Diversified exposure to emerging markets, capturing value and growth

The Fund normally invests at least 80% of its total assets in equity securities of companies located in emerging markets and investments that are tied economically to emerging markets, such as common stock, preferred and preference stock, depositary receipts, including American Depositary Receipts, Global Depositary Receipts, European Depositary Receipts, Swedish Depositary Receipts and other types of depositary receipts, real estate investment trusts (“REITs”) and exchange-traded funds (“ETFs”) that invest in emerging markets securities. The Investment Manager primarily invests in common stock, but will use those other security types referred to above if, for example, they provide greater liquidity, the Fund cannot access common stock through a local market, or the yield rate of preferred or preference stock is deemed favourable. Typically, less than 10% of the Fund’s Net Asset Value will be invested in ETFs, and investment in ETFs will be limited to 15% of the Fund’s Net Asset Value.

The Fund generally invests in companies with market capitalisations of US$500 million or greater at the time of investment. However, the Fund may invest in smaller market capitalisation companies if, based on the quantitative investment approach described below, it finds an attractive investment with a lower market capitalisation and sufficient liquidity. The Fund may invest in any industry or sector, but generally will not invest more than 25% of its total assets in the equity securities of companies in a single industry. Typically, the Fund will hold a diversified portfolio of over 80 equity securities.

The Investment Manager uses a quantitative investment approach to purchase and sell equity securities and those other investments as detailed above for the Fund. The Investment Manager’s quantitative investment approach uses a proprietary computer model that analyses historical financial data, or “factors,” to assist in selecting investments as detailed above. The model currently analyses factors relating to valuation, earnings growth, technical indicators (such as stock price momentum), macroeconomics, currency, countries and economic sectors, ranking companies within each factor and combining these rankings to select investments. As the Investment Manager is continually seeking to improve model performance, the factors and their weightings in the model may change over time. By ranking companies based on a combination of these factors, the Investment Manager seeks to identify a portfolio of investments that will outperform the MSCI Emerging Markets Index. In addition to its quantitative research, the Investment Manager’s fundamental research analysts review the quantitative outputs to attempt to identify and address special issues, such as significant corporate actions or management changes, which are difficult to detect quantitatively.

Please see the Prospectus and Supplement for more information. Please contact [email protected] for a Fund Application.

Nav*
€ 18.22
Inception
February 10, 2016
ISIN
IE00BWT3P209
Benchmark
MSCI Emerging Markets in EUR
Minimum investment
€1,000,000
Total expense ratio
1.24%
*As of February 25, 2021
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Strategy overview

The portfolio managers discuss our Emerging Markets strategy.

Portfolio managers

Quantitative Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years Since inception
Fund 4.4%4.4%16.1%2.4%11.8%
MSCI Emerging Markets in EUR 3.8%3.8%17.1%5.7%14.0%
QTD YTD 1 year3 years Since inception
Fund 4.4%4.4%16.1%2.4%11.8%
MSCI Emerging Markets in EUR 3.8%3.8%17.1%5.7%14.0%
20182017
Fund -18.3%38.1%
MSCI Emerging Markets in EUR -14.6%37.3%
20182017
Fund -18.3%38.1%
MSCI Emerging Markets in EUR -14.6%37.3%

Portfolio (as of January 31, 2021)

Benchmark:
Asset Allocation
Fund
Stocks 98.5%
Cash 1.5%
Fund Characteristics
Fund Benchmark
Holdings 115 1379
Weighted avg. market cap (US $MM) $174,887 $145,130
NTM price/earnings 11.8 14.6
Price/book value 1.8 2.1
NTM EPS revision (wtd. avg.)
Net assets $2,333,366.50 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank China 2.0%
Tencent Holdings China 1.9%
Kweichow Moutai Co China 1.4%
Samsung Electronics Co South Korea 1.3%
TSMC Taiwan 1.3%
KIA Motors South Korea 1.2%
Jd.com China 1.0%
Wuliangye Yibin Co China 1.0%
Baidu China 1.0%
HON Hai Precision Industry Co Taiwan 0.9%

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. “Earnings-per-share” is the portion of a company’s profit allocated to each outstanding share of common stock. “Earnings-per-share year-over-year estimate growth (next 12 months)” is the average next-12-months earnings-per-share estimate from one year ago for an individual company compared with that estimate today; note that this calculation is done on a company-by-company basis and is aggregated through a weighted average based on the individual company’s weight in the corresponding index. Also note that this characteristic is supplied directly by MSCI.

