Seeking diversified exposure to international small cap companies
The Fund invests primarily in common stocks of companies with smaller market capitalizations located in developed and emerging markets outside the US. The Fund normally invests at least 80% of its total assets in equity securities of companies with smaller market capitalizations. Smaller market capitalization companies are companies with market capitalizations that do not exceed the highest market capitalization of a company within the Fund’s benchmark, the MSCI ACWI ex USA Small Cap Index (Gross), at the time of purchase. Some of these companies, although small by US standards, might be large companies in their local markets. The Fund may continue to hold securities of a portfolio company that appreciate above the smaller market capitalization threshold and thus may from time to time hold less than 80% of its total assets in equity securities of companies with smaller market capitalizations. The Fund may invest in a wide range of industries. The Fund’s investment objective is to seek long-term growth of capital.
- YTD Return*
- -10.52%
- Nav*
- $10.21, +0.06
- Inception
- October 20, 2014
- Cusip
- 14949P703
- Benchmark
- MSCI ACWI ex USA Small Cap
- Minimum Investment
- $1,000,000
- Sales Charge
- None
- Net Expense Ratio
- 1.12%
- Gross Expense Ratio
- 1.53%
Portfolio managers
Arjun Jayaraman, PhD, CFA
Quantitative Portfolio Manager
Dr. Jayaraman is a director, quantitative portfolio manager and head of the quantitative research at Causeway and has been with the firm since January 2006. Dr. Jayaraman’s responsibilities and research include stock selection, asset allocation, risk model development, and portfolio construction.
From 2004 to 2005, Dr. Jayaraman was a portfolio manager at PanAgora Asset Management. He was the lead portfolio manager on the non-U.S. large cap core equity portfolios and was the co-portfolio manager on the global large cap core equity portfolios. From 2000 to 2004, Dr. Jayaraman managed the same portfolios at Putnam Investments, in addition to working closely with the teams that managed Putnam's traditional non-U.S. strategies. From 1998 to 2000, Dr. Jayaraman worked as a quantitative analyst at Harborview Trading Associates.
Dr. Jayaraman earned a PhD from New York University at the Stern School of Business and a BA in economics from Columbia University. Dr. Jayaraman is a CFA charterholder.
MacDuff Kuhnert, CFA
Mr. Kuhnert is a director and a quantitative portfolio manager at Causeway and has been with the firm since its inception in June 2001. Mr. Kuhnert’s responsibilities and research include stock selection, asset allocation, risk model development, and portfolio construction.
From 1996 to 2001, Mr. Kuhnert worked for the international team of the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM) as a quantitative research associate. During his tenure at HW-MLIM, Mr. Kuhnert created and developed advanced quantitative models used in the international value investment process. He also helped develop the team’s first equity risk model.
Mr. Kuhnert earned a BA in chemistry from Dartmouth College. He is a CFA charterholder, a member of the CFA Society of Los Angeles, and a member of the Chicago Quantitative Alliance. Mr. Kuhnert co-authored “To Hedge or Not to Hedge: Factor Dependence and Skill among Hedge Funds” published in The Journal of Alternative Investments.
Joe Gubler, CFA
Mr. Gubler is a quantitative portfolio manager at Causeway. He joined the firm in 2005 and has been a portfolio manager since January 2014. In addition to managing quantitative portfolios and conducting alpha research, Mr. Gubler also leads the efforts to maintain and enhance Causeway’s proprietary risk models. He is also a member of the operating committee.
From 1999 to 2005, Mr. Gubler worked as a software engineer, with employers ranging from startups to established businesses such as Monster.com. From 1998 to 1999, Mr. Gubler worked as a staff scientist for News Corporation, conducting studies on the RF propagation of broadcast signals. While studying astrophysics at UC San Diego, Mr. Gubler worked as a graduate research assistant in the Jet Propulsion Laboratory's stellar interferometry group.
Mr. Gubler earned a BS, cum laude, in physics from UC Irvine, an MS in physics from UC San Diego, and an MBA from the UCLA Anderson Graduate School of Management. Mr. Gubler is a CFA charterholder.
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 reflects fee waivers in effect. 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 1.53% and 1.17% after adviser fee waiver. The expense ratios for Investor Class shares are 1.78% and 1.42% after adviser fee waiver.
Portfolio (as of September 30, 2020)
Asset Allocation
| Fund | |
|---|---|
| Stocks | 98.1% |
| Cash | 1.9% |
Fund Characteristics
| Fund | Benchmark | |
|---|---|---|
| No. of holdings | 135 | 4055 |
| Weighted avg. market cap (US $MM) | $1,762 | $1,753 |
| FY2 price/earnings | 9.5 | 14.7 |
| Price/book value | 1.2 | 1.3 |
| Net assets | $51,665,057 | - |
TOP 10 ACTIVE HOLDINGS
| Security | Country | Active weight* |
|---|---|---|
| Radiant Opto-Electronics Corp. | Taiwan | 2.0% |
| Huaxin Cement Co | China | 1.9% |
| General Interface Solution (GIS) Holding Ltd. | Taiwan | 1.9% |
| JB Hi-Fi Ltd. | Australia | 1.9% |
| Capcom Co., Ltd. | Japan | 1.9% |
| Granules India Ltd. | India | 1.8% |
| ASR Nederland NV | Netherlands | 1.8% |
| HASEKO Corp. | Japan | 1.8% |
| TAG Immobilien AG | Germany | 1.7% |
| Centamin Plc | United Kingdom | 1.7% |
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.
*Active defined as Fund weight minus MSCI ACWI ex USA Small Cap Index weight. Holdings are subject to change.
SECTOR WEIGHTS
| Sector | Fund | Benchmark |
|---|---|---|
| Industrials | 15.1% | 19.9% |
| Information Technology | 14.4% | 12.4% |
| Health Care | 12.7% | 8.1% |
| Consumer Discretionary | 12.0% | 12.5% |
| Financials | 11.9% | 9.5% |
| Consumer Staples | 8.8% | 6.4% |
| Communication Services | 7.6% | 4.5% |
| Materials | 6.7% | 10.2% |
| Real Estate | 6.1% | 11.1% |
| Utilities | 2.3% | 3.3% |
| Energy | 0.4% | 2.0% |
TOP 10 COUNTRIES
| Country | Fund | Benchmark |
|---|---|---|
| Japan | 17.7% | 22.4% |
| United Kingdom | 10.5% | 11.7% |
| Taiwan | 8.9% | 5.0% |
| Sweden | 8.7% | 5.5% |
| China | 6.5% | 2.7% |
| South Korea | 5.9% | 4.0% |
| Netherlands | 5.8% | 1.6% |
| Australia | 5.1% | 6.1% |
| Canada | 4.2% | 6.5% |
| Germany | 4.0% | 4.1% |
Regional Allocation
- Europe – other 38.1%
- Emerging Asia 26.4%
- Pacific 25.4%
- North America 4.2%
- Emerging Latin America 2.9%
- Emerging Europe, Middle East, Africa 1.1%
Distributions
| Dividends | Short-term capital gains | Long-term capital gains | |
|---|---|---|---|
| 2019 | $0.4390 | $0.0000 | $0.0000 |
| 2018 | $0.3165 | $0.0000 | $0.0000 |
| 2017 | $0.3792 | $0.2375 | $0.4794 |
| 2016 | $0.2901 | $0.0000 | $0.0000 |
| 2015 | $0.2407 | $0.0000 | $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).
Documents
Fund information:
Forms:
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Commentary (As of September 30, 2020)
Highlights
Portfolio attribution
In our view, the most compelling companies in the developed market value universe are those engaged in operational restructuring, using the disruption of the pandemic to lean out their cost bases and shed non-core assets. This ensuing boost in operating leverage may position these forward-thinkers well for an upturn in revenues as recovery develops.
From a sector perspective, Fund holdings in the health care, communications services, and financials contributed the most to performance relative to the Index. Fund holdings in the consumer discretionary, real estate, and information technology sectors offset a portion of the performance. Relative performance for the month can be mostly attributed to stock selection. The largest contributor to performance was pharmaceutical company, Granules India Ltd. (India). Additional top contributors included biopharmaceutical company, Pharma Mar SA (Spain), plastics & polymers manufacturer, Korea Petrochemical Ind. Co., Ltd. (South Korea), recreational products company, Capcom Co., Ltd. (Japan), and social and professional networking company, Mixi, Inc. (Japan). The top detractor from performance was electronics retailer, JB Hi-Fi Ltd. (Australia). Additional top detractors included semiconductor services provider, BE Semiconductor Industries NV (Netherlands), food distributor, Metcash Ltd. (Australia), lithium battery producer, Simplo Technology Co., Ltd. (Taiwan), and gaming company, NetEnt AB (Sweden).
Investment outlook
Though we analyze many different stock selection factors in our alpha model, value factors receive the largest weight on average. As of September 30, the Small Cap Growth Index traded at a 22.8x forward price-to-earnings multiple compared to 14.0x for the Small Cap Value Index. This 63% premium is well above the 27% average premium over the last 15 years. We believe that value’s relative performance should improve once COVID-19 uncertainty abates, especially given the discount offered by value stocks currently. Notably our value alpha factors performed well in September despite the Small Cap Value Index underperforming the Small Cap Growth Index. However, the sheer breadth of the international small cap universe means that the typical tradeoffs in portfolio characteristics do not necessarily apply. In addition to value, we look for favorable growth, momentum, and quality characteristics. We believe that at most points in time our portfolio has exhibited more attractive metrics relative to the Index across all factor categories simultaneously. Smaller cap equities are currently exhibiting a higher long-term earnings-per-share growth trend than larger cap equities. Additionally, international smaller cap equities have exhibited greater valuation dispersion than larger cap equities on both a forward-earnings-yield basis and a price-to-book value basis, indicating more information content in valuation ratios for these equities. This characteristic has allowed us to construct a portfolio with lower valuation ratios relative to the Index without, in our view, compromising quality.
We continue to observe several intriguing features in the smaller cap landscape. We believe the intersection of international equities and smaller cap companies creates a recipe for inefficiency. Additionally, international smaller cap stocks are an underappreciated asset class that we believe can offer meaningful diversification benefits with the potential to reduce portfolio volatility. Finally, smaller cap stocks are typically less exposed to the potential risk of rising barriers to trade, given their home country revenue exposure. Despite the potential benefits, we believe many investors may be underallocated to the asset class despite its meaningful growth and diversification prospects. Causeway’s international small cap strategy combines the flexibility and breadth of quantitative analysis with our global industry knowledge, which we believe will benefit long-term investors in the Fund.
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 will be subject to risk. International and emerging markets investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets and smaller companies involve additional risks and higher volatility.