Our full alpha-generating capabilities, seeking lower volatility or no equity market correlation

The Fund takes long and short exposures in common and preferred stocks of companies located primarily in developed countries outside the US and of companies in the US. To obtain exposure to long and short positions in securities, the Fund enters into one or more total return equity swap agreements. Although the Fund is permitted to take direct long and short positions in securities, other than swap agreements, it does not currently intend directly to purchase or sell securities or directly to hold short positions in securities. The Investment Adviser integrates fundamental and quantitative research to manage the Fund’s long exposures (the “long portfolio” of the Fund). The Investment Adviser uses its quantitative investment strategy designed to identify short exposures that it expects to underperform the MSCI World Index to manage the Fund’s short exposures (the “short portfolio” of the Fund). The Fund’s investment objective is to seek long-term growth of capital with low or no correlation to the MSCI World Index.

YTD Return*
-12.91%
Nav*
$7.89, -0.01
Inception
January 24, 2011
Cusip
14949P406
Benchmark
ICE BoAML 3-Month US TBill
Minimum Investment
$1,000,000
Sales Charge
None
Net Expense Ratio
1.52%
Gross Expense Ratio
1.81%
*As of July 17, 2019

Strategy overview

The portfolio managers discuss our Global Absolute Return Fund strategy.

Portfolio managers

Chief Executive Officer
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years5 years Since inception
Fund -6.0%-12.4%-2.4%-1.8%-1.2%1.3%
ICE BoAML 3-Month US TBill 0.6%1.2%2.3%1.4%0.9%0.6%
QTD YTD 1 year3 years5 years Since inception
Fund -6.0%-12.4%-2.4%-1.8%-1.2%1.3%
ICE BoAML 3-Month US TBill 0.6%1.2%2.3%1.4%0.9%0.6%
QTD YTD 1 year3 years5 years Since inception
Fund -6.0%-12.4%-2.4%-1.8%-1.2%1.3%
ICE BoAML 3-Month US TBill 0.6%1.2%2.3%1.4%0.9%0.6%
QTD YTD 1 year3 years5 years Since inception
Fund -6.0%-12.4%-2.4%-1.8%-1.2%1.3%
ICE BoAML 3-Month US TBill 0.6%1.2%2.3%1.4%0.9%0.6%
2018201720162015201420132012
Fund 9.0%-8.2%11.2%-5.2%0.1%12.5%-3.7%
ICE BoAML 3-Month US TBill 1.9%0.9%0.3%0.0%0.0%0.1%0.1%
Fund
ICE BoAML 3-Month US TBill
2018201720162015201420132012
9.0%-8.2%11.2%-5.2%0.1%12.5%-3.7%
1.9%0.9%0.3%0.0%0.0%0.1%0.1%

Portfolio (as of June 30, 2019)

Benchmark: MSCI World
Position Details
Fund
Cash 42,971,932
Market value (long) 69,911,819
Market value (short) -70,135,320
Net positional value -223,500
NAV 42,748,431
Fund
Net exposure -0.52%
Leverage 3.28
Long positions 99
Short positions 123
Total 222
Fund Characteristics
Long portfolio Short portfolio Benchmark
No. of exposures 99 123 1655
Weighted avg. market cap (US $MM) $53,901 $11,641 $147,824
FY2 price/earnings 9.6 16.2 14.9
Price/book value 1.4 1.6 2.4
Return on equity (%) 17.5 6.2 19.3

A “weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio 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. The FY2 P/E ratio is a forward P/E ratio using a next-twenty-four months EPS estimate in the denominator. Return on equity is calculated by taking a year's worth of earnings and dividing them by the average shareholder equity for that year.

Holdings are subject to change.

Top 10 Long Exposures
CompanyEnding weight
Coca-Cola Amatil Ltd. 3.38%
BHP Group Plc 3.33%
H&R Block, Inc. 3.33%
Citigroup, Inc. 3.28%
Microsoft Corp. 3.26%
Oracle Corp. 3.23%
Viacom, Inc. 3.20%
Gildan Activewear 3.19%
KDDI Corp. 3.18%
Manulife Financial 3.16%
Top 10 Short Exposures
CompanyEnding weight
The Howard Hughes Corp. -3.55%
Cellnex Telecom SA -3.41%
Premium Brands Holdings -3.36%
Markel Corp. -3.30%
Kansai Paint Co., Ltd. -3.26%
Aqua America, Inc. -3.23%
SiteOne Landscape Supply, Inc. -3.22%
Bayerische Motoren Werke AG -3.16%
Banco Comercial Português SA -3.03%
AusNet Services Ltd. -3.02%
Sector Exposure
Sector Long exposure Short exposure Net exposure
Health Care11.6%-5.7%5.90%
Energy9.0%-4.7%4.30%
Information Technology16.5%-12.4%4.10%
Industrials26.5%-23.4%3.10%
Consumer Discretionary15.8%-14.5%1.30%
Communication Services13.7%-12.5%1.20%
Materials12.8%-13.6%-0.80%
Financials34.6%-37.9%-3.30%
Consumer Staples5.7%-10.6%-4.90%
Utilities11.2%-16.5%-5.30%
Real Estate6.3%-12.1%-5.80%
Country Exposure
Country Long exposure Short exposure Net exposure
China 12.3% -1.8% 10.50%
Switzerland 7.9% -2.4% 5.50%
United Kingdom 15.2% -10.0% 5.20%
Sweden 4.2% 0.0% 4.20%
Canada 13.8% -9.6% 4.20%
Netherlands 3.0% 0.0% 3.00%
New Zealand 1.4% -0.3% 1.10%
Japan 21.7% -20.9% 0.80%
Italy 0.3% 0.0% 0.30%
South Korea 8.7% -9.3% -0.60%
Germany 5.3% -6.4% -1.10%
Norway 0.0% -2.4% -2.40%
Belgium 0.0% -2.5% -2.50%
France 2.9% -5.6% -2.70%
Portugal 0.0% -3.0% -3.00%
United States 61.9% -65.6% -3.70%
Singapore 1.6% -5.7% -4.10%
Spain 0.0% -4.2% -4.20%
Australia 3.4% -8.4% -5.00%
Hong Kong 0.0% -5.7% -5.70%
Regional Allocation
Long exposure Short exposure Net exposure
Europe - Other27.3%-14.8%12.1%
North America75.7%-75.2%0.1%
Pacific49.1%-52.2%-2.6%
Euro11.5%-21.6%-10.1%

Commentary (As of June 30, 2019)

Highlights

  • Bolstered by central bank dovishness, developed equity markets rallied in June and furthered year-to-date gains.

Portfolio attribution

Causeway Global Absolute Return Fund (“Fund”) outperformed the ICE BofAML US 3-Month Treasury Bill Index in the month of June. The Fund’s outperformance was driven by the short portfolio: although the Fund’s long portfolio underperformed the MSCI World Index (“World Index”), the Fund’s short portfolio underperformed the World Index by a larger margin, contributing positively to overall portfolio return.

The Fund takes long and short notional exposures to securities under swap agreements. We use a combination of fundamental and quantitative inputs to select exposures for the long portfolio of the Fund, while we use primarily quantitative inputs to select exposures for the short portfolio. Our fundamental inputs reflect the risk-adjusted total return potential of stocks favored by our fundamental research team. Our quantitative inputs include signals that seek long (short) positions in stocks which we believe are undervalued (overvalued) and have improving (deteriorating) earnings growth dynamics, positive (negative) technical price movements, and superior (inferior) quality of earnings. During the month of June, all quantitative alpha factor categories demonstrated predictive power. Stocks with cheap valuations outperformed those with expensive valuations, stocks with improving earnings growth dynamics outperformed those with worsening dynamics, stocks with positive technical indicators outperformed those with negative technical indicators, and stocks demonstrating higher earnings quality outperformed those with lower earnings quality.

Investment outlook

The 2019 G20 summit struck a tone of geopolitical fragmentation as major relationships worldwide shift and nationalistic sentiment increases. Though we do not believe globalization will reverse, global equity markets appear to disagree with us. Economically defensive stocks have generally reached, in our view, extreme valuation highs, and economically sensitive cyclical stocks have lagged. The decline in bond yields in major economies globally has also dampened investor enthusiasm for cyclicality, and favored long duration growth stocks. When the price of money (aka borrowing) falls to such low levels, investors typically get more desperate to buy growth at increasingly higher valuations. Can central banks, especially the Fed, prolong the post-2008 economic expansion by ultra-accommodative monetary policy? And if they cannot, how deep a recession would the US and other economies endure? Our fundamental research, which is an input for the long portfolio, focuses on companies with managements implementing operational improvements that translate to greater efficiency and expansion potential. We believe this operational “self-help” should deliver an improvement in earnings and free cash flow growth.

On an aggregate long/short portfolio basis, we are maintaining a near market-neutral posture, with -0.23% net exposure overall (long exposures minus absolute value of short exposures). Consistent with our goal of delivering low equity market sensitivity, we target a zero expected beta to the World Index. On an aggregate basis, our largest net biases by sector are toward health care and energy, where we have significant positive net exposure, and against real estate and utilities, where we have meaningful negative net exposure. By geography, we are net biased toward China and Switzerland, and biased against Hong Kong and Australia. Gross exposure (leverage) for the Fund is 327% (3.27x) as of June 30, 2019.

 

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.

Distributions

Dividends Short-term capital gains Long-term capital gains
2018 $0.8783 $0.0000 $0.0000
2017 $0.0000 $0.0000 $0.0000
2016 $1.0925 $0.0000 $0.0000
2015 $0.3858 $0.0000 $0.0000
2014 $0.0000 $0.0000 $0.0000
2013 $0.433 $0.000 $0.000
2012 $0.280 $0.000 $0.000
2011 $0.101 $0.305 $0.000

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: