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.

YTD Return*
+9.78%
Nav*
$ 9.88, -0.07
Inception
October 19, 2016
ISIN
IE00BWT3P316
Benchmark
MSCI Emerging Markets in USD
Minimum investment
$1,000,000
Total expense ratio
1.25%
*As of July 17, 2019

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

QTD YTD 1 year3 years Since inception
Fund 0.5%8.7%-2.6%0.0%5.6%
MSCI Emerging Markets in USD 0.7%10.8%1.6%11.1%8.3%
QTD YTD 1 year3 years Since inception
Fund 0.5%8.7%-2.6%0.0%5.6%
MSCI Emerging Markets in USD 0.7%10.8%1.6%11.1%8.3%
20182017
Fund -14.4%21.1%
MSCI Emerging Markets in USD -14.2%37.8%
20182017
Fund -14.4%21.1%
MSCI Emerging Markets in USD -14.2%37.8%

Portfolio (as of June 30, 2019)

Benchmark:
Asset Allocation
Fund
Stocks 97.1%
Cash 2.9%
Fund Characteristics
Fund Benchmark
Holdings 150 1193
Weighted avg. market cap (US $MM) $59,730 $52,111
NTM price/earnings 9.0 11.3
Price/book value 1.3 1.6
NTM EPS revision (wtd. avg.)
Net assets $2,188,224.11 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Tencent Holdings Ltd. China 6.5%
Samsung Electronics Co., Ltd. South Korea 4.9%
Alibaba Group Holding - ADR China 4.3%
China Construction Bank Corp. China 3.4%
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR Taiwan 3.2%
Ping An Insurance (Group) Co. of China Ltd. China 2.4%
Lukoil - ADR Russia 1.9%
Gazprom PJSC - ADR Russia 1.9%
Investimentos Itau Brazil 1.9%
Sberbank - ADR Russia 1.8%

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
Financials 26.0% 25.2%
Information Technology 15.2% 13.9%
Communication Services 12.7% 11.7%
Energy 9.9% 7.9%
Consumer Discretionary 9.5% 13.4%
Materials 6.8% 7.6%
Industrials 5.8% 5.3%
Consumer Staples 5.6% 6.6%
Real Estate 2.5% 3.0%
Health Care 1.9% 2.6%
Utilities 1.2% 2.7%
TOP 10 COUNTRIES
testing
Country Strategy Benchmark
China 33.3% 31.6%
South Korea 14.1% 12.4%
India 10.8% 9.0%
Taiwan 9.5% 10.8%
Brazil 9.2% 7.6%
Russia 7.0% 4.0%
Thailand 3.1% 3.0%
Mexico 2.1% 2.5%
South Africa 1.8% 5.9%
Indonesia 1.2% 2.1%
Regional Allocation
  • Emerging Asia 72.6%
  • Emerging Latin America 12.4%
  • Emerging Europe, Middle East, Africa 12.1%
  • Multi Region Emerging (ETF) 0.0%

Commentary (As of April 30, 2019)

Highlights

  • Buoyed by an increasingly dovish US Federal Reserve and optimism surrounding US-China trade negotiations, emerging markets equities posted positive returns in the first quarter of 2019.

Portfolio Attribution

Causeway Emerging Markets UCITS Fund - USD share class ("Fund") underperformed the Index during the quarter. We use both bottom-up and top-down factor categories to seek to forecast alpha for the stocks in the Fund's investable universe. Our value factor was the top performing bottom-up category during the quarter and earnings growth was modestly positive. Our price momentum factor category was a negative indicator during the period. Of our top-down factors, macroeconomic and currency were positive indicators during the quarter. The country and sector factors were negative during the period.

Investment Outlook

After underperforming in 2018, our momentum factor has continued to lag this year. We acknowledge that momentum's performance can be volatile and the current environment may be particularly challenging for this factor. In the late stages of a market and economic cycle characterized by uncertain Fed policy, US-China trade tensions, and Brexit-related issues, trends may be fleeting and overwhelmed by investors’ desires to harvest short-term profits. This has presented a difficult environment for the momentum factor. We are researching momentum’s recent underperformance to determine whether this phenomenon is cyclical, structural, or attributable to natural volatility. However, we continue to believe that adding momentum to a value-based strategy helps minimize value traps and enhances the Fund's risk-adjusted return profile over the long-term.

 

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: