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*
$11.16, +0.04
October 20, 2014
MSCI ACWI ex USA Small Cap
Minimum Investment
Sales Charge
Net Expense Ratio
Gross Expense Ratio
*As of February 19, 2020

Strategy overview

The portfolio managers discuss our International Small Cap strategy.

Portfolio managers

Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager


QTD YTD 1 year3 years Since inception
Fund -4.6%-4.6%4.4%5.0%5.6%
MSCI ACWI ex USA Small Cap -3.1%-3.1%10.4%7.6%6.6%
QTD YTD 1 year3 years Since inception
Fund -4.6%-4.6%4.4%5.0%5.6%
MSCI ACWI ex USA Small Cap -3.1%-3.1%10.4%7.6%6.6%
QTD YTD 1 year3 years Since inception
Fund 10.3%18.8%18.8%8.1%6.6%
MSCI ACWI ex USA Small Cap 11.1%22.9%22.9%10.1%7.3%
QTD YTD 1 year3 years Since inception
Fund 10.3%18.8%18.8%8.1%6.6%
MSCI ACWI ex USA Small Cap 11.1%22.9%22.9%10.1%7.3%
Fund 18.8%-21.1%34.7%3.3%4.7%
MSCI ACWI ex USA Small Cap 22.9%-17.9%32.1%4.3%3.0%
MSCI ACWI ex USA Small Cap

Portfolio (as of January 31, 2020)

Benchmark: MSCI ACWI ex USA Small Cap
Asset Allocation
Stocks 98.2%
Cash 1.8%
Fund Characteristics
Fund Benchmark
No. of holdings 149 4206
Weighted avg. market cap (US $MM) $1,653 $1,852
FY2 price/earnings 9.1 14.3
Price/book value 1.1 1.4
Net assets $81,138,387 -
Security Country Active weight*
Qualicorp Consultoria e Corretora de Seguros SA Brazil 1.9%
ASR Nederland NV Netherlands 1.9%
HASEKO Corp. Japan 1.8%
DIP Corp. Japan 1.6%
JB Hi-Fi Ltd. Australia 1.6%
Radiant Opto-Electronics Corp. Taiwan 1.6%
Huaxin Cement Co China 1.4%
AGF Management Canada 1.4%
Simplo Technology Co., Ltd. Taiwan 1.4%
King Yuan Electronics Co., Ltd. Taiwan 1.4%

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.

*Active defined as Fund weight minus MSCI ACWI ex USA Small Cap Index weight. Holdings are subject to change.

Sector Fund Benchmark
Information Technology 15.0% 11.2%
Industrials 14.8% 19.3%
Financials 14.1% 10.5%
Real Estate 13.1% 12.8%
Consumer Discretionary 11.0% 12.4%
Health Care 9.3% 7.4%
Consumer Staples 5.2% 6.0%
Materials 5.1% 9.8%
Communication Services 3.8% 4.3%
Utilities 3.3% 3.4%
Energy 3.2% 3.0%
Equity Funds 0.4% 0.0%
Country Fund Benchmark
Japan 20.7% 21.9%
United Kingdom 10.4% 13.2%
Taiwan 7.8% 4.1%
Netherlands 5.8% 1.9%
Sweden 5.6% 4.5%
Brazil 5.5% 2.2%
China 5.4% 2.2%
Australia 5.1% 5.5%
Canada 4.6% 6.9%
Germany 4.4% 4.5%
Regional Allocation
  • Europe – other 35.9%
  • Pacific 27.7%
  • Emerging Asia 20.6%
  • Emerging Latin America 6.7%
  • North America 4.6%
  • Emerging Europe, Middle East, Africa 2.8%

Commentary (As of January 31, 2020)


  • After delivering impressive returns in calendar 2019, equity markets faltered in January in local currency terms, as concerns over the coronavirus outbreak may have weighed on investor optimism.
  • In China, key infrastructure and travel were shut down in an attempt to slow the spread of the coronavirus, which will likely be a near-term drag on Chinese (and likely global) economic growth. Chinese authorities will likely enact additional targeted stimulus in response to the outbreak.
  • The overall outlook for smaller cap equities remains favorable in our view. Smaller cap equities are currently exhibiting a higher long-term earnings-per-share growth trend than larger cap equities.

Portfolio attribution

Causeway International Small Cap Fund (“Fund”) underperformed the Index during the month. To evaluate stocks in our investable universe, our multi-factor quantitative model employs four bottom-up factor categories – valuation, earnings growth, technical indicators, and quality – and two top-down factor categories assessing macroeconomic and country aggregate characteristics.

From a sector perspective, fund holdings in the real estate, information technology, and materials sectors detracted the most from performance relative to the Index. Holdings in the health care, communication services, and energy sectors offset a portion of the underperformance. Relative performance for the month can be mostly attributed to stock selection. The largest detractor from performance was real estate developer and operator, Hammerson Plc (United Kingdom). Additional top detractors included, cement & concrete manufacturer, Huaxin Cement Co (China), electronics manufacturer, Radiant Opto-Electronics Corp. (Taiwan), semiconductor tester, King Yuan Electronics Co., Ltd. (Taiwan), and apparel company, Adastria Co., Ltd. (Japan). The largest contributor to performance was semiconductor services provider, BE Semiconductor Industries NV (Netherlands). Additional top contributors included human resource services provider, DIP Corp. (Japan), real estate developer, PSP Swiss Property AG (Switzerland), investment management firm, AGF Management (Canada), and arcade and online game company, International Games System Co., Ltd. (Taiwan).

Investment outlook

Though we analyze many different stock selection factors in our alpha model, value factors receive the largest weight on average. Despite value’s relatively strong performance late in the year, value stocks still significantly underperformed growth stocks in 2019, both in developed and emerging markets. As of January 31, the MSCI ACWI ex USA Small Cap Growth Index traded at a 18.7x forward price-to-earnings multiple compared to 12.3x for the MSCI ACWI ex USA Small Cap Value Index. This 53% premium is well above the 27% average premium over the last 15 years. Given the valuations of growth stocks, which we believe are stretched, we feel comfortable with our meaningful active exposure to value factors.

The overall outlook for smaller cap equities remains favorable in our view. Improving market sentiment (due to potential progress on US-China trade negotiations and a steepening yield curve) could lead to stronger demand for risk assets including smaller market-cap stocks. Smaller cap equities are also 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 a number of 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. In spite of 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.


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).


Fund information: