Global Small Cap

Portfolio attribution

The Portfolio 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. All of our alpha factor categories delivered positive returns in October. The strategy’s value factors produced positive returns in October, and value remains the best-performing factor in 2023 and over the last twelve months. Our earnings growth and technical factors also posted positive returns last month. Competitive strength generated the highest returns among our bottom-up alpha factor categories in October, and it is the second-best performing factor group over the year-to-date period. Our macroeconomic and country aggregate factors delivered positive monthly returns as countries exhibiting stronger metrics (such as Japan) outperformed those with relatively weaker characteristics (such as Australia). All factor groups remain positive on an inception-to-date basis.

Economic outlook

Excluding Australia, major Developed Market central banks, including the US Federal Reserve Bank, The Bank of England, The European Central Bank and The Bank of Japan, voted to leave rates unchanged at their most recent meetings. The global manufacturing output PMI slipped 0.9 points to 48.9 last month, a level consistent with a 0.5% annual rate contraction in factory output. The standout positive in the October PMIs was the US, with a rise in both the output (+0.5 points) and new orders (+1.4 points) indexes. However, China stepped down, and the Euro area PMI remains stuck at a recessionary level.

According to JP Morgan, mainland China’s global PMI slipped to 48.8 likely reflecting the ongoing drags from the real estate sector and domestic demand weakness and raising questions about the resilience of the end-of-third quarter momentum.

Investment outlook

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 October, the MSCI ACWI ex USA Small Cap Growth Index traded at a 15.7x forward price-to-earnings (P/E) multiple compared to 9.6x for the MSCI ACWI ex USA Small Cap Value Index, a 63% premium, which is the smallest it has been all year.

Another attractive feature of global small caps is that they exhibit greater valuation dispersion than large caps on both a forward earnings yield and B/P basis. This indicates more information content in the valuation ratios of small caps. In addition to exhibiting greater valuation dispersion, small caps exhibit a higher long-term earnings per share growth trend.

International Small Cap

Portfolio Attribution

The Portfolio modestly underperformed the Index during the month. To evaluate stocks in our investable universe, our multi-factor quantitative model employs five bottom-up factor categories – valuation, sentiment, technical indicators, quality, and corporate events -and two top-down factor categories assessing macroeconomic and country aggregate characteristics. Though alpha factor performance was mixed in March, most alpha factors posted positive performance in the first quarter overall. Valuation was the best-performing alpha factor category in March and over the last twelve months. The strategy’s sentiment and technical factors delivered negative returns in March, though both were relatively flat for the first quarter. Our quality and corporate events alpha factors both posted positive returns for March and the first quarter. Our macroeconomic and country aggregate factors posted negative returns in March as countries exhibiting stronger metrics (such as Taiwan) underperformed those with relatively weaker characteristics (such as India and Brazil). All factor groups remain positive on an inception to date basis.

Quarterly Investment Outlook

The US is expected to announce substantial tariff increases on imports from nearly all US trading partners in early April. Many countries may retaliate, creating rising barriers to global trade. Generally speaking, small cap stocks should be less impacted than their larger peers due to greater focus on their home market. Constituents of the Index derive, on average, 66% of their revenue from their home market, compared to just 48% for constituents of the ACWI ex US Index.

In China, we are optimistic about the recent consumption-oriented stimulus measures announced in March as well as the vow to “stabilize the stock market.” Market participants remain skeptical about China hitting GDP growth targets, however the clear pivot to stimulus indicates the government’s willingness to do whatever it takes to boost the economy. Although China is just 3% of the Index, recent stimulus measures should be supportive of global economic growth.

International small caps continue to trade at a rare discount to their larger-cap (ACWI ex USA Index) peers on a forward P/E basis. In addition to the attractive relative valuation of the asset class overall, Causeway’s International Small Cap portfolio continues to trade at a substantial discount to the Index while simultaneously exhibiting more favorable growth, quality, momentum, and positive estimate revisions than the Index. We believe that this highly attractive combination of characteristics better insulates our portfolio from future volatility.

International Value Select

Portfolio Attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the consumer durables & apparel, semiconductors & semi equipment, and transportation industry groups detracted from relative performance. Holdings in the pharmaceuticals & biotechnology, insurance, and technology hardware & equipment industry groups offset some of the underperformance compared to the Index. The largest detractor was multinational luxury conglomerate, Kering SA (France). Additional notable detractors included semiconductor company, Renesas Electronics Corp.(Japan), and rail operator, Canadian Pacific Kansas City Ltd. (Canada). The top contributor to return was Asian life insurer, Prudential Plc (United Kingdom). Other notable contributors included electric, gas & renewables power generation & distribution company, Enel SpA (Italy), and electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea).

Quarterly Investment Outlook

Global trade tensions are escalating, with the trade war introducing significant economic and geopolitical uncertainty. During the quarter, the US placed the most punitive tariffs on China. Meanwhile China is prioritizing economic stability, technological advancement, and domestic consumption to meet its ambitious growth targets. EU fiscal integration is accelerating, with growing urgency to deepen capital markets. Recognizing the need for greater self-reliance, European leaders have committed to military and economic revitalization. Germany, just weeks after its February election, approved substantial defense and infrastructure spending. Additionally, Chinese investment in Europe is likely to continue climbing as China diversifies its trade relationships. In contrast, the UK faces stagflation, with the Bank of England cautiously navigating persistent inflation and gilt market volatility amid slowing growth.

De-globalization and tariffs appear likely to dampen real growth, increase inflationary pressures, and create sector-level dislocations. However, these disruptions can generate mispricing and opportunities for active investors. Despite the likelihood of a more difficult economic environment ahead, we remain optimistic that we can exploit share price weakness in desirable stocks. This period of market dislocation provides an opportunity to add to positions in companies we believe will overcome tariffs and produce attractive multi-year returns. Companies with few competitors and strong pricing power have become especially valuable in this environment.

Causeway’s global and international value portfolios focus on identifying undervalued stocks rather than positioning around macroeconomic trends. Despite recent gains, non-US developed markets continue to trade at a significant discount to the US, where indices remain driven by a handful of AI-focused companies. The era of ultra-low interest rates is over, making near-term cash flows more attractive than speculative growth. Certain cyclical stocks now offer some of the lowest valuations since 2020 and are rising in our risk-adjusted return rankings. We are also focusing on companies providing mission-critical services to enterprises, which should see robust order growth regardless of tariff changes. As companies invest in digitalization and cloud transitions, IT Services firms are poised for renewed interest. Across sectors, Causeway targets companies improving efficiency, driving earnings, and boosting cash flow growth.

International Opportunities

Portfolio Attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the consumer durables & apparel and consumer services industry groups, along with an overweight position in the semiconductors & semi equipment industry group, detracted from relative performance. Holdings in the pharmaceuticals & biotechnology, financial services, and insurance industry groups offset some of the underperformance compared to the Index. The largest detractor was multinational luxury conglomerate, Kering SA (France). Additional notable detractors included semiconductor company, Renesas Electronics Corp. (Japan), and integrated circuit manufacturer, Taiwan Semiconductor Manufacturing Co., Ltd.(Taiwan). The top contributor to return was Asian life insurer, Prudential Plc (United Kingdom). Other notable contributors included banking & financial services company, BNP Paribas SA (France), and electric, gas & renewables power generation & distribution company, Enel SpA (Italy).

Quarterly Investment Outlook

Global trade tensions are escalating, with the trade war introducing significant economic and geopolitical uncertainty. During the quarter, the US placed the most punitive tariffs on China. Meanwhile China is prioritizing economic stability, technological advancement, and domestic consumption to meet its ambitious growth targets. The Portfolio was overweight Chinese stocks as of quarter-end, with the majority of Chinese exposure in communication services and consumption-oriented businesses, which tend to be more domestically-focused and continue to look attractive on both self-relative valuation and growth characteristics. Recognizing the need for greater self-reliance, European leaders have committed to military and economic revitalization. Additionally, Chinese investment in Europe is likely to continue climbing as China diversifies its trade relationships. In contrast, the UK faces stagflation, with the Bank of England cautiously navigating persistent inflation and gilt market volatility amid slowing growth. In EM, Taiwan and South Korea are two of the most externally-exposed economies. In contrast, India may be less exposed as the country has one of the largest tariff differentials between exports to and imports from the United States. As of quarter-end, we were overweight South Korean stocks in the Portfolio due in part to bottom-up valuation and top-down considerations.

