Our full alpha-generating capabilities, seeking lower volatility and low or no equity market correlation

Causeway's Global Absolute Return (GAR) strategy is designed for clients who want returns while seeking lower volatility than the MSCI World Index and low equity market correlation with the MSCI World Index. The strategy invests in global developed markets equities and may invest in emerging markets, using swap agreements or direct investments to obtain long and short exposures to equity securities.

Benchmark
ICE BoAML 3-Month US TBill
Inception
February 28, 2011

Strategy overview

The portfolio managers discuss our Global Absolute Return strategy.

Portfolio managers

Chief Executive Officer
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years5 years Since inception
Strategy (gross) -2.4%-21.9%-26.5%-9.5%-4.8%-0.4%
Strategy (net) -2.4%-22.2%-27.3%-10.6%-6.0%-1.8%
ICE BoAML 3-Month US TBill 0.0%0.6%2.1%1.8%1.2%0.7%
QTD YTD 1 year3 years5 years Since inception
Strategy (gross) -2.4%-21.9%-26.5%-9.5%-4.8%-0.4%
Strategy (net) -2.4%-22.2%-27.3%-10.6%-6.0%-1.8%
ICE BoAML 3-Month US TBill 0.0%0.6%2.1%1.8%1.2%0.7%
QTD YTD 1 year3 years5 years Since inception
Strategy (gross) -19.5%-19.5%-26.7%-9.0%-4.4%-0.1%
Strategy (net) -19.8%-19.8%-27.5%-10.0%-5.6%-1.5%
ICE BoAML 3-Month US TBill 0.6%0.6%2.2%1.8%1.2%0.7%
QTD YTD 1 year3 years5 years Since inception
Strategy (gross) -19.5%-19.5%-26.7%-9.0%-4.4%-0.1%
Strategy (net) -19.8%-19.8%-27.5%-10.0%-5.6%-1.5%
ICE BoAML 3-Month US TBill 0.6%0.6%2.2%1.8%1.2%0.7%
Fund 20192018201720162015201420132012
Strategy (gross) -14.7%10.8%-6.5%13.1%-3.6%1.9%14.5%-1.9%
Strategy (net) -15.6%9.6%-7.8%11.4%-5.0%0.3%12.8%-3.5%
ICE BoAML 3-Month US TBill 2.3%1.9%0.9%0.3%0.0%0.0%0.1%0.1%
Strategy (gross)
Strategy (net)
ICE BoAML 3-Month US TBill
20192018201720162015201420132012
-14.7%10.8%-6.5%13.1%-3.6%1.9%14.5%-1.9%
-15.6%9.6%-7.8%11.4%-5.0%0.3%12.8%-3.5%
2.3%1.9%0.9%0.3%0.0%0.0%0.1%0.1%

Portfolio (as of April 30, 2020)

Benchmark: MSCI World
Position Details
Strategy
Cash 10,695,097
Market value (long) 17,479,733
Market value (short) -17,742,777
Net positional value -263,044
NAV 10,432,053
Strategy
Net exposure -2.52%
Leverage 3.38
Long positions 106
Short positions 118
Total 224
Strategy Charcterisics
Long portfolio Short portfolio Benchmark
No. of exposures 106 118 1640
Weighted avg. market cap (US $MM) $57,735 $8,418 $203,477
FY2 price/earnings 7.7 17.2 16.2
Price/book value 0.9 1.4 2.3
Return on equity (%) 20.5 4.1 20.3

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. Return on equity is calculated by taking a year's worth of earnings and dividing them by the average shareholder equity for that year.

Holdings are subject to change.

Top 10 Long Exposures
CompanyEnding weight
Takeda Pharmaceutical Co., Ltd. 3.60%
Microsoft Corp. 3.43%
British American Tobacco plc 3.40%
SYNNEX Corp. 3.34%
Roche Holding AG 3.30%
Oracle Corp. 3.24%
H&R Block, Inc. 3.21%
Balfour Beatty Plc 3.19%
Exelon Corp. 3.19%
Tokuyama Corp. 3.17%
Top 10 Short Exposures
CompanyEnding weight
AusNet Services Ltd. -3.46%
CoreSite Realty Corp. -3.29%
The Bank of East Asia Ltd. -3.06%
Soitec SA -3.06%
Bâloise Holding AG -3.00%
AMP Ltd. -2.99%
First Quantum Minerals -2.92%
The Travelers Cos., Inc. -2.81%
Maruichi Steel Tube Ltd. -2.79%
Haidilao International Holding Ltd. -2.79%
Sector Exposure
Sector Long exposure Short exposure Net exposure
Consumer Discretionary21.8%-16.2%5.64%
Health Care17.2%-12.0%5.19%
Industrials28.4%-23.5%4.83%
Communication Services6.8%-4.4%2.42%
Energy6.5%-6.2%0.27%
Materials13.7%-13.5%0.22%
Consumer Staples4.0%-6.0%-2.04%
Financials31.6%-33.9%-2.32%
Real Estate10.3%-15.3%-5.05%
Utilities8.5%-14.2%-5.67%
Information Technology18.8%-24.6%-5.73%
Country Exposure
Country Long exposure Short exposure Net exposure
China 14.4% -8.5% 5.91%
Switzerland 8.3% -3.6% 4.71%
Canada 10.0% -5.8% 4.22%
Japan 15.0% -11.4% 3.63%
Singapore 2.9% 0.0% 2.93%
Belgium 2.5% 0.0% 2.54%
New Zealand 2.5% 0.0% 2.53%
United Kingdom 10.9% -8.7% 2.25%
Austria 0.6% 0.0% 0.56%
South Korea 10.1% -9.7% 0.44%
Netherlands 0.4% 0.0% 0.40%
Sweden 0.0% 0.0% 0.00%
Israel 0.7% -0.8% -0.10%
Norway 0.0% -0.3% -0.29%
Italy 0.4% -0.7% -0.35%
Finland 0.0% -0.7% -0.66%
Spain 2.4% -3.6% -1.20%
Portugal 0.0% -1.2% -1.22%
Germany 4.8% -8.1% -3.26%
Denmark 0.0% -3.4% -3.39%
Hong Kong 0.0% -4.3% -4.29%
France 2.6% -7.2% -4.62%
Australia 2.9% -7.8% -4.84%
United States 52.4% -59.8% -7.36%
Regional Allocation
Long exposure Short exposure Net exposure
Euro18.8%-16.1%2.7%
Europe - Other25.8%-24.8%1.0%
Developed Middle East0.9%0.0%0.9%
Pacific49.8%-52.9%-3.1%
North America72.4%-76.0%-3.7%

