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*
+6.92%
Nav*
$12.20, +0.01
Inception
October 20, 2014
Cusip
14949P802
Benchmark
MSCI ACWI ex USA Small Cap
Minimum Investment
$5,000
Sales Charge
None
Net Expense Ratio
1.35%
Gross Expense Ratio
1.64%
*As of May 09, 2023
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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 2.1%6.0%-0.8%15.6%1.5%5.7%
MSCI ACWI ex USA Small Cap 1.5%6.4%-2.3%11.8%2.2%5.7%
QTD YTD 1 year3 years5 years Since inception
Fund 2.1%6.0%-0.8%15.6%1.5%5.7%
MSCI ACWI ex USA Small Cap 1.5%6.4%-2.3%11.8%2.2%5.7%
QTD YTD 1 year3 years5 years Since inception
Fund 3.8%3.8%-7.8%18.1%1.0%5.5%
MSCI ACWI ex USA Small Cap 4.8%4.8%-9.9%15.5%2.1%5.6%
QTD YTD 1 year3 years5 years Since inception
Fund 3.8%3.8%-7.8%18.1%1.0%5.5%
MSCI ACWI ex USA Small Cap 4.8%4.8%-9.9%15.5%2.1%5.6%
20222021202020192018201720162015
Fund -11.5%21.2%2.5%18.5%-21.3%34.5%3.1%4.4%
MSCI ACWI ex USA Small Cap -19.6%13.4%14.7%22.9%-17.9%32.1%4.3%3.0%
Fund
MSCI ACWI ex USA Small Cap
20222021202020192018201720162015
-11.5%21.2%2.5%18.5%-21.3%34.5%3.1%4.4%
-19.6%13.4%14.7%22.9%-17.9%32.1%4.3%3.0%

Portfolio (as of April 30, 2023)

Benchmark: MSCI ACWI ex USA Small Cap
Asset Allocation
Fund
Stocks 98.5%
Cash 1.5%
Fund Characteristics
Fund Benchmark
No. of holdings 140 4357
Weighted avg. market cap (US $MM) $2,017 $1,830
FY2 price/earnings 6.8 11.4
Price/book value 0.9 1.3
Net assets $22,146,766 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
KPIT Technologies Ltd. India 2.1%
Centrica United Kingdom 2.0%
Power Finance Corp. Ltd. India 2.0%
Sojitz Corp. Japan 2.0%
Electric Power Development Co., Ltd. Japan 1.9%
Simplo Technology Co., Ltd. Taiwan 1.8%
Radiant Opto-Electronics Corp. Taiwan 1.8%
SSAB Sweden 1.7%
JB Hi-Fi Ltd. Australia 1.7%
Hello Group China 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 18.6% 20.7%
Financials 15.4% 10.7%
Information Technology 13.6% 11.4%
Materials 12.6% 11.7%
Consumer Discretionary 11.4% 11.8%
Energy 5.4% 3.9%
Real Estate 5.0% 9.4%
Utilities 4.9% 3.4%
Consumer Staples 4.8% 6.2%
Health Care 3.3% 7.0%
Communication Services 3.2% 3.9%
Equity Funds 0.3% 0.0%
TOP 10 COUNTRIES
Country Fund Benchmark
Japan 16.8% 20.7%
United Kingdom 9.0% 10.5%
Taiwan 8.8% 5.6%
Australia 7.8% 6.4%
Canada 7.7% 7.1%
South Korea 7.6% 3.9%
India 6.8% 6.0%
Italy 5.1% 2.4%
Sweden 3.1% 4.0%
Thailand 3.0% 0.9%
Regional Allocation
  • Emerging Asia 30.4%
  • Europe – other 28.3%
  • Pacific 27.2%
  • North America 7.7%
  • Emerging Europe, Middle East, Africa 4.8%
  • Multi Region All Country 0.3%
  • Emerging Latin America 0.0%

Commentary (As of April 30, 2023)

