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 Marketing@causewaycap.com for a Fund Application.

Nav*
€ 16.02
Inception
February 10, 2016
ISIN
IE00BWT3P209
Benchmark
MSCI Emerging Markets in EUR
Minimum investment
€1,000,000
Total expense ratio
1.25%
*As of January 24, 2020

Strategy overview

The portfolio managers discuss our Emerging Markets strategy.

Portfolio managers

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

Performance

QTDYTD1 year3 yearsSince inception
Fund8.7%18.4%18.4%7.1%12.3%
MSCI Emerging Markets in EUR6.9%14.6%14.6%6.9%6.8%
QTDYTD1 year3 yearsSince inception
Fund8.7%18.4%18.4%7.1%12.3%
MSCI Emerging Markets in EUR6.9%14.6%14.6%6.9%6.8%
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 December 31, 2019)

Benchmark:
Asset Allocation
Fund
Stocks98.9%
Cash1.1%
Fund Characteristics
FundBenchmark
Holdings 130
Weighted avg. market cap (US $MM)$91,829$0
NTM price/earnings10.10.0
Price/book value1.50.0
NTM EPS revision (wtd. avg.)
Net assets$1,515,315.18-
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp.China2.0%
Samsung Electronics Co., Ltd.South Korea1.9%
Investimentos ItauBrazil1.6%
LukoilRussia1.5%
Anhui Conch Cement Co., Ltd.China1.3%
Gazprom PJSCRussia1.3%
Tencent Holdings Ltd.China1.3%
JBS SABrazil1.2%
SberbankRussia1.1%
Banco do Brasil SABrazil1.1%

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
Financials23.6%24.2%
Information Technology19.5%15.7%
Consumer Discretionary12.5%14.2%
Communication Services11.1%11.0%
Energy9.7%7.4%
Consumer Staples6.2%6.3%
Materials5.6%7.4%
Industrials3.9%5.3%
Real Estate2.6%3.0%
Health Care2.1%2.8%
Equity Funds1.1%0.0%
Utilities1.0%2.6%
TOP 10 COUNTRIES
Country Strategy Benchmark
China34.4%34.3%
South Korea13.6%11.7%
Taiwan12.9%11.7%
Brazil10.5%7.5%
India8.3%8.6%
Russia7.9%3.9%
Thailand2.6%2.6%
Mexico1.7%2.3%
South Africa1.5%4.7%
Multi-National Emerging (ETF)1.1%0.0%
Regional Allocation
  • Emerging Asia 72.7%
  • Emerging Latin America 13.1%
  • Emerging Europe, Middle East, Africa 12.0%
  • Multi Region Emerging (ETF) 1.1%

Commentary (As of November 30, 2019)

Highlights

  • With growth slowing in most emerging market (“EM”) countries, EM equities posted muted returns in November.
  • According to Bloomberg consensus estimates, gross domestic product (“GDP”) growth for EM countries is expected to be 3.7% in 2019 and 3.8% in 2020. Both of these estimates have been lowered over the past three months.
  • Despite slowing growth, earnings upgrades continue to be strong within EM equities compared to other regions. EM is the only major region that has experienced net positive earnings upgrades over the past three months. In addition to favorable earnings upgrades, EM countries also look compelling from a valuation perspective as EM equities have underperformed most regions YTD.

Portfolio Attribution

Causeway Emerging Markets UCITS Fund - EUR share class (“Fund”) outperformed the Index in November 2019. 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 value factor was our strongest performing bottom-up indicator in November, but it has been the weakest indicator over the year-to-date (“YTD”) period. Our bottom-up price momentum and earnings growth factors were both negative indicators in November. Of our top-down factors, macroeconomic, country, and currency were positive indicators during the month. Our sector factor was neutral.

Investment Outlook

In November, the MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index by 1.1%, further widening the discount for value stocks. In contrast, our value factor was positive during the month. This disconnect is primarily attributable to two factors. First, the strong performance of a few large cap growth stocks buoyed the Growth Index. While the Index is capitalization-weighted, we use equally-weighted returns for our value factor in order to avoid assigning a handful of stocks a disproportionate weight. Secondly, our value factor has a sector-relative component while MSCI’s style classification schemes do not include sector adjustments.

MSCI EM small capitalization (“cap”) stocks underperformed their large cap peers in November and the YTD period, continuing their multi-year underperformance since 2016. We have been overweight mid- and small cap stocks in our Fund, which has detracted from relative performance. On the positive side, our contextual weighting scheme continued to rebound in November. When calculating a stock’s expected alpha, the relative weight assigned to each bottom-up stock-specific factor for a particular company differs depending on its classification. While this methodology has underperformed a uniform-weighted approach YTD, we remain confident in our contextual weighting scheme and are encouraged by the recent rebound in performance.

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: