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Global Absolute Return Fund
Our full alpha-generating capabilities, with lower volatility and low or no equity market correlation
NAV (as of 19 Nov 2018)
$10.19, -0.03
YTD
+12.85%
INCEPTION
24 Jan 2011
TICKER/CUSIP
CGAVX/14949P505
Global Absolute Return Fund
Fund Profile
The Fund takes long and short exposures in common and preferred stocks of companies located primarily in developed countries outside the U.S. and of companies in the U.S. 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).
| Minimum Investment | $5,000 |
| Sales Charge | None |
| Net Expense Ratio | 1.77% |
| Gross Expense Ratio | 1.80% |
| Dividend Frequency | Annual |
| Capital Gain Frequency | Annual |
| Benchmark | BofA ML 3M US TBill |
Performance
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth less than their original cost and current performance may be lower than the performance quoted. Returns greater than one year are average annual total returns. Total returns assume reinvestment of dividends and capital gains distributions at net asset value when paid. All information is as of the date shown. Investment performance may reflect contractual fee waivers. In the absence of such fee waivers, total return would be reduced. Contractual fee waivers are in effect until 1/31/19. The expense ratios for Institutional Class shares are 1.55% and 1.52% after adviser fee waiver. The expense ratios for Investor Class shares are 1.80% and 1.77% after adviser fee waiver. If your account incurred a redemption fee, your performance will be lower than the performance quoted. If you invest through a financial intermediary, it may apply the Fund’s redemption fee or other frequent trading restrictions. After 4/30/15, the Fund will no longer apply a redemption fee.
Portfolio
Position Details as of 31 Oct 2018
| Cash | 40,755,185 |
| Market Value Long | 62,388,867 |
| Market Value Short | -59,696,395 |
| Net Positional Value | 2,692,472 |
| NAV | 43,447,656 |
| Net Exposure | 6.20% |
| Leverage | 2.81 |
| Long Positions | 99 |
| Short Positions | 113 |
| Total | 212 |
Characteristics as of 31 Oct 2018
| Long Portfolio | Short Portfolio | MSCI World | |
|---|---|---|---|
| No. of Exposures | 99 | 113 | 1636 |
| Wtd Avg Mkt Cap (Mn $US) | $50,456 | $14,899 | $140,215 |
| FY2 Price/Earnings | 9.9 | 14.3 | 14.1 |
| Price/Book Value | 1.5 | 1.6 | 2.3 |
| Return on Equity (%) | 16.5 | 5.8 | 19.0 |
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.
Sector Exposure as of 31 Oct 2018
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| Consumer Discretionary | 21.34 | -14.19 | 7.15 |
| Health Care | 12.54 | -7.21 | 5.33 |
| Industrials | 26.29 | -20.97 | 5.32 |
| Energy | 6.20 | -1.19 | 5.01 |
| Telecommunication Services | 8.68 | -6.15 | 2.53 |
| Materials | 15.79 | -13.98 | 1.81 |
| Financials | 26.76 | -28.16 | -1.40 |
| Information Technology | 15.01 | -18.16 | -3.15 |
| Consumer Staples | 1.49 | -5.79 | -4.30 |
| Real Estate | 3.37 | -7.87 | -4.50 |
| Utilities | 9.26 | -13.81 | -4.55 |
Country Exposure as of 31 Oct 2018
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| China | 14.35 | -7.05 | 7.30 |
| Switzerland | 7.28 | -0.39 | 6.89 |
| Germany | 9.69 | -3.48 | 6.21 |
| United Kingdom | 14.43 | -8.94 | 5.49 |
| Canada | 9.53 | -5.67 | 3.86 |
| Netherlands | 1.61 | 0.00 | 1.61 |
| Sweden | 0.91 | 0.00 | 0.91 |
| New Zealand | 1.27 | -0.37 | 0.90 |
| South Korea | 6.52 | -6.16 | 0.36 |
| United States | 60.26 | -60.00 | 0.26 |
| Belgium | 0.00 | -0.28 | -0.28 |
| Denmark | 0.00 | -0.69 | -0.69 |
| Singapore | 1.56 | -2.29 | -0.73 |
| Portugal | 0.00 | -0.80 | -0.80 |
| France | 2.23 | -3.09 | -0.86 |
| Italy | 0.00 | -1.24 | -1.24 |
| Austria | 0.00 | -1.68 | -1.68 |
| Norway | 0.00 | -1.68 | -1.68 |
| Spain | 0.00 | -2.52 | -2.52 |
| Japan | 15.81 | -18.45 | -2.64 |
| Hong Kong | 1.28 | -4.30 | -3.02 |
| Ireland | 0.00 | -3.72 | -3.72 |
| Australia | 0.00 | -4.68 | -4.68 |
TOP 10 Positions as of 31 Oct 2018
| Top Ten Long Positions | Top Ten Short Positions | ||
|---|---|---|---|
| Company | Ending Weight (%) | Company | Ending Weight (%) |
| Linde Plc | 2.95% | Marsh & McLennan Cos., Inc. | -2.98% |
| First Bancorp/Puerto Rico | 2.88% | Cboe Global Markets, Inc. | -2.91% |
| Novartis AG | 2.86% | Healthcare Trust of America, Inc. | -2.85% |
| Gildan Activewear | 2.80% | AusNet Services Ltd. | -2.75% |
| Oracle Corp. | 2.79% | Healthcare Services Group, Inc. | -2.72% |
| Japan Airlines Co., Ltd. | 2.78% | L Brands, Inc. | -2.71% |
| SK Telecom Co., Ltd. | 2.78% | United Utilities Group Plc | -2.71% |
| FirstEnergy Corp. | 2.77% | Daimler AG | -2.70% |
| Sompo Holdings, Inc. | 2.76% | Northland Power | -2.69% |
| Eli Lilly & Co. | 2.74% | Kansai Paint Co., Ltd. | -2.63% |
Holdings are subject to change.
