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 “stock specific” factors relating to valuation, growth, technical indicators (such as stock price momentum), competitive strength, and “top-down” factors relating to macroeconomics, currency, country and economic sector. Currently, the valuation factor category receives the highest overall weight in the model and stock-specific factors comprise approximately 75% of the score for a company. For each stock, the relative weight assigned to each stock-specific factor differs depending on its classification (for example, value, growth, momentum, capitalisation or other classifications). The relative weights of these stock-specific factors are sometimes referred to as “contextual weights.”. As the Investment Manager is continually seeking to improve model performance, the factors and their weightings in the model may change over time, or if the classification of a stock changes. 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 EM 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*
€17.61
Inception
February 10, 2016
ISIN
IE00BWT3P209
Benchmark
MSCI Emerging Markets in EUR
Minimum investment
€1,000,000
Total expense ratio
1.24%
*As of October 15, 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 -7.1%3.6%18.9%6.3%10.2%
MSCI Emerging Markets in EUR -5.8%4.5%20.0%9.0%12.4%
QTD YTD 1 year3 years Since inception
Fund -7.1%3.6%18.9%6.3%10.2%
MSCI Emerging Markets in EUR -5.8%4.5%20.0%9.0%12.4%
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 September 30, 2021)

Benchmark:
Asset Allocation
Fund
Stocks 96.9%
Cash 3.1%
Fund Characteristics
Fund Benchmark
Holdings 132 1418
Weighted avg. market cap (US $MM) $104,743 $90,555
NTM price/earnings 8.9 11.8
Price/book value 1.5 1.9
NTM EPS revision (wtd. avg.) 12.49 2.35
Net assets $2,964,849.10 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 2.0%
Hindalco Industries India 1.7%
OAO Gazprom Russia 1.3%
JBS SA Brazil 1.2%
Samsung Electronics Co., Ltd. South Korea 1.1%
Fubon Financial Holding Co Taiwan 1.1%
Tencent Holdings Ltd. China 1.1%
Kia Corp. South Korea 1.0%
Sberbank Russia 1.0%
Hon Hai Precision Industry Co., Ltd. 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 24.5% 20.9%
Financials 19.1% 19.5%
Materials 12.0% 8.7%
Consumer Discretionary 11.5% 14.7%
Communication Services 8.9% 10.3%
Energy 6.7% 5.9%
Industrials 5.9% 4.9%
Consumer Staples 5.5% 5.9%
Health Care 2.7% 4.9%
Real Estate 0.0% 2.1%
Utilities 0.0% 2.3%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 28.5% 34.0%
Taiwan 18.3% 14.7%
South Korea 16.7% 12.6%
India 12.8% 12.2%
Brazil 5.4% 4.4%
Russia 5.0% 3.9%
Mexico 2.7% 1.9%
Saudi Arabia 2.2% 3.4%
Thailand 1.7% 1.6%
South Africa 1.6% 3.2%
Regional Allocation
  • Emerging Asia 78.4%
  • Emerging Europe, Middle East, Africa 10.2%
  • Emerging Latin America 8.3%

Commentary (As of August 31, 2021)

Highlights

  • Emerging Markets (“EM”) stocks rebounded in August as the US Federal Reserve’s accommodative policies continued to support global liquidity.
  • In our continued effort to enhance our investment process for the benefit of our clients, we added a new indicator into our model’s top-down macroeconomic factor category. The factor, changes in the Markit country manufacturing Purchasing Manager’s Index (“PMI”), is used in conjunction with our Organisation for Economic Co-operation and Development (OECD) Composite Leading Indicator (“CLI”) factor to assess whether a country’s manufacturing economy is growing or shrinking.
  • While we incorporate bottom-up earnings growth factors into our assessment of each stock, we continue to emphasize valuation in our multi-factor investment process. Despite outperforming year-to-date, we believe the outlook for value stocks remains compelling as many companies in this cohort offer discounted valuations relative to history and attractive dividend yields.

Portfolio Attribution

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

Investment Outlook

Earnings upgrades in EM have lagged developed markets, which have been led by the US. Within EM, earnings upgrades have been strongest in Russia, South Korea, and Saudi Arabia. As commodity-linked economies, Russia and Saudi Arabia have benefitted from firm oil prices. South Korea has benefitted from positive earnings revisions within the information technology sector. Indonesia, Thailand, and China have experienced the weakest earnings revisions. Indonesia and Thailand continue to experience economic challenges related to Covid-19. Chinese stocks are facing a myriad of pressures including supply chain disruptions related to Covid-19, reduced stimulus, and regulatory pressures. On a sector basis, materials, energy, and industrials have experienced the strongest earnings upgrades. We are overweight materials stocks in the Fund due to favorable earnings growth and price momentum. The sectors with the weakest earnings upgrade profiles were real estate, communication services, and consumer discretionary. Real estate’s weakness was due in part to the regulatory tightening in China and the issues faced by over-levered developers in the country. We are underweight Chinese real estate stocks in the Fund. While we incorporate bottom-upearnings growth factors into our assessment of each stock, we continue to emphasize valuation in our multi-factor investment process. Despite outperforming year-to-date, we believe the outlook for value stocks remains compelling as many companies in this cohort offer discounted valuations relative to history and attractive dividend yields.

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.

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