Highlights

  • Global markets were mixed for the month of April. International smaller capitalization (“cap”) equities, as measured by the MSCI ACWI ex USA Small Cap Index (“Index”), performed in line with international large caps in April.
  • The US economy may have already entered a stagflation period, likely exacerbated by tightening credit conditions and price rises embedded in wages, goods, and services. Despite headline-generating layoff announcements, payroll figures have been resilient, and the nationwide unemployment rate is a low 3.4%.
  • International small caps exhibit greater valuation dispersion than large caps on both a forward earnings yield and price-to-book basis, indicating more information content in the valuation ratios of small caps.

Portfolio attribution

The 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. In April, the strategy’s value factors produced the highest returns among our alpha factor groups, and value is the best-performing factor YTD and over the last twelve months. Following a challenging first quarter, our earnings growth factors also posted positive returns last month. However, the strategy’s competitive strength and technical factors generated negative monthly returns. Our macroeconomic and country aggregate factors were also negative indicators in April as countries exhibiting superior top-down metrics generally underperformed those with relatively weaker characteristics. All factor group returns remain positive from inception of the Fund (10/20/14) to the end of April.

Economic outlook

The US economy may have already entered a stagflation period, likely exacerbated by tightening credit conditions and price rises embedded in wages, goods, and services. Despite headline-generating layoff announcements, payroll figures have been resilient, and the nationwide unemployment rate is a low 3.4%. Employers who suffered labor shortages during the pandemic may be reluctant to reduce staff, even as demand weakens. In contrast, data suggests the European Central Bank may have flexibility to slow its tightening policy. Although headline Eurozone inflation rose to 7% in April, the rate of core inflation—which removes the volatile food and energy price categories—declined for the first time in ten months, to 5.6%. In both the US and Europe, credit appears to be contracting after recent banking system shocks. As Europe and the US potentially near the end of their rate hike cycles, the Bank of Japan has yet to begin. We expect the Japanese central bank to continue its policy of monetary easing, conducted through yield curve control.

After a robust reopening from Covid lockdowns, Chinese manufacturing contracted in April; China’s official purchasing managers’ index (“PMI”) declined to 49.2. Our fundamental research corroborates this reading. In the materials sector, where China is the world’s largest customer and a critical link in supply chains, companies doing business with China are reporting a weaker recovery than past economic accelerations. Across developed markets, industrial production is declining from peak levels as companies work through backlogs accrued during the pandemic.

Investment outlook

The latest casualty in the US banking crisis was First Republic Bank, whose assets were seized by regulators and sold to JP Morgan. Outside of this incident, however, there has been relative calm in the banking sector, particularly outside of the US.

As of April 30, the Fund has a roughly 4.0% weight to banks, just slightly above the benchmark weight, and attribution was modestly positive for these positions in April.
Though we analyze many different stock selection factors in our alpha model, value factors receive the largest weight on average. Even if the U.S. Fed pauses future interest rate hikes following its May 3rd 25-bps hike, interest rates are likely to remain elevated for some time. A higher cost of capital should translate into a continued preference for value stocks. As of the end of April, the MSCI ACWI ex USA Small Cap Growth Index traded at a 17.1x forward P/E multiple compared to 10.0x for the MSCI ACWI ex USA Small Cap Value Index, a 71% premium.

International small caps exhibit greater valuation dispersion than large caps on both a forward earnings yield and price-to-book basis, indicating more information content in the valuation ratios of small caps. In addition to exhibiting greater valuation dispersion, small caps exhibit a higher long-term EPS growth trend.

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
2022 $0.3141 $0.0000 $0.0000
2021 $0.4608 $0.0000 $0.0000
2020 $0.3870 $0.0000 $0.0000
2019 $0.4079 $0.0000 $0.0000
2018 $0.2903 $0.0000 $0.0000
2017 $0.3588 $0.2375 $0.4794
2016 $0.2619 $0.0000 $0.0000
2015 $0.2095 $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:

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