Emerging Markets UCITS Fund – EUR
Portfolio Attribution
The Fund outperformed the Index in May 2025. 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, growth, and competitive strength factors were positive indicators during the month. Our corporate events factor was a negative indicator and technical (price momentum) was neutral in May. Our top-down currency and macroeconomic factors were positive while country/sector aggregate was negative during the month.
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. As of quarter-end, we were overweight South Korean and Taiwanese stocks in the Fund due in part to bottom-up valuation and top-down considerations. In China, the government has refrained from aggressive spending to boost consumption despite continued disinflationary trends. During the first quarter, the US placed record-high punitive tariffs on China. China reciprocated, making all but essential (or tariff-exempt) trade between the two countries cost-prohibitive. A subsequent trade truce in May buys time for the two sides to strike a longer-term deal. The Fund 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 Fund was overweight Turkish stocks as of quarter-end due in part to top-down considerations.
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.