The Causeway Global Value Fund (“Fund”), on a net asset value basis, underperformed the Index during the month, due primarily to stock selection. On a gross return basis, Fund holdings in the semiconductors & semi equipment and capital goods industry groups, along with an underweight position in the energy industry group, detracted from relative performance. Holdings in the insurance, pharmaceuticals & biotechnology, and commercial & professional services industry groups offset some of the underperformance compared to the Index. The largest detractor was semiconductor company, Renesas Electronics Corp. (Japan). Additional notable detractors included passenger & cargo airline, Alaska Air Group, Inc. (United States), and rolling stock, signaling, and services provider for the rail industry, Alstom SA (France). The top contributor to return was global financial services giant, Citigroup, Inc. (United States). Other notable contributors included telecommunication services provider, KDDI Corp. (Japan), and global biopharmaceutical company, Pfizer Inc. (United States).
Investment Outlook
The escalating Middle East conflict and partial closure of the Strait of Hormuz increased oil prices and inflation risks, reducing growth expectations. Global equities fell in March, and traditional safe havens offered limited diversification. Energy stocks benefited from supply concerns, while other sectors struggled. Europe and energy-importing Asian economies are the most oil & gas sensitive, while emerging markets weakened as investors reduced risk exposure. Software and services stocks remain unpopular as competition from generative AI-native entrants may disrupt incumbents. Rising energy prices have cast a shadow over economically sensitive sectors, depressing the valuations of many cyclical stocks. Even after the US ultimately disengages from Iran, geopolitical risk will likely remain elevated for several quarters. In technology and consumer sectors, recent weakness reflects both cyclical concerns and longer-term structural shifts, requiring even greater precision in stock selection. If the US achieves a satisfactory set of goals for Iran, portfolio holdings have the potential to rally. Overall, the conflict has not currently caused us to mark down our two-year price targets for portfolio companies. Per Causeway history, we use unjustified share price weakness to add to existing positions where our investment thesis remains intact. Market dislocations may also create opportunities to initiate new investments in high-quality businesses at more attractive values.
International Small Cap Fund
Portfolio Attribution
The Causeway International Small Cap Fund (“Fund”), on a net asset value basis, outperformed the Index during the month. To evaluate stocks in our investible universe, our multi-factor quantitative model employs five bottom-up factor categories –valuation, sentiment, technical indicators, quality, and corporate events – and two top-down factor categories assessing macroeconomic and country aggregate characteristics. Though alpha factor performance was more mixed in March, most alpha factors posted positive performance in the first quarter overall. Our quality, valuation, and corporate events factor categories led returns in March, though our sentiment and technical factors posted negative returns given the sharp change in market leadership. For the first quarter overall, all factors delivered positive returns except for quality, which had been out of favor recently as the only alpha factor category with negative returns over the last twelve months. Our technical factors were the best-performing factor group in the first quarter and over the last twelve months. Our macroeconomic and country aggregate factors posted positive returns in March as countries exhibiting stronger metrics (such as Taiwan and Norway) outperformed those with relatively weaker characteristics (such as Australia and India). All alpha factor group returns remain positive on an inception to date basis.
Investment Outlook
Amid a backdrop of rising energy prices, the new chair of the US Federal Reserve (“Fed”), Kevin Warsh, faces a challenge. He needs to determine if the rising prices are transitory as he seeks to balance inflation and growth considerations. Rising US interest rates driven by inflation concerns and a flight to safety amid market volatility have contributed to falling international currencies.
International small caps (ACWI ex USA Small Cap Index) continue to trade at a rare discount to their larger-cap (ACWI ex USA Index) peers on a forward P/E basis despite typically trading at a premium. 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.
We believe another attractive feature of international small caps is that they exhibit greater valuation dispersion than large caps on both a forward earnings yield and B/P basis. This indicates more information content in the valuation ratios of small caps. In addition to exhibiting greater valuation dispersion, small caps exhibit a higher long-term earnings per share growth trend.
We continue to monitor the fluid conflict in the Middle East and the Fund remains underweight stocks in the EMEA and Developed Middle East regions due primarily to bottom-up considerations.
International Opportunities Fund
Portfolio Attribution
The Causeway International Opportunities Fund (“Fund”) on a net asset value basis, underperformed the Index during the month. On a gross return basis, Fund holdings in the semiconductors & semi equipment, banks, and energy industry groups detracted from relative performance. Positioning in the pharmaceuticals & biotechnology, commercial & professional services, and materials industry groups contributed to relative performance. The largest detractors from absolute returns included semiconductor company, Renesas Electronics Corp. (Japan), electronic equipment manufacturer, Samsung Electronics Co., Ltd.(South Korea), and semiconductor company, SK hynix, Inc. (Taiwan). The greatest contributors to absolute returns included crude oil & natural gas company, BP Plc (United Kingdom), bank, China Construction Bank Corp. (China), and automobile company, Geely Automobile Holdings Ltd. (China).
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 overweight. We identify five primary factors as most indicative of the ideal allocation target: valuation, quality, earnings growth, macroeconomic, and risk aversion. Our valuation, risk aversion, and macroeconomic factors are positive for emerging markets. Our quality metric, which includes such measures as profit margins and return on equity, is also positive. Our earnings growth factor is a neutral indicator.
