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*
+6.19%
Nav*
$16.13, -0.23
Inception
March 30, 2007
Cusip
149498206
Benchmark
MSCI Emerging Markets
Minimum Investment
$5,000
Sales Charge
None
Net Expense Ratio
1.35%
Gross Expense Ratio
1.41%
*As of January 15, 2021
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Strategy overview

The portfolio managers discuss our Emerging Markets strategy.

Portfolio managers

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

Performance

QTD YTD 1 year3 years5 years10 years Since inception
Fund 19.3%16.7%16.7%3.6%11.1%3.7%5.1%
MSCI Emerging Markets 19.8%18.7%18.7%6.6%13.2%4.0%5.3%
QTD YTD 1 year3 years5 years10 years Since inception
Fund 19.3%16.7%16.7%3.6%11.1%3.7%5.1%
MSCI Emerging Markets 19.8%18.7%18.7%6.6%13.2%4.0%5.3%
QTD YTD 1 year3 years5 years10 years Since inception
Fund 19.3%16.7%16.7%3.6%11.1%3.7%5.1%
MSCI Emerging Markets 19.8%18.7%18.7%6.6%13.2%4.0%5.3%
QTD YTD 1 year3 years5 years10 years Since inception
Fund 19.3%16.7%16.7%3.6%11.1%3.7%5.1%
MSCI Emerging Markets 19.8%18.7%18.7%6.6%13.2%4.0%5.3%
2020201920182017201620152014201320122011201020092008
Fund 16.7%16.4%-18.1%39.5%8.9%-16.2%1.8%-2.8%25.6%-18.2%26.1%87.9%-58.5%
MSCI Emerging Markets 18.7%18.9%-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
2020201920182017201620152014201320122011201020092008
16.7%16.4%-18.1%39.5%8.9%-16.2%1.8%-2.8%25.6%-18.2%26.1%87.9%-58.5%
18.7%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, 2020)

Benchmark: MSCI Emerging Markets
Asset Allocation
Fund
Stocks 98.5%
Cash 1.5%
Fund Characteristics
Fund Benchmark
No. of holdings 118 1396
Weighted avg. market cap (US $MM) $150,908 $124,202
NTM price/earnings 11.9 14.8
Price/book value 1.7 2.0
NTM EPS revision (wtd. avg) 20.8 13.6
Net assets $705,095,753 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 1.9%
Tencent Holdings Ltd. China 1.8%
Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 1.4%
Baidu China 1.0%
Kia Motors Corp. South Korea 1.0%
Vale SA Brazil 0.9%
Hindalco Industries India 0.9%
POSCO South Korea 0.8%
Investimentos Itau Brazil 0.8%
Petróleo Brasileiro SA Brazil 0.8%

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
Information Technology 23.5% 20.5%
Financials 16.8% 18.0%
Consumer Discretionary 15.8% 18.3%
Communication Services 12.2% 11.6%
Materials 8.4% 7.6%
Equity Funds 5.8% 0.0%
Energy 4.5% 5.0%
Consumer Staples 4.3% 5.9%
Health Care 3.1% 4.7%
Industrials 2.4% 4.3%
Real Estate 1.4% 2.1%
Utilities 0.3% 2.0%
TOP 10 COUNTRIES
Country Fund Benchmark
China 35.8% 39.1%
South Korea 17.9% 13.5%
Taiwan 15.5% 12.8%
India 9.7% 9.2%
Brazil 6.5% 5.1%
Russia 4.0% 3.0%
South Africa 2.5% 3.5%
Mexico 1.8% 1.7%
Malaysia 1.0% 1.5%
Saudi Arabia 0.9% 2.4%
Regional Allocation
  • Emerging Asia 81.8%
  • Emerging Latin America 8.8%
  • Emerging Europe, Middle East, Africa 7.9%
  • Multi Region Emerging (ETF) 0.0%

Commentary (As of December 31, 2020)

Highlights

  • Emerging market (“EM”) equities continued to post strong returns in December, outpacing developed market equities during the month.
  • Leading the group of major EM countries, China’s 2021 GDP growth is expected to be 8.2% according to analyst estimates. The technology-oriented economies of Taiwan and South Korea are also expected to produce solid growth in 2021. We are overweight South Korean and Taiwanese stocks in the Fund due to attractive bottom-up and top-down characteristics.
  • The MSCI Emerging Markets Value Index is trading near record low valuations based on both price-to-earnings and price-to-book value ratios. Looking forward, we believe that EM value stocks are poised to rebound given the valuation discount and the anticipated resumption of global growth in 2021.

Portfolio attribution

Causeway Emerging Markets Fund (“Fund”) outperformed the Index in December 2020. 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 bottom-up price momentum and growth factors were positive indicators in December. Our valuation factor was a negative indicator during the month. In December, we added a new competitive strength bottom-up factor category to our alpha model. After extensive research, we found that an industry’s competitive landscape and a company’s position within it have been closely linked to changes in profitability and, ultimately, a stock’s return potential. These new alpha factors examine current levels and longer-term trends in a broad range of metrics relevant to competitive strength: margins, returns, competition, industry structure, market share, and balance sheet strength. Of our top-down factors, country and macroeconomic were positive indicators while sector and currency were negative.

Investment outlook

Earnings growth prospects have continued to improve for many EM companies. Earnings growth upgrades have exceeded downgrades in every sector except for real estate. In the Fund, we are underweight real estate stocks due to unfavorable earnings growth and price momentum characteristics. On the positive side, the information technology, materials, and communication services sectors have experienced the strongest net upgrades. Information technology companies have continued to benefit from increased technological adoption during the pandemic, strong demand related to 5G, and the latest iPhone upgrade cycle. Like information technology, communication services stocks have also benefitted from strong demand due to the pandemic and 5G expansion. Materials stocks have been buoyed by more stable commodity prices due to the resumption of global growth and US dollar weakness. Financial services companies, which faced growth challenges in 2020, experienced strong net upgrades. Analysts anticipate an earnings upswing for these companies as economic growth begins to normalize in 2021. While growth is one input in our multi-factor investment approach, we continue to emphasize value factors in our process. After underperforming in 2019, the MSCI Emerging Markets Value Index again lagged the MSCI Emerging Markets Growth Index in 2020. The MSCI Emerging Markets Value Index is trading near record low valuations based on both price-to-earnings and price-to-book value ratios. Looking forward, we believe that EM value stocks are poised to rebound given the valuation discount and the anticipated resumption of global growth in 2021.

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

Dividends Short-term capital gains Long-term capital gains
2020 $0.1787 $0.0000 $0.0000
2019 $0.2362 $0.0000 $0.0000
2018 $0.1777 $0.0000 $0.0000
2017 $0.1937 $0.0000 $0.0000
2016 $0.1353 $0.0000 $0.0000
2015 $0.1434 $0.0000 $0.0000
2014 $0.2425 $0.0000 $0.0000
2013 $0.1100 $0.0000 $0.0000
2012 $0.2768 $0.0000 $0.0000
2011 $0.0972 $0.0000 $0.0000
2010 $0.2560 $0.0000 $0.0000
2009 $0.2866 $0.0000 $0.0000
2008 $0.1506 $0.0000 $0.0000
2007 $0.2097 $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).

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