Diversified exposure to emerging markets, seeking to capture value and growth

The Fund normally invests at least 80% of its total assets in equity securities of companies located in emerging (less developed) markets and other investments that are tied economically to emerging markets. Generally these investments include common stock, preferred and preference stock, American Depositary Receipts, European Depositary Receipts, Global Depositary Receipts, and exchange-traded funds (“ETFs”) that invest in emerging markets securities.

Causeway uses a quantitative investment approach to purchase and sell investments for the Fund. Causeway’s proprietary computer model analyzes a variety of factors to assist in selecting securities. The model currently analyzes factors relating to valuation, earnings growth, technical indicators, macroeconomics, currency, countries and sectors.

YTD Return*
-0.23%
Nav*
$13.01, -0.12
Inception
March 30, 2007
Cusip
149498107
Benchmark
MSCI Emerging Markets
Minimum Investment
$1,000,000
Sales Charge
None
Total Expense Ratio
1.15%
*As of January 24, 2020

Strategy overview

The portfolio managers discuss our Emerging Markets strategy.

Portfolio managers

Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTDYTD1 year3 years5 years10 yearsSince inception
Fund12.1%16.7%16.7%10.2%4.2%4.7%4.4%
MSCI Emerging Markets11.9%18.9%18.9%12.0%6.0%4.0%4.3%
QTDYTD1 year3 years5 years10 yearsSince inception
Fund12.1%16.7%16.7%10.2%4.2%4.7%4.4%
MSCI Emerging Markets11.9%18.9%18.9%12.0%6.0%4.0%4.3%
QTDYTD1 year3 years5 years10 yearsSince inception
Fund12.1%16.7%16.7%10.2%4.2%4.7%4.4%
MSCI Emerging Markets11.9%18.9%18.9%12.0%6.0%4.0%4.3%
QTDYTD1 year3 years5 years10 yearsSince inception
Fund12.1%16.7%16.7%10.2%4.2%4.7%4.4%
MSCI Emerging Markets11.9%18.9%18.9%12.0%6.0%4.0%4.3%
201920182017201620152014201320122011201020092008
Fund16.7%-17.9%39.8%9.2%-16.0%2.1%-2.6%25.8%-18.1%26.3%88.1%-58.4%
MSCI Emerging Markets18.9%-14.2%37.8%11.6%-14.6%-1.8%-2.3%18.6%-18.2%19.2%79.0%-53.2%
Fund
MSCI Emerging Markets
201920182017201620152014201320122011201020092008
16.7%-17.9%39.8%9.2%-16.0%2.1%-2.6%25.8%-18.1%26.3%88.1%-58.4%
18.9%-14.2%37.8%11.6%-14.6%-1.8%-2.3%18.6%-18.2%19.2%79.0%-53.2%

Portfolio (as of December 31, 2019)

Benchmark: MSCI Emerging Markets
Asset Allocation
Fund
Stocks98.7%
Cash1.3%
Fund Characteristics
FundBenchmark
No. of holdings 130 1403
Weighted avg. market cap (US $MM)$92,997$80,073
NTM price/earnings10.212.6
Price/book value1.41.7
NTM EPS revision (wtd. avg)7.31.7
Net assets$3,710,729,714-
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp.China2.0%
Samsung Electronics Co., Ltd.South Korea1.7%
Investimentos ItauBrazil1.7%
LukoilRussia1.3%
Tencent Holdings Ltd.China1.2%
Gazprom PJSCRussia1.2%
Anhui Conch Cement Co., Ltd.China1.2%
JBS SABrazil1.1%
SberbankRussia1.1%
Ping An Insurance Group Co OfChina1.1%

A "weighted average” measures a characteristic by the market capitalization of each stock. Price/book value is the weighted average of the price/book values of all the stocks in a portfolio. The P/B value of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. “Earnings-per-share” is the portion of a company’s profit allocated to each outstanding share of common stock. “Earnings-per-share year-over-year estimate growth (next 12 months)” is the average next-12-month earnings-per-share estimate from one year ago for an individual company compared with that estimate today; note that this calculation is done on a company-by-company basis and is aggregated through a weighted average based on the individual company’s weight in the corresponding index. Also note that this characteristic is supplied directly by MSCI.

*Active defined as Fund weight minus MSCI EM Index weight. Holdings are subject to change.

