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*
+2.98%
Nav*
$11.75, +0.05
Inception
October 20, 2014
Cusip
14949P802
Benchmark
MSCI ACWI ex USA Small Cap
Minimum Investment
$5,000
Sales Charge
None
Net Expense Ratio
1.38%
Gross Expense Ratio
1.72%
*As of January 17, 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 15.3%-11.5%-11.5%3.2%0.5%5.2%
MSCI ACWI ex USA Small Cap 13.4%-19.6%-19.6%1.5%1.1%5.2%
QTD YTD 1 year3 years5 years Since inception
Fund 15.3%-11.5%-11.5%3.2%0.5%5.2%
MSCI ACWI ex USA Small Cap 13.4%-19.6%-19.6%1.5%1.1%5.2%
QTD YTD 1 year3 years5 years Since inception
Fund 15.3%-11.5%-11.5%3.2%0.5%5.2%
MSCI ACWI ex USA Small Cap 13.4%-19.6%-19.6%1.5%1.1%5.2%
QTD YTD 1 year3 years5 years Since inception
Fund 15.3%-11.5%-11.5%3.2%0.5%5.2%
MSCI ACWI ex USA Small Cap 13.4%-19.6%-19.6%1.5%1.1%5.2%
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 December 31, 2022)

Benchmark: MSCI ACWI ex USA Small Cap
Asset Allocation
Fund
Stocks 98.5%
Cash 1.5%
Fund Characteristics
Fund Benchmark
No. of holdings 126 4331
Weighted avg. market cap (US $MM) $2,018 $1,674
FY2 price/earnings 6.2 11.3
Price/book value 0.8 1.3
Net assets $31,196,878 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
POSCO INTERNATIONAL Corp. South Korea 2.0%
Sojitz Corp. Japan 2.0%
Electric Power Development Co., Ltd. Japan 2.0%
SHIMAMURA Co., Ltd. Japan 1.9%
SSAB Sweden 1.8%
JB Hi-Fi Ltd. Australia 1.7%
Simplo Technology Co., Ltd. Taiwan 1.7%
Centrica United Kingdom 1.7%
Power Finance Corp. Ltd. India 1.7%
Radiant Opto-Electronics Corp. Taiwan 1.6%

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 17.6% 20.2%
Financials 14.3% 11.1%
Information Technology 11.9% 10.7%
Materials 11.1% 11.6%
Consumer Discretionary 9.2% 11.5%
Energy 8.0% 4.3%
Utilities 6.3% 3.5%
Consumer Staples 6.0% 6.3%
Real Estate 5.3% 9.9%
Health Care 4.7% 7.2%
Communication Services 2.2% 3.7%
Equity Funds 1.8% 0.0%
TOP 10 COUNTRIES
Country Fund Benchmark
Japan 22.6% 21.1%
Australia 10.1% 6.8%
Canada 7.6% 7.3%
Taiwan 6.9% 5.1%
United Kingdom 6.4% 10.0%
South Korea 5.9% 3.6%
India 5.2% 6.0%
Thailand 3.2% 1.1%
Brazil 3.1% 1.5%
China 2.9% 2.6%
Regional Allocation
  • Pacific 35.6%
  • Emerging Asia 26.9%
  • Europe – other 18.4%
  • North America 7.6%
  • Emerging Europe, Middle East, Africa 4.5%
  • Emerging Latin America 3.1%
  • Multi Region All Country 1.8%
  • Developed Middle East 0.4%

Commentary (As of December 31, 2022)

Highlights

  • International equity markets rose sharply in the fourth quarter, on easing inflation concerns and optimism for China’s continued reopening. December’s returns were positive, although comparatively modest, tempered by disappointing economic data and rising bond yields.
  • Currently, recession in major world economies is emerging as a top concern for the coming year. Last year’s policies to confront inflation will likely also weaken demand and slow the growth rate of the economy at a minimum.
  • Signs continue to indicate an easing in U.S. inflation, which should allow the Federal Reserve to continue slowing or potentially pause interest rate hikes in the coming months.

Portfolio attribution

The Causeway International Small Cap Fund (“Fund”), on a net asset value basis, modestly 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 competitive strength – and two top-down factor categories assessing macroeconomic and country aggregate characteristics. Returns to our value factors were positive in December and the quarter, and value was the best performing alpha factor group in 2022 as higher interest rates led to a derating of growth stocks. The strategy’s earnings growth alpha factors posted modestly positive returns in December but negative returns for the fourth quarter overall. Our technical factors delivered positive returns in December, but negative returns in the fourth quarter as November witnessed a change in the Fed’s posture and early signs of a China reopening, the combination of which led to an abrupt change in market leadership. Our competitive strength factor category delivered negative returns for the month and the quarter. Our macroeconomic and country aggregate factors delivered positive returns in December as countries exhibiting superior metrics (such as China and Turkey) outperformed those with relatively weaker macroeconomic characteristics (such as Brazil and Canada). All factor group returns remain positive from inception of the Fund (10/20/14) to the end of December.

Investment outlook

Signs continue to indicate an easing in U.S. inflation, which should allow the Federal Reserve to continue slowing or potentially pause interest rate hikes in the coming months. The change in expectations around U.S. monetary policy has recently led to a weakening USD. International small caps, deriving more of their revenues from local currencies compared to large caps, stand to potentially benefit from appreciating local currencies relative to the USD.


Though we analyze many different stock selection factors in our alpha model, value factors receive the largest weight on average. As of the end of December, the MSCI ACWI ex USA Small Cap Growth Index traded at a 16.0x forward P/E multiple compared to 9.4x for the MSCI ACWI ex USA Small Cap Value Index, a 70% premium.


The Fed has begun to slow the pace of rate tightening, but global monetary policy is expected to remain restrictive for some time. As long as economic growth remains intact, higher policy rates should continue to favor value stocks over longer-duration growth stocks.


International small caps exhibit greater valuation dispersion than large caps on both a forward earnings yield and B/P 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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