Commentary (As of April 30, 2020)

Highlights

  • After the severe shock of the COVID-19 pandemic in March and the subsequent emergency relief measures provided by monetary and fiscal authorities worldwide, global equities rebounded in April.
  • Market participants have typically anticipated the benefits (and liquidity surge) of monetary and fiscal stimulus. Equity markets’ sharp rebound in April suggests the short-term bottom of the current crisis was around March 23, when governments and central banks around the world enacted massive stimulus programs.
  • In the long portfolio, we have used the market weakness—especially the punishing of economically sensitive stocks—to buy, in our view, some of the world’s best placed and best managed companies in sectors that historically recovered the fastest from bear markets.

Portfolio attribution

After the severe shock of the COVID-19 pandemic in March and the subsequent emergency relief measures provided by monetary and fiscal authorities worldwide, global equities rebounded in April. The top performing markets in our investable universe were Australia, Austria, the United States, Canada, and Norway. The worst performing markets were Portugal, Spain, Italy, France, and the United Kingdom. The best performing sectors in the World Index were consumer discretionary, energy, and materials. The worst performing sectors were utilities, consumer staples, and financials.


The Portfolio takes long and short notional exposures to securities under swap agreements. We use a combination of fundamental and quantitative inputs to select exposures for the long portfolio of the Portfolio, while we use primarily quantitative inputs to select exposures for the short portfolio. Our fundamental inputs reflect the risk-adjusted total return potential of stocks favored by our fundamental research team. Our quantitative inputs include signals that seek long (short) positions in stocks which we believe are undervalued (overvalued) and have improving (deteriorating) earnings growth dynamics, positive (negative) technical price movements, and superior (inferior) quality of earnings. During the month of April, value was the only quantitative alpha factor category to demonstrate predictive power. Stocks with cheap valuations outperformed those with expensive valuations. However, stocks with improving earnings growth dynamics underperformed those with worsening dynamics, stocks with positive technical indicators underperformed those with negative technical indicators, and stocks demonstrating higher earnings quality underperformed those with lower earnings quality, contrary to expectations.

Investment outlook

In past crises (such as the 1997 Asian financial crisis, the 2008-2009 Global Financial Crisis, and the 2011 European debt crisis), markets reached the bottom, and subsequently began their recovery many months before the recovery became evident in the economic data. Market participants have typically anticipated the benefits (and liquidity surge) of monetary and fiscal stimulus. Equity markets’ sharp rebound in April suggests the short-term bottom of the current crisis was around March 23, when governments and central banks around the world enacted massive stimulus programs. This crisis differs from prior periods of economic contraction in its origin: a global pandemic and government-mandated closures. For consumers and businesses alike, a sustained recovery in confidence will require effective therapies to mitigate the severity of COVID-19. Our healthcare research indicates that the development of such therapies this year is possible, with mass produced vaccines likely by mid-2021.

In the long portfolio, we have used the market weakness—especially the punishing of economically sensitive stocks—to buy, in our view, some of the world's best placed and best managed companies in sectors that historically recovered the fastest from bear markets. Investors appear to have no patience to wait for recoveries in some of the companies most negatively affected by the shutdowns, such as those in the aerospace and aviation industries, and those exposed to the travel & leisure industry. As long-term investors, we are taking advantage of the opportunity to add these exposures to the Portfolio's long portfolio.


On an aggregate long/short portfolio basis, we are maintaining a near market-neutral posture, with -2.23% net exposure overall (long exposures minus absolute value of short exposures). Consistent with our goal of delivering low equity market sensitivity, we target a zero expected beta to the World Index. On an aggregate basis, our largest net biases by sector are toward consumer discretionary and health care, where we have significant positive net exposure, and against informational technology and utilities, where we have meaningful negative net exposure. By geography, we are net biased toward China and Switzerland, and biased against Hong Kong and Australia. Gross exposure (leverage) for the Portfolio is 337% (3.37x) as of April 30, 2020.

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 portfolio holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. The securities identified and described above 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. Past performance does not guarantee future results. For a description of our performance attribution methodology, or to obtain a list showing every holding's contribution to the overall account's performance during the quarter, please contact our product manager, Kevin Moutes, at 310-231-6116 or [email protected].