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*
+6.05%
Nav*
$12.09, +0.03
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 October 17, 2019

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
Fund-4.5%4.1%-5.2%4.7%1.1%4.6%3.5%
MSCI Emerging Markets-4.1%6.2%-1.6%6.4%2.7%3.7%3.4%
QTDYTD1 year3 years5 years10 yearsSince inception
Fund-4.5%4.1%-5.2%4.7%1.1%4.6%3.5%
MSCI Emerging Markets-4.1%6.2%-1.6%6.4%2.7%3.7%3.4%
QTDYTD1 year3 years5 years10 yearsSince inception
Fund-4.5%4.1%-5.2%4.7%1.1%4.6%3.5%
MSCI Emerging Markets-4.1%6.2%-1.6%6.4%2.7%3.7%3.4%
QTDYTD1 year3 years5 years10 yearsSince inception
Fund-4.5%4.1%-5.2%4.7%1.1%4.6%3.5%
MSCI Emerging Markets-4.1%6.2%-1.6%6.4%2.7%3.7%3.4%
20182017201620152014201320122011201020092008
Fund-17.9%39.8%9.2%-16.0%2.1%-2.6%25.8%-18.1%26.3%88.1%-58.4%
MSCI Emerging Markets-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
20182017201620152014201320122011201020092008
-17.9%39.8%9.2%-16.0%2.1%-2.6%25.8%-18.1%26.3%88.1%-58.4%
-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 September 30, 2019)

Benchmark: MSCI Emerging Markets
Asset Allocation
Fund
Stocks99.0%
Cash1.0%
Fund Characteristics
FundBenchmark
No. of holdings 140 1201
Weighted avg. market cap (US $MM)$61,887$51,469
NTM price/earnings9.311.8
Price/book value1.31.6
NTM EPS revision (wtd. avg)0.6-0.1
Net assets$3,509,293,105-
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp.China1.9%
Tencent Holdings Ltd.China1.8%
Investimentos ItauBrazil1.6%
Samsung Electronics Co., Ltd.South Korea1.5%
JBS SABrazil1.4%
Gazprom PJSCRussia1.3%
LukoilRussia1.2%
SberbankRussia1.1%
Ping An Insurance (Group) Co. of China Ltd.China1.1%
Anhui Conch Cement Co., Ltd.China1.0%

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
Financials24.1%24.7%
Information Technology18.1%15.1%
Communication Services11.8%11.6%
Consumer Discretionary11.4%13.1%
Energy9.2%7.7%
Consumer Staples6.7%6.9%
Materials5.4%7.3%
Industrials4.8%5.4%
Real Estate2.4%2.9%
Equity Funds2.2%0.0%
Health Care2.0%2.6%
Utilities1.0%2.8%
TOP 10 COUNTRIES
Country Fund Benchmark
China34.9%31.9%
South Korea14.1%12.2%
Taiwan11.6%11.5%
India9.4%8.9%
Brazil9.1%7.6%
Russia7.2%4.0%
Thailand3.1%2.9%
Mexico2.1%2.5%
South Africa1.6%4.7%
Indonesia1.1%2.1%
Regional Allocation
  • Emerging Asia 74.7%
  • Emerging Latin America 12.2%
  • Emerging Europe, Middle East, Africa 12.1%

Commentary (As of September 30, 2019)

Highlights

  • While slowing growth and US-China trade tensions weighed on emerging market (“EM”) equities in July and August, the asset class rebounded in September.
  • While challenges remain, the macroeconomic backdrop for EM assets is improving. In addition to supportive monetary policies, fiscal stimulus is increasing in select EM countries.
  • Compared to developed markets, September’s value rally in EM was more modest. In many developed markets, inverted yield curves and negative interest rates have become the norm and any hint of normalizing monetary policy can lead to sharp value rallies. In contrast, EM central banks are pursuing relatively orthodox monetary policies and EM yield curves are still positively sloped.

Portfolio attribution

Causeway Emerging Markets Fund (“Fund”) outperformed the Index in September 2019. We use both bottom-up and top-down factor categories to seek to forecast alpha for the stocks in the Fund’s investable universe. Despite rebounding in September, our value factor was the weakest bottom-up indicator during the quarter and the year-to-date (“YTD”) period. While positive for the quarter and YTD periods, our earnings growth and price momentum factors were both negative indicators in September. Of our top-down factors, country and sector factors were positive indicators during the month. The macroeconomic and currency factors were negative in September.

Investment outlook

Despite rebounding in September, EM value stocks have underperformed YTD. Compared to developed markets, September’s value rally in EM was more modest. In many developed markets, inverted yield curves and negative interest rates have become the norm and any hint of normalizing monetary policy can lead to sharp value rallies. In contrast, EM central banks are pursuing relatively orthodox monetary policies and EM yield curves are still positively sloped. EM value stocks trade at significant discounts to EM growth stocks while offering attractive dividend yields. We continue to emphasize value factors in our investment process, which should benefit the portfolio if EM value stocks rebound, which we believe they ultimately will.

We are also overweight EM small cap stocks within the Fund. This has been a headwind for performance as the MSCI Emerging Markets Small Cap Index has lagged the MSCI Emerging Markets Large Cap Index each year since 2016. In addition to our small cap overweight, our contextual weighting approach has contributed to underperformance YTD. When calculating a stock’s expected alpha, we first classify it as value, growth, or momentum and then assign weights that we believe are appropriate for that classification. Despite recent underperformance, we remain confident in this methodology, which we believe has benefitted the strategy compared to an equal-weighted approach since the Fund’s inception in 2007.

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
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: