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*
+2.92%
Nav*
$11.65, -0.20
Inception
October 20, 2014
Cusip
14949P802
Benchmark
MSCI ACWI ex USA Small Cap
Minimum Investment
$5,000
Sales Charge
None
Net Expense Ratio
1.37%
Gross Expense Ratio
1.78%
*As of January 15, 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 12.5%2.5%2.5%-1.5%5.8%5.8%
MSCI ACWI ex USA Small Cap 18.6%14.7%14.7%5.0%9.8%8.5%
QTD YTD 1 year3 years5 years Since inception
Fund 12.5%2.5%2.5%-1.5%5.8%5.8%
MSCI ACWI ex USA Small Cap 18.6%14.7%14.7%5.0%9.8%8.5%
QTD YTD 1 year3 years5 years Since inception
Fund 12.5%2.5%2.5%-1.5%5.8%
MSCI ACWI ex USA Small Cap 18.6%14.7%14.7%5.0%8.5%
QTD YTD 1 year3 years5 years Since inception
Fund 12.5%2.5%2.5%-1.5%5.8%
MSCI ACWI ex USA Small Cap 18.6%14.7%14.7%5.0%8.5%
202020192018201720162015
Fund 2.5%18.5%-21.3%34.5%3.1%4.4%
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
2.5%18.5%-21.3%34.5%3.1%4.4%
14.7%22.9%-17.9%32.1%4.3%3.0%

Portfolio (as of December 31, 2020)

Benchmark: MSCI ACWI ex USA Small Cap
Asset Allocation
Fund
Stocks 98.3%
Cash 1.7%
Fund Characteristics
Fund Benchmark
No. of holdings 132 4246
Weighted avg. market cap (US $MM) $1,956 $1,960
FY2 price/earnings 8.8 15.7
Price/book value 1.2 1.5
Net assets $2,000,197 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Mineral Resources Ltd. Australia 2.3%
JB Hi-Fi Ltd. Australia 2.0%
Capcom Co., Ltd. Japan 2.0%
Royal Mail Plc United Kingdom 1.9%
ASR Nederland NV Netherlands 1.9%
EVRAZ Plc United Kingdom 1.8%
Metcash Ltd. Australia 1.8%
BE Semiconductor Industries NV Netherlands 1.6%
Radiant Opto-Electronics Corp. Taiwan 1.6%
Huaxin Cement Co China 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 16.7% 20.6%
Consumer Discretionary 16.2% 12.2%
Information Technology 14.6% 12.1%
Financials 12.6% 10.2%
Materials 8.7% 11.1%
Health Care 7.7% 7.6%
Communication Services 6.6% 4.1%
Real Estate 6.2% 10.7%
Consumer Staples 5.5% 5.6%
Utilities 2.6% 3.5%
Energy 0.6% 2.3%
TOP 10 COUNTRIES
Country Fund Benchmark
Japan 15.2% 20.2%
Taiwan 9.6% 4.9%
United Kingdom 9.2% 12.4%
Australia 9.0% 6.4%
South Korea 8.0% 4.3%
Sweden 6.2% 5.3%
Netherlands 6.1% 1.9%
Canada 5.0% 6.3%
Germany 4.9% 3.7%
India 4.2% 3.6%
Regional Allocation
  • Europe – other 33.4%
  • Emerging Asia 27.9%
  • Pacific 27.6%
  • North America 5.0%
  • Emerging Latin America 3.3%
  • Emerging Europe, Middle East, Africa 1.1%

Commentary (As of December 31, 2020)

Highlights

  • Bolstered by optimism for an end to the COVID-19 pandemic as several countries began rolling out vaccines, global equity markets rose in December to close out the year.
  • We believe that as vaccine rollout efforts ramp up, beleaguered economies will begin to return to normality before year end. In order to bridge the economic gap, central banks and governments have continued to provide monetary and fiscal support, creating demand.
  • In December, we added new Competitive Strength factors to supplement our existing Financial Strength alpha factors. After extensive research, we found that an industry’s competitive landscape and a company’s position within it have been closely linked to changes in profitability and, ultimately, a stock’s return potential.

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 competitive strength – and two top-down factor categories assessing macroeconomic and country aggregate characteristics.

From a sector perspective, Fund holdings in health care, communication services, and real estate detracted the most from performance relative to the Index. Fund holdings in the industrials, consumer staples, and consumer discretionary 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 biopharmaceutical company, Pharma Mar SA (Spain). Additional top detractors included rubber products company, Kossan Rubber Industries Bhd. (Malaysia), pharmaceutical company, Granules India Ltd.(India), video game developer, GungHo Online Entertainment, Inc. (Japan), and professional and social networking company, Mixi, Inc. (Japan). Top contributor to performance was transportation service provider, Yang Ming Marine Transport Corp.(Taiwan). Additional top contributors included food distributor, Metcash Ltd. (Australia), solar energy company, Daqo New Energy (China), steel & iron distribution company, EVRAZ Plc (United Kingdom), and mining industry service provider, Mineral Resources Ltd. (Australia).

Investment outlook

Though we analyze many different stock selection factors in our alpha model, value factors receive the largest weight on average, and they were under significant pressure in 2020. As of December 31, the Small Cap Growth Index traded at a 25.2x forward price-to-earnings multiple compared to 13.8x for the Small Cap Value Index. This 83% premium is the highest it has been over the last 15 years. We believe that value’s relative performance should improve as inflation expectations increase, the yield curve steepens, and COVID-19 uncertainty continues to abate.

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 most 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-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.

In December, we added new Competitive Strength factors to supplement our existing Financial Strength alpha factors. After extensive research, we found that an industry’s competitive landscape and a company’s position within it have been closely linked to changes in profitability and, ultimately, a stock’s return potential. These new alpha factors examine current levels and longer-term trends in a broad range of metrics relevant to competitive strength: margins, returns, competition, industry structure, market share, and balance sheet strength.

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 $0.3870 $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:

Forms: