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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 23 Jun 2017)
$8.66, -0.02
YTD
-12.08%
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 uses its fundamental global value equity strategy to manage the Fund’s long exposures (the “global 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 “global short portfolio” of the Fund).
| Minimum Investment | $5,000 |
| Sales Charge | None |
| Net Expense Ratio | 2.20% |
| Gross Expense Ratio | 2.25% |
| Dividend Frequency | Annual |
| Capital Gain Frequency | Annual |
| Benchmark | MSCI World |
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 1/31/18. The expense ratios for Investor Class shares is 2.20% and for Institutional Class shares is 1.95%. 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 May 2017
| Cash | 66,141,087 |
| Market Value Long | 96,444,998 |
| Market Value Short | -99,955,578 |
| Net Positional Value | -3,510,580 |
| NAV | 62,630,508 |
| Net Exposure | -5.61% |
| Leverage | 3.14 |
| Long Positions | 50 |
| Short Positions | 125 |
| Total | 175 |
Characteristics as of 31 May 2017
| Long Portfolio | Short Portfolio | MSCI World | |
|---|---|---|---|
| No. of Exposures | 50 | 125 | 1626 |
| Wtd Avg Mkt Cap (Mn $US) | $77,129 | $39,403 | $106,701 |
| FY2 Price/Earnings | 12.8 | 16.3 | 15.7 |
| Price/Book Value | 1.7 | 1.9 | 2.3 |
| Return on Equity (%) | 13.7 | 6.8 | 16.1 |
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 May 2017
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| Telecommunication Services | 15.33 | -7.50 | 7.83 |
| Energy | 17.48 | -10.90 | 6.58 |
| Health Care | 22.20 | -17.28 | 4.92 |
| Industrials | 23.30 | -21.25 | 2.05 |
| Information Technology | 28.71 | -29.22 | -0.51 |
| Utilities | 1.36 | -1.94 | -0.58 |
| Financials | 25.23 | -27.67 | -2.44 |
| Real Estate | 1.92 | -4.98 | -3.06 |
| Materials | 3.99 | -8.22 | -4.23 |
| Consumer Discretionary | 11.41 | -16.56 | -5.15 |
| Consumer Staples | 4.05 | -15.51 | -11.46 |
Country Exposure as of 31 May 2017
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| United Kingdom | 33.69 | -23.36 | 10.33 |
| Switzerland | 14.74 | -5.79 | 8.95 |
| Netherlands | 3.99 | 0.00 | 3.99 |
| China | 3.13 | 0.00 | 3.13 |
| Italy | 3.07 | -0.23 | 2.84 |
| Spain | 1.92 | 0.00 | 1.92 |
| Germany | 4.40 | -3.29 | 1.11 |
| Japan | 14.05 | -13.66 | 0.39 |
| Hong Kong | 8.42 | -8.50 | -0.08 |
| South Korea | 6.84 | -6.95 | -0.11 |
| Denmark | 0.00 | -0.30 | -0.30 |
| France | 4.45 | -5.04 | -0.59 |
| Canada | 3.12 | -4.67 | -1.55 |
| Sweden | 0.00 | -1.69 | -1.69 |
| Norway | 0.00 | -1.83 | -1.83 |
| Finland | 0.00 | -3.13 | -3.13 |
| Australia | 0.00 | -3.79 | -3.79 |
| Singapore | 0.00 | -5.30 | -5.30 |
| Belgium | 0.00 | -5.63 | -5.63 |
| United States | 53.19 | -67.86 | -14.67 |
TOP 10 Positions as of 31 May 2017
| Top Ten Long Positions | Top Ten Short Positions | ||
|---|---|---|---|
| Company | Ending Weight (%) | Company | Ending Weight (%) |
| Royal Dutch Shell Plc | 4.79% | Nokia Oyj | -3.13% |
| Citigroup, Inc. | 4.65% | China Overseas Land & Investment Ltd. | -3.13% |
| China Mobile Ltd. | 4.53% | Ford Motor Co. | -3.12% |
| Volkswagen AG | 4.40% | American International Group, Inc. | -3.09% |
| Novartis AG | 4.38% | Saga Plc | -3.08% |
| Oracle Corp. | 4.37% | Molson Coors Brewing Co. | -3.07% |
| Microsoft Corp. | 4.31% | Visa, Inc. | -3.06% |
| East Japan Railway Co. | 4.17% | Toyota Motor Corp. | -3.05% |
| KDDI Corp. | 4.12% | Berkshire Hathaway, Inc. | -3.05% |
| Prudential Plc | 4.11% | The Kraft Heinz Co. | -3.05% |
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 uses its fundamental global value equity strategy 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 attempts to mitigate risk in a number of ways: on the short side, qualitative risk may be captured by a fundamental review of short positions, and short exposures are constrained. Unrealized gains or losses through swap agreements are also constrained, limiting counterparty risk. There are approximately twice as many short exposures as long, designed to mitigate idiosyncratic risk.