De-globalization and tariffs appear likely to dampen real growth, increase inflationary pressures, and create sector-level dislocations. However, these disruptions can generate mispricing and opportunities for active investors. Despite the likelihood of a more difficult economic environment ahead, we remain optimistic that we can exploit share price weakness in desirable stocks to upgrade portfolios. This period of market dislocation provides an opportunity to add to positions in companies we believe will overcome tariffs and produce attractive multi-year returns. Companies with few competitors and strong pricing power have become especially valuable in this environment. Within the developed markets portion of the Portfolio, we focus on identifying undervalued stocks rather than positioning around macroeconomic trends. Despite recent gains, non-US developed markets continue to trade at a significant discount to the US, where indices remain driven by a handful of AI-focused companies. The era of ultra-low interest rates is over, making near-term cash flows more attractive than speculative growth. Certain cyclical stocks now offer some of the lowest valuations since 2020 and are rising in our risk-adjusted return rankings. We are also focusing on companies providing mission-critical services to enterprises, which should see robust order growth regardless of tariff changes. As companies invest in digitalization and cloud transitions, IT Services firms are poised for renewed interest. Across sectors, Causeway targets companies improving efficiency, driving earnings, and boosting cash flow growth.

Emerging Markets Equity

Portfolio Attribution

The Portfolio outperformed the Index in March 2025. We use both bottom-up “stock-specific” and top-down factor categories to seek to forecast alpha for the stocks in the Portfolio’s investable universe. Our bottom-up valuation, growth, and corporate events factors were positive indicators in March. Our technical (price momentum) and competitive strength factors were negative indicators. Our top-down macroeconomic, country/sector aggregate, and currency factors were negative indicators in March.

Quarterly Investment Outlook

The Trump administration’s tariff policies have roiled global markets. Within EM, Taiwan and South Korea are two of the most externally-exposed economies. In contrast, India may be less exposed as the country has one of the largest tariff differentials between exports to and imports from the United States. As of quarter-end, we were overweight South Korean and Taiwanese stocks in the Portfolio due in part to bottom-up valuation and top-down considerations. The Portfolio was underweight Indian stocks due in part to valuation and macroeconomic considerations. In China, the government has refrained from aggressive spending to boost consumption despite continued disinflationary trends. China’s economy is also exposed to trade disruption and the Trump administration is also working to quantify non-tariff barriers. The Portfolio was overweight Chinese stocks as of quarter-end, with the majority of Chinese exposure in communication services and consumption-oriented businesses, which tend to be more domestically-focused and continue to, in our view, look attractive on both self-relative valuation and growth characteristics. In Turkey, equities sold off and the lira fell late in the quarter after police detained the mayor of Istanbul, Ekrem Imamoglu, the primary opposition candidate in the 2028 presidential election. While the development is troubling, we are encouraged by the fact that President Erdogan has not abandoned the central banks hawkish interest rate policy. The Portfolio was overweight Turkish stocks as of quarter-end due in part to top-down considerations.

Global Value Equity

Portfolio Attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the consumer durables & apparel, banks, and consumer services industry groups detracted from relative performance. Holdings in the insurance, technology hardware & equipment, and capital goods industry groups offset some of the underperformance compared to the Index. The largest detractor was multinational luxury conglomerate, Kering SA (France). Additional notable detractors included semiconductor company, Renesas Electronics Corp. (Japan), and media & entertainment conglomerate, The Walt Disney Co. (United States). The top contributor to return was Asian life insurer, Prudential Plc (United Kingdom). Other notable contributors included medical device producer, Zimmer Biomet Holdings, Inc. (United States), and electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea).

Quarterly Investment Outlook

Global trade tensions are escalating, with the trade war introducing significant economic and geopolitical uncertainty. During the quarter, the US placed the most punitive tariffs on China. Meanwhile China is prioritizing economic stability, technological advancement, and domestic consumption to meet its ambitious growth targets. EU fiscal integration is accelerating, with growing urgency to deepen capital markets. Recognizing the need for greater self-reliance, European leaders have committed to military and economic revitalization. Germany, just weeks after its February election, approved substantial defense and infrastructure spending. Additionally, Chinese investment in Europe is likely to continue climbing as China diversifies its trade relationships. In contrast, the UK faces stagflation, with the Bank of England cautiously navigating persistent inflation and gilt market volatility amid slowing growth.

De-globalization and tariffs appear likely to dampen real growth, increase inflationary pressures, and create sector-level dislocations. However, these disruptions can generate mispricing and opportunities for active investors. Despite the likelihood of a more difficult economic environment ahead, we remain optimistic that we can exploit share price weakness in desirable stocks. This period of market dislocation provides an opportunity to add to positions in companies we believe will overcome tariffs and produce attractive multi-year returns. Companies with few competitors and strong pricing power have become especially valuable in this environment.

Causeway’s global and international value portfolios focus on identifying undervalued stocks rather than positioning around macroeconomic trends. Despite recent gains, non-US developed markets continue to trade at a significant discount to the US, where indices remain driven by a handful of AI-focused companies. The era of ultra-low interest rates is over, making near-term cash flows more attractive than speculative growth. Certain cyclical stocks now offer some of the lowest valuations since 2020 and are rising in our risk-adjusted return rankings. We are also focusing on companies providing mission-critical services to enterprises, which should see robust order growth regardless of tariff changes. As companies invest in digitalization and cloud transitions, IT Services firms are poised for renewed interest. Across sectors, Causeway targets companies improving efficiency, driving earnings, and boosting cash flow growth.

International Value Equity

Portfolio Attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the consumer durables & apparel, semiconductors & semi equipment, and transportation industry groups detracted from relative performance. Holdings in the pharmaceuticals & biotechnology, materials, and technology hardware & equipment industry groups offset some of the underperformance compared to the Index. The largest detractor was multinational luxury conglomerate, Kering SA (France). Additional notable detractors included semiconductor company, Renesas Electronics Corp.(Japan), and rail operator, Canadian Pacific Kansas City Ltd. (Canada). The top contributor to return was Asian life insurer, Prudential Plc (United Kingdom). Other notable contributors included electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea), and banking & financial services company, BNP Paribas SA (France).

Quarterly Investment Outlook

Global trade tensions are escalating, with the trade war introducing significant economic and geopolitical uncertainty. During the quarter, the US placed the most punitive tariffs on China. Meanwhile China is prioritizing economic stability, technological advancement, and domestic consumption to meet its ambitious growth targets. EU fiscal integration is accelerating, with growing urgency to deepen capital markets. Recognizing the need for greater self-reliance, European leaders have committed to military and economic revitalization. Germany, just weeks after its February election, approved substantial defense and infrastructure spending. Additionally, Chinese investment in Europe is likely to continue climbing as China diversifies its trade relationships. In contrast, the UK faces stagflation, with the Bank of England cautiously navigating persistent inflation and gilt market volatility amid slowing growth.

De-globalization and tariffs appear likely to dampen real growth, increase inflationary pressures, and create sector-level dislocations. However, these disruptions can generate mispricing and opportunities for active investors. Despite the likelihood of a more difficult economic environment ahead, we remain optimistic that we can exploit share price weakness in desirable stocks. This period of market dislocation provides an opportunity to add to positions in companies we believe will overcome tariffs and produce attractive multi-year returns. Companies with few competitors and strong pricing power have become especially valuable in this environment.

Causeway’s global and international value portfolios focus on identifying undervalued stocks rather than positioning around macroeconomic trends. Despite recent gains, non-US developed markets continue to trade at a significant discount to the US, where indices remain driven by a handful of AI-focused companies. The era of ultra-low interest rates is over, making near-term cash flows more attractive than speculative growth. Certain cyclical stocks now offer some of the lowest valuations since 2020 and are rising in our risk-adjusted return rankings. We are also focusing on companies providing mission-critical services to enterprises, which should see robust order growth regardless of tariff changes. As companies invest in digitalization and cloud transitions, IT Services firms are poised for renewed interest. Across sectors, Causeway targets companies improving efficiency, driving earnings, and boosting cash flow growth.