Investment Outlook
The escalating Middle East conflict and partial closure of the Strait of Hormuz increased oil prices and inflation risks, reducing growth expectations. Global equities fell in March, and traditional safe havens offered limited diversification. Energy stocks benefited from supply concerns, while other sectors struggled. Two of the portfolio’s largest EM country overweights, South Korea and Taiwan, are importer of oil and Liquefied Natural Gas (“LNG”). We continue to identify, in our view, attractive investment opportunities in these countries, due to compelling bottom-up and top-down characteristics. Amid a backdrop of rising energy prices, the new chair of the US Federal Reserve (“Fed”), Kevin Warsh, faces a challenge. He needs to determine if the rising prices are transitory as he seeks to balance inflation and growth considerations. Rising US interest rates driven by inflation concerns and a flight to safety amid market volatility have contributed to falling EM currencies.
Software and services stocks remain unpopular as competition from generative AI-native entrants may disrupt incumbents. Rising energy prices have cast a shadow over economically sensitive sectors, depressing the valuations of many cyclical stocks. Even after the US ultimately disengages from Iran, geopolitical risk will likely remain elevated for several quarters. In technology and consumer sectors, recent weakness reflects both cyclical concerns and longer-term structural shifts, requiring even greater precision in stock selection. If the US achieves a satisfactory set of goals for Iran, portfolio holdings have the potential to rally. Overall, the conflict has not currently caused us to mark down our two-year price targets for portfolio companies. Per Causeway history, we use unjustified share price weakness to add to existing positions where our investment thesis remains intact. Market dislocations may also create opportunities to initiate new investments in high-quality businesses at more attractive values.
Emerging Markets Fund
Portfolio Attribution
The Fund, on a net asset value basis, outperformed the Index in March 2026. We use both bottom-up “stock-specific” and top-down factor categories to forecast alpha for the stocks in the Fund’s investable universe. Our bottom-up valuation and competitive strength factors were positive indicators in March. Our growth, technical (price momentum), and corporate events factors were negative indicators. Our top-down macroeconomic, currency, and country/sector aggregate factors were negative indicators during the month.
Investment Outlook
The conflict in the Middle East remains fluid and traffic in the Strait of Hormuz has been limited. This has fueled volatility in energy prices and global equity markets. Two of the Fund’s largest country overweights, South Korea and Taiwan, are importers of oil and Liquefied Natural Gas (“LNG”). Rising energy prices heavily impacted stock returns in these markets in March. We continue to identify, in our view, attractive investment opportunities in these countries, due to compelling bottom-up and top-down characteristics. The Fund was overweight Indian equities as of quarter-end due in part to valuation considerations, which diversifies the portfolio’s energy exposure as India is also an oil importer. The Fund was also underweight Gulf Cooperation Council (“GCC”) countries as of quarter-end. We believe the conflict in the Middle East will eventually wind down and some semblance of normalcy will return for most economies. However, this path to normalcy may be longer for the GCC countries as some have suffered significant infrastructure damage. The conflict should further incentivize energy-importing countries to diversify away from the Middle East. While the valuations of stocks in GCC countries are increasingly attractive, we do not believe this adequately compensates for the increased risks. Amid a backdrop of rising energy prices, the new chair of the US Federal Reserve (“Fed”), Kevin Warsh, faces a challenge. He needs to determine if the rising prices are transitory as he seeks to balance inflation and growth considerations. Rising US interest rates driven by inflation concerns and a flight to safety amid market volatility have contributed to falling EM currencies.
In Causeway’s EM model, we re-estimated factor weights during the quarter. We monitor factor performance monthly and periodically adjust factor weights, letting historical risk-adjusted performance serve as our guide. The primary model update involved increasing the weight to earnings growth while modestly reducing weights to value and technical (price momentum) factors.
International Value Fund
Portfolio Attribution
The Causeway International Value Fund (“Fund”), on a net asset value basis, underperformed the Index during the month, due primarily to stock selection. On a gross return basis, Fund holdings in the semiconductors & semi equipment and capital goods industry groups, along with an underweight position in the energy industry group, detracted from relative performance compared to the Index. Holdings in the commercial & professional services industry group, as well as an underweight position in the automobiles & components and real estate management & development industry groups, offset some of the underperformance compared to the Index. The largest detractor was semiconductor company, Renesas Electronics Corp.(Japan). Additional notable detractors included household & personal care products company, Reckitt Benckiser Group Plc (United Kingdom), and rolling stock, signaling, and services provider for the rail industry, Alstom SA (France). The top contributor to return was crude oil & natural gas company, BP Plc (United Kingdom). Other notable contributors included telecommunication services provider, KDDI Corp. (Japan), and specialty chemicals company, Syensqo NV (Belgium).
Investment Outlook
The escalating Middle East conflict and partial closure of the Strait of Hormuz increased oil prices and inflation risks, reducing growth expectations. Global equities fell in March, and traditional safe havens offered limited diversification. Energy stocks benefited from supply concerns, while other sectors struggled. Europe and energy-importing Asian economies are the most oil & gas sensitive, while emerging markets weakened as investors reduced risk exposure. Software and services stocks remain unpopular as competition from generative AI-native entrants may disrupt incumbents. Rising energy prices have cast a shadow over economically sensitive sectors, depressing the valuations of many cyclical stocks. Even after the US ultimately disengages from Iran, geopolitical risk will likely remain elevated for several quarters. In technology and consumer sectors, recent weakness reflects both cyclical concerns and longer-term structural shifts, requiring even greater precision in stock selection. If the US achieves a satisfactory set of goals for Iran, portfolio holdings have the potential to rally. Overall, the conflict has not currently caused us to mark down our two-year price targets for portfolio companies. Per Causeway history, we use unjustified share price weakness to add to existing positions where our investment thesis remains intact. Market dislocations may also create opportunities to initiate new investments in high-quality businesses at more attractive values.
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