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*
-8.12%
Nav*
$12.1, +0.22
Inception
March 30, 2007
Cusip
149498206
Benchmark
MSCI Emerging Markets
Minimum Investment
$5,000
Sales Charge
None
Total Expense Ratio
1.41%
*As of July 02, 2020
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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

QTD YTD 1 year3 years5 years10 years Since inception
Fund 10.0%-15.4%-3.9%-1.6%-0.8%3.4%2.7%
MSCI Emerging Markets 10.0%-15.9%-4.0%0.2%1.3%2.8%2.8%
QTD YTD 1 year3 years5 years10 years Since inception
Fund 10.0%-15.4%-3.9%-1.6%-0.8%3.4%2.7%
MSCI Emerging Markets 10.0%-15.9%-4.0%0.2%1.3%2.8%2.8%
QTD YTD 1 year3 years5 years10 years Since inception
Fund -23.1%-23.1%-17.5%-3.6%-1.9%1.6%2.0%
MSCI Emerging Markets -23.6%-23.6%-17.4%-1.3%0.0%1.0%2.1%
QTD YTD 1 year3 years5 years10 years Since inception
Fund -23.1%-23.1%-17.5%-3.6%-1.9%1.6%2.0%
MSCI Emerging Markets -23.6%-23.6%-17.4%-1.3%0.0%1.0%2.1%
201920182017201620152014201320122011201020092008
Fund 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 18.9%-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
16.4%-18.1%39.5%8.9%-16.2%1.8%-2.8%25.6%-18.2%26.1%87.9%-58.5%
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 May 31, 2020)

Benchmark: MSCI Emerging Markets
Asset Allocation
Fund
Stocks 96.7%
Cash 3.3%
Fund Characteristics
Fund Benchmark
No. of holdings 116 1402
Weighted avg. market cap (US $MM) $101,322 $84,517
NTM price/earnings 10.4 12.7
Price/book value 1.3 1.5
NTM EPS revision (wtd. avg) -8.4 -13.8
Net assets $420,106,431 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 1.8%
Samsung Electronics Co., Ltd. South Korea 1.7%
Anhui Conch Cement Co., Ltd. China 1.5%
Lukoil Russia 1.1%
Jd.com China 1.0%
JBS SA Brazil 1.0%
Tencent Holdings Ltd. China 0.9%
Ping An Insurance Group Co Of China 0.9%
Gazprom PJSC Russia 0.8%
Hana Financial Group, Inc. South Korea 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 20.1% 16.7%
Financials 17.1% 20.2%
Communication Services 14.2% 13.0%
Consumer Discretionary 14.1% 15.9%
Energy 7.0% 6.4%
Materials 6.1% 7.1%
Equity Funds 4.8% 0.0%
Consumer Staples 4.7% 6.7%
Industrials 3.1% 5.0%
Health Care 2.6% 3.8%
Real Estate 2.1% 2.7%
Utilities 0.6% 2.5%
TOP 10 COUNTRIES
Country Fund Benchmark
China 41.8% 39.1%
Taiwan 13.1% 12.5%
South Korea 13.0% 11.9%
India 7.7% 8.1%
Russia 6.3% 3.6%
Brazil 6.2% 5.1%
South Africa 1.9% 3.8%
Mexico 1.4% 1.9%
Thailand 1.3% 2.4%
Malaysia 1.0% 1.9%
Regional Allocation
  • Emerging Asia 78.3%
  • Emerging Europe, Middle East, Africa 10.3%
  • Emerging Latin America 8.1%
  • UNKNOWN 0.0%

Commentary (As of May 31, 2020)

Highlights

  • While posting positive returns in May, emerging market (“EM”) equities underperformed developed market equities during the month.
  • 2020 economic growth estimates for EM countries have continued to decline due to the economic shutdown stemming from the COVID-19 pandemic. Growth may continue to deteriorate as some major EM countries, including India and Brazil, remain locked down or are just beginning to loosen restrictions. Moreover, most EM countries have limited ability to enact fiscal and monetary stimulus.
  • The MSCI Emerging Markets Value Index is trading at a sizable discount based on both price-to-earnings and price-to-book value ratios. We continue to emphasize value factors in our investment process and we believe that value’s relative performance should improve once COVID-19 uncertainty abates, especially given the discount offered by value stocks currently.

Portfolio attribution

Causeway Emerging Markets Fund (“Fund”) outperformed the Index in May 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. As April’s rebound continued into May, price momentum was our strongest bottom-up indicator during the month. Our earnings growth factor was modestly negative. Our value factor was the weakest bottom-up indicator in May, and has also trailed earnings growth and price momentum over most longer time periods. Of our top-down factors, sector was a positive indicator. Macroeconomic, currency, and country factors were negative indicators in May.

Investment outlook

Compared to developed markets, earnings growth prospects for EM companies have been relatively resilient over the past three months. Communication services experienced net positive earnings growth upgrades as internet companies have navigated the COVID-19 lockdown relatively well. Additionally, telecommunications stocks benefitted from their more defensive profiles. Consumer discretionary companies have also been resilient, buoyed by significant exposure to the online economy. Cyclical sectors including energy, financials, and real estate have been the most challenged. The earnings growth expectations for information technology companies, our largest sector overweight in the Fund, were negatively impacted by increased restrictions against selling to, and manufacturing semiconductor chips for, Huawei, the Chinese telecom equipment and smartphone manufacturing giant. From a country perspective, China has experienced modest net positive upgrades over the last three months. This reflects the significant presence of online stocks, the market’s expectation of supportive fiscal and monetary stimulus, and China’s relative success in controlling the COVID-19 pandemic and re-opening its economy. Net downgrades increased in Taiwan due to the Huawei issue noted above. India, Russia, and Brazil have experienced more net downgrades than average as these countries have been less successful in controlling their COVID-19 outbreaks.

The MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index in May and has lagged every month this year. Following a poor 2019, the MSCI Emerging Markets Value Index has underperformed the MSCI Emerging Markets Growth Index by 12.7% over the year-to-date period in local currency terms. The MSCI Emerging Markets Value Index is trading at a sizable discount based on both price-to-earnings and price-to-book value ratios. We continue to emphasize value factors in our investment process and we believe that value’s relative performance should improve once COVID-19 uncertainty abates, especially given the discount offered by value stocks currently.

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
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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