Emerging Markets UCITS Fund – EUR

Portfolio Attribution

The Causeway Emerging Markets UCITS Fund (“Fund”) underperformed the Index in April 2022. We use both bottom-up “stock -specific” and top-down factor categories to seek to forecast alpha for the stocks in the Fund’s investable universe. Our growth and competitive strength factors were negative indicators during the month while bottom-up valuation and price momentum were positive. Of our top-down factors, our country and sector factors were negative indicators. Our macroeconomic and currency factors were positive in April.

Investment Outlook

Earnings growth upgrades for EM equities continue to lag those in developed markets. EM sectors with the weakest earnings upgrades were communication services, consumer discretionary, and real estate. All three of these sectors are dominated by Chinese stocks, which were impacted by the Covid-19 lockdowns. The sectors with the strongest earnings upgrades were energy, information technology, and financials. Energy benefitted from strong oil prices and information technology benefitted from positive revisions for a few larger capitalization stocks. Financials benefitted from rising interest rates. The countries with the weakest net upgrades include China, India, and Thailand. While Covid-19 containment policies have weighed on Chinese stocks, rising commodity prices have dampened the growth outlook for Indian equities. The countries with the strongest net upgrades include Taiwan, Turkey, and Mexico. Positive revisions for larger capitalization companies drove strength in Taiwan. We are overweight Taiwanese stocks in the Fund due to attractive bottom-up and top-down characteristics. Mexican stocks have benefitted from economic linkages with the US. While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. With a balance of favorable valuation, growth, and price momentum characteristics relative to the Index, we believe the portfolio provides outperformance potential looking forward.

Emerging Markets UCITS Fund

Portfolio Attribution

The Causeway Emerging Markets UCITS Fund (“Fund”) performed in-line with the Index in April 2022. We use both bottom-up “stock-specific” and top-down factor categories to seek to forecast alpha for the stocks in the Fund’s investable universe. Our bottom-up valuation and price momentum factors were positive indicators during the month while growth and competitive strength were negative. Of our top-down factors, our macroeconomic and currency factors were positive. Our country and sector factors were negative indicators in April.

Investment Outlook

Earnings growth upgrades for EM equities continue to lag those in developed markets. EM sectors with the weakest earnings upgrades were communication services, consumer discretionary, and real estate. All three of these sectors are dominated by Chinese stocks, which were impacted by the Covid-19 lockdowns. The sectors with the strongest earnings upgrades were energy, information technology, and financials. Energy benefitted from strong oil prices and information technology benefitted from positive revisions for a few larger capitalization stocks. Financials benefitted from rising interest rates. The countries with the weakest net upgrades include China, India, and Thailand. While Covid-19 containment policies have weighed on Chinese stocks, rising commodity prices have dampened the growth outlook for Indian equities. The countries with the strongest net upgrades include Taiwan, Turkey, and Mexico. Positive revisions for larger capitalization companies drove strength in Taiwan. We are overweight Taiwanese stocks in the Fund due to attractive bottom-up and top-down characteristics. Mexican stocks have benefitted from economic linkages with the US. While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. With a balance of favorable valuation, growth, and price momentum characteristics relative to the Index, we believe the portfolio provides outperformance potential looking forward.

Global Value UCITS Fund

Portfolio Attribution

The Causeway Global Value UCITS Fund (“Fund”) outperformed the Index during the month, due primarily to country allocation (a byproduct of our bottom-up stock selection process). Fund holdings in the software & services, materials, and pharmaceuticals & biotechnology industry groups, as well as an underweight position in the semiconductors & semi equipment and retailing industry groups, contributed to relative performance. Holdings in the capital goods and insurance industry groups, along with an underweight position in the food beverage & tobacco, real estate, and telecommunication services industry groups, offset some of the outperformance compared to the Index. The top contributor to return was paper & packaging solutions company, WestRock Co. (United States). Other notable contributors included pharmaceutical giant, Sanofi (France), pharmaceutical producer, Novartis AG (Switzerland), household & personal care products company, Reckitt Benckiser Group (United Kingdom), and Waste Management, Inc. (United States). The largest detractor was jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom). Additional notable detractors included technology conglomerate, Alphabet, Inc. (United States), media & entertainment conglomerate, The Walt Disney Co. (United States), power & healthcare conglomerate, General Electric Co. (United States), and life insurer, Prudential Plc (United Kingdom).

Investment Outlook

More than a decade of intense global central bank quantitative easing (culminating in an explosion of monetary stimulus during Covid) pushed asset prices higher as too much money chased too few opportunities. That 10-year money geyser resulted in very low, and in some regions, negative, interest rates and equity valuation multiples that rose sharply, often outpacing earnings (or the prospect of earnings at some future date). We believe a new monetary policy regime has begun—one that will likely lead to the opposite result with earnings and multiples under pressure as investors once again focus on valuation. We are most interested in identifying companies with strong balance sheets and pricing power combined with effective cost-cutting measures that can protect their profit margins. We seek to add, in our view, high-quality, competitively well-positioned, cash-generative companies to our client portfolios, including those that we believe will benefit from a complete re-opening of the global economy, investment in energy independence in Europe, and the building of onshore manufacturing in many developed markets to mitigate supply chain vulnerabilities. We typically look for dividend income and share buybacks as an indication of management’s resolve to reward shareholders and maintain efficient capital structures. We want that dividend income compounding, providing an important component of total return for our clients.