Emerging Markets UCITS Fund – EUR

Portfolio Attribution

The Fund outperformed the Index in January 2024. 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 technical (price momentum), growth, competitive strength, and valuation factors were positive indicators in January. Our top-down currency, country/sector aggregate, and macroeconomic factors were negative indicators during the month.

Quarterly Investment Outlook

After appearing less attractive for much of 2023, earnings growth upgrades for EM equities are becoming, in our view, more attractive relative to those in ex-US developed markets. Within EM, communication services and consumer discretionary are exhibiting positive net upgrades. In both sectors, growth expectations for select Chinese stocks are driving the optimistic outlook. In addition, consumer discretionary stocks are also supported by positive sentiment surrounding South Korean automobile manufacturers. The Portfolio is overweight consumer discretionary stocks due in part to valuation considerations. On the negative side, materials are experiencing the most net downgrades due to lackluster demand for commodities, excluding oil, from global consumers, including China. The Portfolio is underweight materials companies, particularly those in the chemicals and metals & mining industries, due in part to growth considerations. Within EM, we continue to identify, in our view, attractive investment opportunities in small cap companies. Historically, our investment process has uncovered EM small cap stocks with alpha potential. The Portfolio’s allocation to small cap stocks was near the high end of the historical range at quarter-end.

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.