The GAR Fund typically has 85-180 long/short exposures. The dollar amount of the long exposures is generally within 10 percentage points of the dollar amount of the short exposures, but the Fund may have sector or regional biases.
Commentary
PERFORMANCE REVIEW for the month ended 31 May 2017
Causeway Global Absolute Return Fund (“Fund”) underperformed the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index in the month of May. The Fund’s underperformance was driven by both the long and short portfolios: The Fund’s long portfolio underperformed the MSCI World Index (“World Index”), and the Fund’s short portfolio outperformed the World Index, also contributing negatively to overall performance.
Global equities continued their ascent in May, buoyed by demand for growth stocks and by evidence of a recovery in European economies. The top performing markets in our investable universe included Portugal, Austria, and South Korea. The worst performing markets included Australia, New Zealand, and Ireland. The best performing sectors in the World Index were financials, information technology, and consumer discretionary. The worst performing sectors were telecommunications services, real estate, and utilities.
The Fund takes long and short notional exposures to securities under swap agreements. We use our fundamental value approach to select securities exposures for the long portfolio of the Fund. The long portfolio underperformed the World Index during the period, due primarily to stock selection. Exposures to the consumer discretionary, energy, and information technology industry groups contributed most to relative underperformance. Exposures to the healthcare, financials, and telecommunications services industry groups offset some of the relative underperformance. The largest detractor was retailer, Signet Group (United States). Additional detractors included oil and gas exploration and production company, SM Energy (United States), oil and gas exploration and production company, PDC Energy, Inc.(United States), global entertainment company, Viacom, Inc. (United States), and auto parts retailer, Advanced Auto Parts, Inc. (United States). The top contributor to performance was pharmaceutical & biotechnology company, AstraZeneca Plc. (United Kingdom), telecommunications services provider, Vodafone (United Kingdom), transportation company, East Japan Railway Co. (Japan), integrated energy company, Royal Dutch Shell (United Kingdom), and energy utility, ENGIE SA (France).
We use a quantitative approach to select securities for the short portfolio of the Fund. Our process seeks to obtain short exposures to stocks which we believe are overvalued and have deteriorating earnings growth dynamics, poor technical price movements, and insolvency risk and/or inferior quality of earnings. During the month of May, our technical and quality factor categories demonstrated predictive power. Companies with weak technical indicators and those demonstrating potential insolvency and/or accounting chicanery underperformed the broader market, as anticipated. However, returns to our value and growth factors were negative. Companies with expensive valuations and those with worsening earnings growth dynamics outperformed the broader market, contrary to expectations.
From an industry group perspective, short-side attribution effects were weakest in the technology hardware & equipment, materials, and banks industry groups. Short-side attribution effects were strongest in the diversified financials, pharmaceuticals & biotechnology, and commercial & professional services industry groups. At the stock exposure level, short exposures that detracted from the Fund’s performance included software & services provider, Autodesk, Inc. (United States), technology hardware &equipment manufacturer, Nokia Oyj (Finland), auto manufacturer, Hyundai Motor Co., Ltd. (South Korea), electric utility, TERNA Rete Elettrica Nazionale SpA (Italy), and telecommunication services provider, China Unicom Ltd. (Hong Kong). Successful shorts included financial services provider, Element Financial (Canada), health care equipment and services company, Acadia Healthcare Co., Inc. (United States), real estate investment trust, Simon Property Group (United States), lighting and building management solution provider, Acuity Brands, Inc. (United States), and consumer apparel company, Nike, 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.
Short-term Capital Gains
| 2016 | $0.0000 |
| 2015 | $0.0000 |
| 2014 | $0.0000 |
| 2013 | $0.0000 |
| 2012 | $0.0000 |
| 2011 | $0.3053 |
Long-term Capital Gains
| 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).