SECTOR WEIGHTS
Sector Fund Benchmark
Financials23.0%24.2%
Information Technology19.7%15.7%
Consumer Discretionary12.6%14.2%
Communication Services11.1%11.0%
Energy9.4%7.4%
Consumer Staples5.8%6.3%
Materials5.5%7.4%
Industrials3.9%5.3%
Real Estate2.6%3.0%
Equity Funds2.2%0.0%
Health Care2.1%2.8%
Utilities0.8%2.6%
TOP 10 COUNTRIES
Country Fund Benchmark
China36.4%34.3%
South Korea13.8%11.7%
Taiwan13.0%11.7%
Brazil9.9%7.5%
India8.0%8.6%
Russia7.6%3.9%
Thailand2.4%2.6%
Mexico1.7%2.3%
South Africa1.4%4.7%
Turkey1.0%0.5%
Regional Allocation
  • Emerging Asia 74.5%
  • Emerging Latin America 12.4%
  • Emerging Europe, Middle East, Africa 11.8%
  • Multi Region Emerging (ETF) 0.0%

Commentary (As of December 31, 2019)

Highlights

  • Buoyed by optimism surrounding the US-China trade deal, emerging markets (“EM”) equities outperformed developed markets in December.
  • The US-China trade dispute took a positive step forward as both sides agreed on a phase one deal, which is scheduled to be formally signed on January 15th. In addition to bolstering Chinese equities, US-China trade optimism helped push the yield on the 10-Year US Treasury Note higher. An upward sloping yield curve generally indicates a positive macroeconomic backdrop for EM assets.
  • While our value factor lagged in 2019, it has outperformed in recent months. Interestingly, the MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index during the fourth quarter. The return differential between our value factor and the MSCI indices can be attributed in part to the strong performance of a few large cap growth stocks.

Portfolio attribution

Causeway Emerging Markets Fund (“Fund”) performed in-line with the Index in December 2019. 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 value factor was our strongest performing bottom-up indicator in December, but it has been the weakest indicator over the year-to-date (“YTD”) period. Our bottom-up price momentum and earnings growth factors were both positive indicators in December and the YTD period. Of our top-down factors, macroeconomic and sector were positive indicators during the month. While our country and currency factors were negative during the month, our four top-down factors were all positive indicators in 2019.

Investment outlook

MSCI EM small capitalization (“cap”) stocks underperformed their large cap peers in 2019, continuing their multi-year underperformance since 2016. Our overweight to mid-and small cap stocks in the Fund has detracted from relative performance. Despite rebounding late in the year,our contextual weighting scheme also underperformed in 2019. When calculating a stock’s expected alpha, our model assigns the relative weight to each bottom-up stock-specific factor for a particular company depending on its classification. We remain confident in this approach, which we believe has benefitted the strategy compared to a uniform weighting scheme since the Fund’s inception in 2007.

While our value factor lagged in 2019, it has outperformed in recent months. Interestingly, the MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index during the fourth quarter. The return differential between our value factor and the MSCI indices can be attributed in part to the strong performance of a few large cap growth stocks. While the Index is capitalization-weighted, we use equally-weighted returns for our factor in order to avoid assigning a handful of stocks a disproportionate weight. Secondly, our value factor has a sector-relative component while MSCI’s style classification schemes do not include sector adjustments. We continue to emphasize value factors in our investment process, and the Fund’s three largest country underweights – South Africa, Saudi Arabia, and Indonesia –are all attributable in part to valuation considerations.

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the Fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Diversification does not protect against market loss. Current and future holdings are subject to risk. The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund's gains or losses. Investing in ETFs is subject to the risks of the underlying funds. International and emerging markets investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets and smaller companies involve additional risks and higher volatility.

Distributions

DividendsShort-term capital gainsLong-term capital gains
2019$0.2650$0.0000$0.0000
2018$0.2296$0.0000$0.0000
2017$0.2232$0.0000$0.0000
2016$0.1597$0.0000$0.0000
2015$0.1620$0.0000$0.0000
2014$0.2775$0.0000$0.0000
2013$0.0825$0.0000$0.0000
2012$0.2526$0.0000$0.0000
2011$0.0778$0.0000$0.0000
2010$0.2451$0.0000$0.0000
2009$0.2830$0.0000$0.0000
2008$0.1186$0.0000$0.0000
2007$0.2002$0.4003$0.0000

Distributions are per share. Distribution amounts are based on gains and losses realized and income earned by the Fund through October 31 (or earlier under certain circumstances).

Documents

Fund information:

Forms: