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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 17 Dec 2018)
$9.78, +0.04
YTD
+8.31%
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 30 Nov 2018
| Cash | 40,037,541 |
| Market Value Long | 62,903,388 |
| Market Value Short | -61,337,391 |
| Net Positional Value | 1,565,998 |
| NAV | 41,603,539 |
| Net Exposure | 3.76% |
| Leverage | 2.99 |
| Long Positions | 99 |
| Short Positions | 113 |
| Total | 212 |
Characteristics as of 30 Nov 2018
| Long Portfolio | Short Portfolio | MSCI World | |
|---|---|---|---|
| No. of Exposures | 99 | 113 | 1634 |
| Wtd Avg Mkt Cap (Mn $US) | $52,118 | $15,541 | $135,128 |
| FY2 Price/Earnings | 10.1 | 15.2 | 14.3 |
| Price/Book Value | 1.5 | 1.6 | 2.3 |
| Return on Equity (%) | 16.3 | 6.0 | 19.4 |
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 30 Nov 2018
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| Consumer Discretionary | 23.15 | -15.53 | 7.62 |
| Industrials | 28.42 | -21.30 | 7.12 |
| Health Care | 13.53 | -7.54 | 5.99 |
| Energy | 5.77 | -1.14 | 4.63 |
| Telecommunication Services | 9.53 | -6.92 | 2.61 |
| Financials | 27.69 | -30.51 | -2.82 |
| Materials | 12.63 | -15.63 | -3.00 |
| Information Technology | 15.96 | -19.48 | -3.52 |
| Consumer Staples | 1.41 | -6.14 | -4.73 |
| Real Estate | 3.68 | -8.55 | -4.87 |
| Utilities | 9.79 | -14.99 | -5.20 |
Country Exposure as of 30 Nov 2018
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| China | 15.88 | -8.36 | 7.52 |
| Switzerland | 7.88 | -0.40 | 7.48 |
| United Kingdom | 14.81 | -9.43 | 5.38 |
| Canada | 10.05 | -4.83 | 5.22 |
| Germany | 6.85 | -3.43 | 3.42 |
| Netherlands | 1.58 | 0.00 | 1.58 |
| New Zealand | 1.54 | -0.32 | 1.22 |
| Sweden | 0.85 | 0.00 | 0.85 |
| South Korea | 7.32 | -6.87 | 0.45 |
| Belgium | 0.00 | -0.32 | -0.32 |
| Singapore | 1.64 | -2.36 | -0.72 |
| Denmark | 0.00 | -0.75 | -0.75 |
| Portugal | 0.00 | -0.87 | -0.87 |
| France | 2.24 | -3.29 | -1.05 |
| United States | 63.69 | -64.92 | -1.23 |
| Austria | 0.00 | -1.26 | -1.26 |
| Italy | 0.00 | -1.40 | -1.40 |
| Norway | 0.00 | -1.68 | -1.68 |
| Spain | 0.00 | -2.72 | -2.72 |
| Hong Kong | 1.38 | -4.76 | -3.38 |
| Ireland | 0.00 | -4.18 | -4.18 |
| Japan | 15.84 | -20.63 | -4.79 |
| Australia | 0.00 | -4.95 | -4.95 |
TOP 10 Positions as of 30 Nov 2018
| Top Ten Long Positions | Top Ten Short Positions | ||
|---|---|---|---|
| Company | Ending Weight (%) | Company | Ending Weight (%) |
| Gildan Activewear | 3.22% | Kansai Paint Co., Ltd. | -3.47% |
| SK Telecom Co., Ltd. | 3.19% | Healthcare Services Group, Inc. | -3.31% |
| Eli Lilly & Co. | 3.14% | Marsh & McLennan Cos., Inc. | -3.24% |
| Advance Auto Parts, Inc. | 3.10% | Healthcare Trust of America, Inc. | -3.19% |
| Novartis AG | 3.10% | Northland Power | -3.06% |
| Park Hotels & Resorts, Inc. | 3.03% | China Unicom (Hong Kong) Ltd. | -3.00% |
| Linde Plc | 2.99% | United Utilities Group Plc | -2.95% |
| First Bancorp/Puerto Rico | 2.96% | Willis Group Holdings | -2.95% |
| FirstEnergy Corp. | 2.96% | L Brands, Inc. | -2.95% |
| The AES Corp. | 2.96% | Samsung Heavy Industries Co., Ltd. | -2.93% |
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 30 Nov 2018
Causeway Global Absolute Return Fund (“Fund”) underperformed the ICE BoAML 3-Month U.S. Treasury Bill Index in the month of November. The Fund’s underperformance was driven by both the long and short portfolios: The Fund’s long portfolio slightly underperformed the MSCI World Index (“World Index”), and the Fund’s short portfolio outperformed the World Index, also contributing negatively to overall performance.
Equity markets fluctuated in November as geopolitical events influenced market movements. The top performing markets in our investable universe included China, Hong Kong, Singapore, Israel, and New Zealand. The worst performing markets included Ireland, Norway, Finland, Austria, and Portugal. The best performing sectors in the World Index were generally economically-defensive or trade tariff immune sectors, led by health care, real estate, and telecommunication services. The worst performing sectors were energy, information technology, 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 November, value was the only quantitative alpha factor category to demonstrate predictive power. Stocks with cheap valuations outperformed those with expensive valuations. However, contrary to expectations, stocks with worsening earnings growth dynamics outperformed those with improving dynamics, stocks with negative technical indicators outperformed those with positive technical indicators, and stocks demonstrating lower earnings quality outperformed those with higher earnings quality.
Within the long portfolio, attribution effects were weakest in the materials, insurance, and banks industry groups. Long-side attribution effects were strongest in the technology hardware & equipment, consumer services, and consumer durables & apparel industry groups. Long exposures that detracted most from the Fund’s performance included metallurgical & thermal coal producer, Arch Coal, Inc. (United States), oil & natural gas producer, Encana (Canada), Takeda Pharmaceutical Co., Ltd. (Japan), property & casualty insurer, Sompo Holdings, Inc. (Japan), and telecommunication services provider, KDDI Corp. (Japan). Long exposures that contributed most to performance were motorsports entertainment provider, International Speedway Corp. (United States), automobile components retailer, Advance Auto Parts, Inc. (United States), apparel manufacturer, Gildan Activewear (Canada), pharmaceutical giant, Eli Lilly & Co. (United States), and wireless communications operator, SK Telecom Co., Ltd. (South Korea).
Within the short portfolio, attribution effects were weakest in the materials, technology hardware & equipment, and insurance industry groups. Short-side attribution effects were strongest in the capital goods, pharmaceuticals & biotechnology, and health care equipment & services industry groups. Short exposures that detracted most from the Fund’s performance included chemicals producer, Kansai Paint Co., Ltd. (Japan), healthcare housekeeping & food services provider, Healthcare Services Group, Inc. (United States), mobile telecommunications services provider, China Unicom (Hong Kong) Ltd. (China), automobile retailer, China Zhengtong Auto Services Holdings (China), and insurance provider, Willis Group Holdings (United Kingdom). Short exposures that contributed most to performance included aerospace & transportation company, Bombardier(Canada), integrated circuits manufacturer, ams AG (Austria), SiteOne Landscape Supply, Inc. (United States), medical device company, Nevro Corp. (United States), and luxury automobile & truck manufacturer, Daimler AG (Germany).
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).