*Active defined as Fund weight minus MSCI EM Index weight. Holdings are subject to change.

SECTOR WEIGHTS
Sector Fund Benchmark
Information Technology 25.9% 20.9%
Consumer Discretionary 16.7% 19.3%
Financials 15.7% 17.1%
Communication Services 13.2% 12.3%
Materials 8.3% 7.4%
Consumer Staples 6.9% 5.7%
Energy 4.0% 4.6%
Health Care 3.2% 4.7%
Industrials 3.0% 4.2%
Real Estate 1.4% 1.9%
Utilities 0.2% 1.9%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 37.1% 40.1%
South Korea 17.5% 13.3%
Taiwan 16.6% 13.3%
India 9.0% 8.9%
Brazil 5.6% 4.6%
Russia 3.6% 2.8%
South Africa 2.3% 3.5%
Mexico 1.9% 1.6%
Saudi Arabia 1.0% 2.4%
Thailand 1.0% 1.8%
Regional Allocation
  • Emerging Asia 83.0%
  • Emerging Latin America 8.0%
  • Emerging Europe, Middle East, Africa 7.5%

Commentary (As of January 31, 2021)

Highlights

  • Propelled by Chinese stocks, emerging market (“EM”) equities delivered positive returns in January.
  • Given the Democrats control both branches of US Congress, albeit with a slim majority, we believe the prospects for sizable fiscal stimulus have improved. The potential impact on EM assets is multi-faceted. Fiscal stimulus should bolster global growth, which would be a positive for EM. However, it would also decrease the need for monetary stimulus, which would likely be a negative for EM assets.
  • In addition to our growth, valuation, and price momentum factors, we recently added a bottom-up competitive strength factor to our model. The new alpha factor examines current levels and longer-term trends in a broad range of metrics relevant to competitive strength: margins, returns, competition, industry structure, market share, and balance sheet strength. Based on our research, the competitive strength factor is a good complement to our value factor, which continues to be the dominant indicator in our model.

Portfolio Attribution

The Causeway Emerging Markets UCITS Fund (“Fund”) outperformed the Index in January 2021. 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 new competitive strength factor was the best performing bottom-up indicator in January. Our bottom-up growth and valuation factors were also positive indicators during the month. Our bottom-up price momentum factor was a negative indicator. Of our top-down factors, currency and macroeconomic were positive indicators while sector and country were negative.

Investment Outlook

Earnings growth prospects have continued to rebound for many EM companies. Earnings growth upgrades exceeded downgrades in all but three sectors – real estate, consumer discretionary, and consumer staples. We are underweight each of these sectors in the Fund due in part to low earnings growth expectations. The materials, information technology, and financials sectors have exhibited the strongest net upgrades. From a country perspective, net earnings growth upgrades have been the most compelling in Taiwan, Russia, and India. In addition to our growth, valuation, and price momentum factors, we recently added a bottom-up competitive strength factor to our model. The new alpha factor examines current levels and longer-term trends in a broad range of metrics relevant to competitive strength: margins, returns, competition, industry structure, market share, and balance sheet strength. The factor has quality aspects as it highlights companies with increasing profit margins and returns on equity. This indicator also seeks to identify companies that operate in environments with few competitors and enjoy significant market share. Given these favorable competitive dynamics, these companies should be better positioned to sustain their strong performance. The factor also includes a balance sheet strength component that considers financial leverage and default risk. Based on our research, the competitive strength factor is a good complement to our value factor, which continues to be the dominant indicator in our model.

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 Fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report 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. Diversification does not protect against market loss. Current and future holdings are subject to risk.

Documents

Fund information: