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*
€15.46
Inception
February 10, 2016
ISIN
IE00BWT3P209
Benchmark
MSCI Emerging Markets in EUR
Minimum investment
€1,000,000
Total expense ratio
1.24%
*As of September 23, 2022
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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 6.1%-7.7%-9.1%4.9%7.6%
MSCI Emerging Markets in EUR 4.3%-6.4%-7.8%6.3%9.6%
QTD YTD 1 year3 years Since inception
Fund 6.1%-7.7%-9.1%4.9%7.6%
MSCI Emerging Markets in EUR 4.3%-6.4%-7.8%6.3%9.6%
20212020201920182017
Fund 4.7%6.4%18.4%-14.4%21.1%
MSCI Emerging Markets in EUR 5.2%8.9%21.1%-9.9%21.0%
20212020201920182017
Fund 4.7%6.4%18.4%-14.4%21.1%
MSCI Emerging Markets in EUR 5.2%8.9%21.1%-9.9%21.0%

Portfolio (as of August 31, 2022)

Benchmark:
Asset Allocation
Fund
Stocks 98.4%
Cash 1.6%
Fund Characteristics
Fund Benchmark
Holdings 186 1382
Weighted avg. market cap (US $MM) $62,665 $66,197
NTM price/earnings 6.5 10.6
Price/book value 1.1 1.7
NTM EPS revision (wtd. avg.) 12.22 0.96
Net assets $2,000,349.42 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 2.0%
Banco do Brasil SA Brazil 1.5%
Kia Corp. South Korea 1.3%
PICC Property & Casualty Co., Ltd. China 1.2%
PetroChina Co., Ltd. China 1.1%
Daqo New Energy China 1.1%
Hon Hai Precision Industry Co., Ltd. Taiwan 1.0%
Tongwei Co China 1.0%
Cosco Shipping Holdings Co China 1.0%
JBS SA Brazil 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 20.9% 19.4%
Financials 20.2% 21.6%
Industrials 10.8% 5.8%
Materials 10.1% 8.4%
Energy 9.5% 5.3%
Consumer Discretionary 8.7% 14.2%
Consumer Staples 6.9% 6.2%
Communication Services 5.6% 10.1%
Health Care 3.5% 3.9%
Utilities 1.9% 3.1%
Real Estate 0.4% 1.9%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 32.1% 32.1%
Taiwan 14.1% 14.6%
India 13.9% 14.5%
South Korea 13.6% 11.6%
Brazil 6.8% 5.3%
Saudi Arabia 5.2% 4.6%
Thailand 3.1% 2.0%
Indonesia 2.5% 2.0%
United Arab Emirates 2.4% 1.3%
South Africa 2.0% 3.4%
Regional Allocation
  • Emerging Asia 79.5%
  • Emerging Europe, Middle East, Africa 10.9%
  • Emerging Latin America 8.0%

Commentary (As of August 31, 2022)

Highlights

  • In August, emerging market equity prices continued their third quarter rebound as the MSCI Emerging Markets (“Index”) returned 1.25% in local currency terms during the month.
  • In the current environment, the Fed is increasing interest rates at the front end of the yield curve, which is dampening global growth and reducing global liquidity. EM currencies have fared relatively well despite these headwinds due in part to the efforts of most EM central banks to increase their benchmark interest rates in anticipation of a Fed rate hiking cycle.
  • China remains a noteworthy outlier compared to other EM countries. The People’s Bank of China has been easing monetary policy as Covid-19 lockdowns have lowered growth and inflation expectations. Buoyed in part by accommodative monetary and fiscal policies, earnings growth estimates for Chinese companies have been improving.

Portfolio Attribution

The Causeway Emerging Markets UCITS Fund (“Fund”) outperformed the Index in August 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 growth and technical factors were positive indicators during the month. Our valuation and competitive strength factors were negative indicators. Of our top-down factors, our country and sector factors were positive indicators while our macroeconomic and currency factors were negative indicators in August.

Investment Outlook

Earnings growth upgrades for EM equities continue to lag those in developed markets. From a country perspective, South Korea, South Africa, and Brazil had the weakest net upgrades. South Korea reflects slowing global growth via the country’s exposure to the information technology sector. South Africa and Brazil are commodity-oriented economies that have been impacted by falling commodity prices. We are overweight South Korean and Brazilian stocks in the Fund due to a combination of valuation, price momentum, and macroeconomic considerations. The countries with the strongest net upgrades were Indonesia, Saudi Arabia, and United Arab Emirates, in part reflecting relatively strong oil and coal prices. The EM sectors with the weakest upgrades were real estate, materials, and information technology. Real estate is primarily driven by slowing growth in the Chinese real estate sector, which is less impactful for China overall as the relative size of the sector has declined. Materials and information technology reflect the falling commodity prices resulting from a slowing global economy. The sectors with the strongest earnings growth upgrades were energy, consumer discretionary, and consumer staples. Energy companies continue to benefit from relatively high oil prices. The positive outlook for consumer discretionary companies reflects the encouraging results of Chinese online consumer companies. Consumer staples, a defensively-oriented sector, reflects the growing concern over an economic slowdown. 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.

 

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: