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*
+20.27%
Nav*
$13.59, +0.13
Inception
October 20, 2014
Cusip
14949P703
Benchmark
MSCI ACWI ex USA Small Cap
Minimum Investment
$1,000,000
Sales Charge
None
Net Expense Ratio
1.10%
Gross Expense Ratio
1.46%
*As of May 03, 2021
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Strategy overview

The portfolio managers discuss our International Small Cap strategy.

Portfolio managers

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

Performance

QTD YTD 1 year3 years5 years Since inception
Fund 12.2%12.2%66.2%2.2%8.7%7.7%
MSCI ACWI ex USA Small Cap 5.6%5.6%70.4%7.0%10.8%9.1%
QTD YTD 1 year3 years5 years Since inception
Fund 12.2%12.2%66.2%2.2%8.7%7.7%
MSCI ACWI ex USA Small Cap 5.6%5.6%70.4%7.0%10.8%9.1%
QTD YTD 1 year3 years5 years Since inception
Fund 12.2%12.2%66.2%2.2%7.7%
MSCI ACWI ex USA Small Cap 5.6%5.6%70.4%7.0%9.1%
QTD YTD 1 year3 years5 years Since inception
Fund 12.2%12.2%66.2%2.2%7.7%
MSCI ACWI ex USA Small Cap 5.6%5.6%70.4%7.0%9.1%
202020192018201720162015
Fund 2.7%18.8%-21.1%34.7%3.3%4.7%
MSCI ACWI ex USA Small Cap 14.7%22.9%-17.9%32.1%4.3%3.0%
Fund
MSCI ACWI ex USA Small Cap
202020192018201720162015
2.7%18.8%-21.1%34.7%3.3%4.7%
14.7%22.9%-17.9%32.1%4.3%3.0%

Portfolio (as of March 31, 2021)

Benchmark: MSCI ACWI ex USA Small Cap
Asset Allocation
Fund
Stocks 98.1%
Cash 1.9%
Fund Characteristics
Fund Benchmark
No. of holdings 128 4213
Weighted avg. market cap (US $MM) $2,113 $2,074
FY2 price/earnings 8.5 14.9
Price/book value 1.2 1.6
Net assets $62,046,600 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Yang Ming Marine Transport Corp. Taiwan 2.5%
Kindred Group Plc Sweden 2.1%
Mineral Resources Ltd. Australia 2.1%
SITC International Holdings Co., Ltd. Hong Kong 2.1%
Royal Mail Plc United Kingdom 2.1%
BE Semiconductor Industries NV Netherlands 2.1%
Hyosung TNC Corp. South Korea 2.0%
EVRAZ Plc United Kingdom 2.0%
ASR Nederland NV Netherlands 1.9%
JB Hi-Fi Ltd. Australia 1.8%

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 18.9% 21.0%
Consumer Discretionary 17.1% 12.8%
Financials 14.1% 10.7%
Information Technology 13.9% 11.6%
Materials 10.6% 11.0%
Real Estate 5.6% 10.2%
Health Care 5.4% 7.2%
Communication Services 4.9% 4.1%
Consumer Staples 4.5% 5.6%
Energy 1.7% 2.4%
Utilities 1.3% 3.4%
TOP 10 COUNTRIES
Country Fund Benchmark
Japan 15.6% 19.7%
Taiwan 9.9% 5.1%
South Korea 9.2% 4.3%
Australia 8.6% 6.1%
United Kingdom 8.5% 12.7%
Canada 7.3% 6.4%
Netherlands 5.5% 1.8%
China 5.0% 2.6%
Sweden 4.3% 5.1%
Hong Kong 4.0% 1.5%
Regional Allocation
  • Emerging Asia 29.9%
  • Pacific 29.7%
  • Europe – other 29.1%
  • North America 7.3%
  • Emerging Latin America 1.3%
  • Emerging Europe, Middle East, Africa 0.8%

Commentary (As of March 31, 2021)

Highlights

  • Equity markets continued to ascend in March amid a steady progression in vaccination rollouts, historically high levels of fiscal and monetary accommodation, and renewed optimism in the outlook for global growth.
  • The rapid reopening of economies and consumers’ pent up demand could lead to a surge in spending, thereby adding to inflation pressures. However, we believe the long-term deflationary forces of demographics and technological advancement (such as digitization and automation) remain in place.
  • Although value was under significant pressure in 2020, it has proven resilient in recent months. We believe there is far more “catching up” to come. Macroeconomic data is becoming increasingly supportive of value outperformance according to historical relationships.

Portfolio attribution

Causeway International Small Cap Fund (“Fund”) outperformed 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 competitive strength – and two top-down factor categories assessing macroeconomic and country aggregate characteristics.

From a sector perspective, Fund holdings in consumer discretionary, industrials, and information technology contributed the most to performance relative to the Index. Fund holdings in the materials sector offset a portion of the outperformance; otherwise holdings in the energy and communication services sectors contributed the least. Relative performance for the month can be mostly attributed to stock selection. The largest contributor to performance was textile manufacturer, Hyosung TNC Corp. (South Korea). Additional top contributors included marine transportation services provider, Yang Ming Marine Transport Corp. (Taiwan), transportation and logistics solutions provider, SITC International Holdings Co., Ltd. (Hong Kong), retailer, JB Hi-Fi Ltd. (Australia), and semiconductor services provider, BE Semiconductor Industries NV (Netherlands). The largest detractor from performance was solar energy company, Daqo New Energy (China). Additional top detractors included plastics & polymers manufacturer, Korea Petrochemical Ind. Co., Ltd. (South Korea), rubber product producer, Sri Trang Agro-Industry Public Co. Ltd. (Thailand), rubber product producer, Kossan Rubber Industries Bhd. (Malaysia), and mortgage lender, Indiabulls Housing Finance Ltd. (India).

Investment outlook

Though we analyze many different stock selection factors in our alpha model, value factors receive the largest weight on average. Although value was under significant pressure in 2020, it has proven resilient in recent months. We believe there is far more “catching up” to come. Macroeconomic data is becoming increasingly supportive of value outperformance according to historical relationships. Higher interest rates favor value stocks since increasing discount rates will penalize longer duration growth stocks whose cash flows are expected farther in the future. Increasing inflation expectations and a steepening yield curve directly benefit financials (via net interest margins) but also support industrials and other cyclicals via strengthening growth expectations. Recovering commodity prices also signal improving growth prospects and directly benefit the materials and energy sectors. As of March 31, the Small Cap Growth Index traded at a 24.1x forward price-to-earnings multiple compared to 14.0x for the Small Cap Value Index, a 73% premium. We believe that value's relative performance should improve as inflation expectations increase, the yield curve steepens, Covid-19 vaccine distribution accelerates, and economies reopen.

While value receives the largest weight on average, 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 many 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-bookvalue 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.

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.

Distributions

Dividends Short-term capital gains Long-term capital gains
2020 $0.4107 $0.0000 $0.0000
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).

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