Approach
Causeway Global Absolute Return (GAR) Fund is designed for investors who want equity-like returns with lower volatility and lower market correlation. The Fund invests in global developed markets equities, using swap agreements to obtain exposures to long and short positions.
Causeway integrates fundamental and quantitative research to manage the Fund’s long exposures and its quantitative investment strategy to manage the short exposures. Both the long and short portfolios seek to add alpha (performance exceeding the long or short MSCI World Index), which is amplified by leverage up to 4x, with a target of 3x.
The GAR Fund's net long/short notional exposure will generally not exceed plus or minus 10% of net assets. However, the long portfolio and the short portfolio will each have different exposures under swap agreements that will not be fully hedged. Unrealized gains or losses through swap agreements are also constrained, limiting counterparty risk.
The GAR Fund typically has 60-120 long exposures and 60-140 short exposures.
Commentary
PERFORMANCE REVIEW for the month ended 31 Oct 2018
Causeway Global Absolute Return Fund (“Fund”) outperformed the ICE BoAML 3-Month U.S. Treasury Bill Index in the month of October. The Fund’s outperformance was driven by both the long and short portfolios: the Fund’s long portfolio outperformed the MSCI World Index (“World Index”), and the Fund’s short portfolio underperformed the World Index, also contributing positively to overall performance.
Most equity markets declined in October, as global monetary liquidity continued to decrease and stock volatility increased. The top performing markets in our investable universe included Turkey, Switzerland, Israel, Austria, and Spain. The worst performing markets included South Korea, Belgium, China, Hong Kong, and Sweden. Defensive sectors generally outperformed cyclical sectors in the month. The best performing sectors in the World Index were utilities, consumer staples, and telecommunication services. The worst performing sectors were industrials, energy, and materials.
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 October, all of our quantitative alpha factor categories demonstrated predictive power with the exception of earnings growth. Stocks with cheap valuations outperformed those with expensive valuations, stocks with positive technical indicators outperformed those with negative technical indicators, and stocks demonstrating higher earnings quality outperformed those with lower earnings quality. However, stocks with worsening earnings growth dynamics outperformed those with improving dynamics, contrary to expectations.
Within the long portfolio, attribution effects were strongest in the consumer services, pharmaceuticals & biotechnology, and energy industry groups. Long-side attribution effects were weakest in the capital goods, materials, and technology hardware & equipment industry groups. Long exposures that contributed most to the Fund’s performance included for-profit educator, K12, Inc. (United States), industrial gas company, Linde AG (Germany), metallurgical & thermal coal producer, Arch Coal, Inc. (Arch Coal), power generation & utility company, The AES Corp. (United States), and Boston Beer Co., Inc. (United States). Long exposures that detracted most from performance were heavy truck manufacturer, Sinotruk Hong Kong Ltd. (China), specialty jewelry retailer, Signet Group (United States), insurance company, Aviva Plc (United Kingdom), motorsports entertainment provider, International Speedway Corp. (United States), and banking & financial services company, BNP Paribas SA (France).
Within the short portfolio, attribution effects were strongest in the capital goods, materials, and banks industry groups. Short-side attribution effects were weakest in the diversified financials, retailing, and utilities industry groups. Short exposures that contributed most to the Fund’s performance included aerospace & transportation company. Bombardier (Canada), integrated circuits manufacturer, ams AG (Austria), insurance & financial services company, American International Group, Inc. (United States), Hitachi Chemical Co., Ltd. (Japan), and cloud content management company, Box, Inc. (United States). Short exposures that detracted most from the Fund’s performance included stock exchange operator, Cboe Global Markets, Inc. (United States), high-frequency trading firm Virtu Financial, Inc. (United States), fashion retailer, L Brands, Inc. (United States), financial markets intermediary, TP ICAP Plc (United Kingdom), and tobacco producer, Philip Morris International, Inc. (United States).
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.
Dividends
| 2017 | $0.0000 |
| 2016 | $1.0639 |
| 2015 | $0.3553 |
| 2014 | $0.0000 |
| 2013 | $0.4126 |
| 2012 | $0.2586 |
| 2011 | $0.0948 |
Short-term Capital Gains
| 2017 | $0.0000 |
| 2016 | $0.0000 |
| 2015 | $0.0000 |
| 2014 | $0.0000 |
| 2013 | $0.0000 |
| 2012 | $0.0000 |
| 2011 | $0.3053 |
Long-term Capital Gains
| 2017 | $0.0000 |
| 2016 | $0.0000 |
| 2015 | $0.0000 |
| 2014 | $0.0000 |
| 2013 | $0.0000 |
| 2012 | $0.0000 |
| 2011 | $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).
