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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 15 Feb 2019)
$8.73, -0.02
YTD
-2.68%
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 | 2.00% |
| 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 1/31/20. The expense ratios for Institutional Class shares are 1.81% and 1.52% after adviser fee waiver. The expense ratios for Investor Class shares are 2.00% 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 Jan 2019
| Cash | 50,721,154 |
| Market Value Long | 82,464,063 |
| Market Value Short | -81,770,809 |
| Net Positional Value | 693,254 |
| NAV | 51,414,408 |
| Net Exposure | 1.35% |
| Leverage | 3.19 |
| Long Positions | 112 |
| Short Positions | 118 |
| Total | 230 |
Characteristics as of 31 Jan 2019
| Long Portfolio | Short Portfolio | MSCI World | |
|---|---|---|---|
| No. of Exposures | 112 | 118 | 1632 |
| Wtd Avg Mkt Cap (Mn $US) | $42,219 | $11,926 | $128,771 |
| FY2 Price/Earnings | 9.2 | 16.1 | 14.1 |
| Price/Book Value | 1.3 | 1.7 | 2.3 |
| Return on Equity (%) | 16.3 | 7.1 | 19.2 |
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 Jan 2019
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| Industrials | 27.70 | -22.34 | 5.36 |
| Energy | 9.20 | -4.13 | 5.07 |
| Health Care | 11.16 | -8.30 | 2.86 |
| Materials | 14.96 | -12.84 | 2.12 |
| Communication Services | 13.13 | -11.92 | 1.21 |
| Consumer Discretionary | 17.25 | -16.05 | 1.20 |
| Information Technology | 13.80 | -13.04 | 0.76 |
| Consumer Staples | 4.21 | -6.65 | -2.44 |
| Financials | 32.79 | -36.78 | -3.99 |
| Utilities | 11.83 | -17.12 | -5.29 |
| Real Estate | 4.39 | -9.74 | -5.35 |
Country Exposure as of 31 Jan 2019
| Long Exposure (%) | Short Exposure (%) | Net Exposure (%) | |
|---|---|---|---|
| China | 17.26 | -8.43 | 8.83 |
| Canada | 13.60 | -8.33 | 5.27 |
| United Kingdom | 13.25 | -9.77 | 3.48 |
| Netherlands | 2.83 | 0.00 | 2.83 |
| Japan | 21.20 | -18.43 | 2.77 |
| Sweden | 1.34 | 0.00 | 1.34 |
| New Zealand | 1.28 | -0.28 | 1.00 |
| France | 2.64 | -1.68 | 0.96 |
| Switzerland | 6.24 | -5.31 | 0.93 |
| Germany | 4.12 | -3.53 | 0.59 |
| South Korea | 6.37 | -6.62 | -0.25 |
| Belgium | 0.00 | -0.26 | -0.26 |
| Denmark | 0.00 | -0.62 | -0.62 |
| Italy | 0.00 | -1.25 | -1.25 |
| Singapore | 0.67 | -2.33 | -1.66 |
| Portugal | 0.00 | -2.25 | -2.25 |
| United States | 65.67 | -68.74 | -3.07 |
| Norway | 0.00 | -3.56 | -3.56 |
| Hong Kong | 0.00 | -4.06 | -4.06 |
| Spain | 0.00 | -4.51 | -4.51 |
| Australia | 3.94 | -8.96 | -5.02 |
TOP 10 Positions as of 31 Jan 2019
| Top Ten Long Positions | Top Ten Short Positions | ||
|---|---|---|---|
| Company | Ending Weight (%) | Company | Ending Weight (%) |
| Showa Denko K.K. | 3.16% | Northland Power | -3.20% |
| Coca-Cola Amatil Ltd. | 3.14% | China Unicom (Hong Kong) Ltd. | -3.13% |
| Takeda Pharmaceutical Co., Ltd. | 3.12% | Aqua America, Inc. | -3.12% |
| Genworth Mi Canada | 3.11% | Cellnex Telecom SA | -3.11% |
| KDDI Corp. | 3.08% | Premium Brands Holdings | -3.11% |
| FirstEnergy Corp. | 3.06% | Daimler AG | -3.11% |
| Manulife Financial | 3.02% | Kansai Paint Co., Ltd. | -3.06% |
| Alaska Air Group, Inc. | 2.99% | Carvana Co. | -3.05% |
| Viacom, Inc. | 2.97% | Bâloise Holding AG | -3.05% |
| Gildan Activewear | 2.91% | Insurance Australia Group Ltd. | -2.98% |
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 Jan 2019
Causeway Global Absolute Return Fund (“Fund”) outperformed the ICE BofAML US 3-Month Treasury Bill Index in the month of January. The Fund’s outperformance was driven by the long portfolio: the Fund’s global long portfolio outperformed the MSCI World Index (“World Index”). The Fund’s global short portfolio also outperformed the World Index, though by a smaller margin, contributing negatively to overall performance.
Equity markets rebounded in January, boosted by more dovish signals from the US Federal Reserve on future interest rate hikes and improving rhetoric on US-China trade tensions. The top performing markets in our investable universe were Canada, China, South Korea, Belgium, and Austria. The worst performing markets were Denmark, Portugal, Ireland, Singapore, and Israel. The best performing sectors in the World Index were real estate, energy, and industrials. The worst performing sectors were consumer staples, utilities, and health care.
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 January, value was the only quantitative alpha factor category to demonstrate predictive power. Stocks with cheap valuations outperformed those with expensive valuations. However, stocks with improving earnings growth dynamics underperformed those with worsening dynamics, stocks with positive technical indicators underperformed those with negative technical indicators, and stocks demonstrating higher earnings quality underperformed those with lower earnings quality, contrary to expectations.
Within the long portfolio, attribution effects were strongest in the pharmaceuticals & biotechnology, diversified financials, and banks industry groups. Long-side attribution effects were weakest in the retailing, transportation, and consumer services industry groups. Long exposures that contributed most to performance were student loan services company, Navient Corp. (United States), global financial services giant, Citigroup, Inc. (United States), for-profit educator, K12, Inc. (United States), heavy truck manufacturer, Sinotruk Hong Kong Ltd. (China), and Takeda Pharmaceutical Co., Ltd. (Japan). Long exposures that detracted most from the Fund’s performance were specialty retail jeweler, Signet Group (United States), tax preparation company, H&R Block, Inc. (United States), electric utility, Tokyo Electric Power Co. Holdings, Inc. (Japan), wireless communications operator, SK Telecom Co., Ltd. (South Korea), and airline, Air New Zealand Ltd. (New Zealand).
Within the short portfolio, attribution effects were weakest in the software & services, pharmaceuticals & biotechnology, and health care equipment & services industry groups. Short-side attribution effects were strongest in the materials, retailing, and banks industry groups. Short exposures that detracted most from the Fund’s performance included shipbuilder, Samsung Heavy Industries Co., Ltd. (South Korea), technology & camera company, Snap, Inc. (United States), water company, United Utilities Group Plc (United Kingdom), investment bank, Moelis & Co. (United States), and financial services provider, Pacific Premier Bancorp, Inc. (United States). Short exposures that contributed most to performance were chemicals producer, Kansai Paint Co., Ltd. (Japan), automobile retailer,China Zhengtong Auto Services Holdings (China), engineering & construction company, Snc-Lavalin Group (Canada), retail bank, Metro Bank Plc (United Kingdom), and telecommunication services provider, Iliad SA (France).
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
| 2018 | $0.8637 |
| 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
| 2018 | $0.0000 |
| 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
| 2018 | $0.0000 |
| 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).
