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*
$7.97, +0.15
October 20, 2014
MSCI ACWI ex USA Small Cap
Minimum Investment
Sales Charge
Net Expense Ratio
Gross Expense Ratio
*As of April 07, 2020
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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 -30.7%-30.7%-26.4%-7.1%-0.8%
MSCI ACWI ex USA Small Cap -28.9%-28.9%-20.8%-4.5%0.5%
QTD YTD 1 year3 years Since inception
Fund -30.7%-30.7%-26.4%-7.1%-0.8%
MSCI ACWI ex USA Small Cap -28.9%-28.9%-20.8%-4.5%0.5%
QTD YTD 1 year3 years Since inception
Fund -30.7%-30.7%-26.4%-7.1%-0.8%
MSCI ACWI ex USA Small Cap -28.9%-28.9%-20.8%-4.5%0.5%
QTD YTD 1 year3 years Since inception
Fund -30.7%-30.7%-26.4%-7.1%-0.8%
MSCI ACWI ex USA Small Cap -28.9%-28.9%-20.8%-4.5%0.5%
Fund 18.5%-21.3%34.5%3.1%4.4%
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 February 29, 2020)

Benchmark: MSCI ACWI ex USA Small Cap
Asset Allocation
Stocks 98.0%
Cash 2.0%
Fund Characteristics
Fund Benchmark
No. of holdings 141 4194
Weighted avg. market cap (US $MM) $1,532 $1,697
FY2 price/earnings 8.3 12.8
Price/book value 1.0 1.3
Net assets $1,312,064 -
Security Country Active weight*
HASEKO Corp. Japan 2.0%
ASR Nederland NV Netherlands 1.8%
Qualicorp Consultoria e Corretora de Seguros SA Brazil 1.6%
Radiant Opto-Electronics Corp. Taiwan 1.6%
King Yuan Electronics Co., Ltd. Taiwan 1.6%
JB Hi-Fi Ltd. Australia 1.6%
Huaxin Cement Co China 1.5%
Unipol Gruppo SpA Italy 1.4%
BE Semiconductor Industries NV Netherlands 1.4%
Simplo Technology 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 15.2% 11.2%
Industrials 14.7% 19.2%
Real Estate 14.6% 13.1%
Financials 13.7% 10.6%
Consumer Discretionary 10.5% 12.0%
Health Care 8.8% 7.6%
Materials 5.4% 9.7%
Consumer Staples 5.1% 6.0%
Communication Services 3.6% 4.3%
Utilities 3.3% 3.5%
Energy 3.0% 2.8%
Country Fund Benchmark
Japan 19.4% 21.4%
United Kingdom 10.8% 12.6%
Taiwan 8.3% 4.5%
China 6.0% 2.5%
Netherlands 5.8% 1.9%
Sweden 5.7% 4.7%
Brazil 5.2% 2.1%
Germany 4.8% 4.4%
Australia 4.8% 5.4%
Canada 4.7% 6.8%
Regional Allocation
  • Europe – other 36.5%
  • Pacific 26.2%
  • Emerging Asia 21.6%
  • Emerging Latin America 6.4%
  • North America 4.7%
  • Emerging Europe, Middle East, Africa 2.5%

Commentary (As of February 29, 2020)


  • We expect the outbreak of the coronavirus to weigh on global gross domestic product (“GDP”) growth, with the greatest drag on China and South Korea, as well as already weak economies in Europe and Japan.
  • Monetary policymakers have already begun implementing supportive measures to ease the financial pain of a prolonged slowdown. A more direct response to counter the effects of the demand slowdown from coronavirus is fiscal stimulus. We believe the virus outbreak may act as a catalyst for European economies, in particular, to enact fiscal stimulus.
  • 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”) 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 quality – and two top-down factor categories assessing macroeconomic and country aggregate characteristics.

From a sector perspective, fund holdings in the real estate, materials, and information technology sectors contributed the most to performance relative to the Index. Holdings in the health care, industrials, and energy 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 online game company, International Games System Co., Ltd. (Taiwan). Additional top contributors included real estate developer, Samhällsbyggnadsbolaget I Norden AB (Sweden), property developer, China Aoyuan Group Ltd. (China), pharmaceutical company, Granules India Ltd. (India), and pharmaceutical company, Ipca Laboratories Ltd. (India). The top detractor from performance was healthcare insurance company, Qualicorp Consultoria e Corretora de Seguros SA (Brazil). Additional top detractors included passenger airline, Dart Group Plc (United Kingdom), recruiting services provider, DIP Corp. (Japan), insurance group, ASR Nederland NV (Netherlands), and investment management firm, AGF Management (Canada).

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, and that trend has persisted in 2020. As of February 29, the MSCI ACWI ex USA Small Cap Growth Index traded at a 17.1x forward price-to-earnings multiple compared to 11.3x for the MSCI ACWI ex USA Small Cap Value Index. This 52% 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. 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 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 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 $0.4079 $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).


Fund information: