth and shareholder returns ahead of market recognition.

Within EM, the Indian general election concluded in June with the Narendra Modi-led Bharatiya Janata party (“BJP”) losing its standalone majority in the lower house. However, the party retained a majority as part of the National Democratic Alliance. While this result initially disappointed the market, Indian stocks rebounded as the BJP indicated that it would remain committed to investing in infrastructure and instituting reforms. Moreover, Prime Minister Modi’s cabinet appointments were largely holdovers from his last cabinet, allaying concerns that the alliance partners were exerting significant influence over these appointments. We remain confident in our India exposure due to valuation support—the portfolio’s Indian stocks currently trade at significant price-to-earnings discounts versus the MSCI India Index.

Emerging Markets Fund

Portfolio attribution

The Causeway Emerging Markets Fund (“Fund”), on a net asset value basis, underperformed the Index in July 2024. We use both bottom-up “stock-specific” and top-down factor categories to seek to forecast alpha for the stocks in the Fund’s investable universe. Our growth and technical (price momentum) factors were negative indicators in July. Our corporate events, competitive strength, and valuation factors were positive indicators. Our top-down macroeconomic and country/sector aggregate factors were negative while our currency factor was a positive indicator.

Quarterly Investment Outlook

The Indian general election concluded in June with the Narendra Modi-led Bharatiya Janata party (“BJP”) losing its standalone majority in the lower house. However, the party retained a majority as part of the National Democratic Alliance. While this result initially disappointed the market, Indian stocks rebounded as the BJP indicated that it would remain committed to investing in infrastructure and instituting reforms. Moreover, Prime Minister Modi’s cabinet appointments were largely holdovers from his last cabinet, allaying concerns that the alliance partners were exerting significant influence over these appointments. We remain confident in our India exposure due to valuation support-the portfolio’s Indian stocks currently trade at significant price-to-earnings discounts versus the MSCI India Index. In South Africa, elections appear to be progressing in a business-friendly manner. The African National Congress formed a government of national unity with center-leaning parties. While we believe the new government is well-positioned to address the country’s economic challenges – low growth, fiscal deficits, and poor infrastructure – it remains to be seen if the leaders will be able to implement effective policies in these areas. South Africa was the largest country underweight in the Fund as of quarter-end due to valuation and top-down considerations. We continue to monitor South Africa’s economic environment.

After appearing less attractive for much of 2023, earnings growth upgrades for EM equities are currently more attractive than those in ex-US developed markets. Within EM, growth upgrades appear attractive in Taiwan and South Korea. In contrast, the growth outlook for Mexican and Brazilian stocks has slumped. Economic growth rates in these countries have been falling and the US Federal Reserve’s hawkishness has prevented them from more aggressively lowering their domestic interest rates to spur growth. Within EM more broadly, we continue to identify, in our view, attractive investment opportunities in small cap companies. Historically, our investment process has uncovered EM small cap stocks with alpha potential. The Fund’s allocation to small cap stocks remains near the high end of the historical range.

International Value Fund

Portfolio Attribution

The Causeway International Value Fund (“Fund”), on a net asset value basis, outperformed the Index during the month, due primarily to stock selection. On a gross return basis, Fund holdings in the capital goods, banks, and pharmaceuticals & biotechnology industry groups contributed to relative performance. Holdings in the consumer durables & apparel, transportation, and household & personal products industry groups offset some of the outperformance compared to the Index. The top contributor to return was pharmaceuticals & biotechnology company, Roche Holding AG (Switzerland). Other notable contributors included rolling stock, signaling, & services provider for the rail industry, Alstom SA (France), and banking & financial services company, Barclays PLC (United Kingdom). The largest detractor was multinational luxury conglomerate, Kering SA (France). Additional detractors included semiconductor companies Renesas Electronics Corp. (Japan) and Infineon Technologies AG (Germany).

Quarterly Investment Outlook

Monetary tightening in many of the world’s economies is slowing economic growth, albeit with long and variable lags. While central banks have largely tamed inflation, high absolute prices for goods and services are causing voter dissatisfaction in many countries. In the US, the much-anticipated reductions in interest rates have yet to materialize, and the prolonged period of elevated rates pose risks to leveraged sectors such as real estate. The European Central Bank has left open the possibility for additional rate cuts later this year. In China, property market restructuring and amplified trade sanctions are expected to encumber economic recovery.

Narrow, momentum-led markets and political risks are creating investment opportunities. As markets concentrate enthusiasm for generative AI in a cohort of chipmakers, we believe client fundamental portfolios have exposure to lesser-known beneficiaries of this technology cycle, across building, delivery, and deployment phases. Fading bullishness for the Japanese market has created potentially promising valuations. We also remain focused on long-term rewards from operational restructuring, aiming to invest in companies poised for earnings growth and shareholder returns ahead of market recognition.