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*
$11.50
Inception
October 19, 2016
ISIN
IE00BWT3P316
Benchmark
MSCI Emerging Markets in USD
Minimum investment
$1,000,000
Total expense ratio
1.24%
*As of May 13, 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 -5.6%-12.0%-19.6%1.7%3.8%
MSCI Emerging Markets in USD -5.5%-12.1%-18.1%2.6%5.7%
QTD YTD 1 year3 years Since inception
Fund -5.6%-12.0%-19.6%1.7%3.8%
MSCI Emerging Markets in USD -5.5%-12.1%-18.1%2.6%5.7%
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 April 30, 2022)

Benchmark:
Asset Allocation
Fund
Stocks 98.4%
Cash 1.6%
Fund Characteristics
Fund Benchmark
Holdings 161 1398
Weighted avg. market cap (US $MM) $74,372 $74,503
NTM price/earnings 7.0 10.7
Price/book value 1.1 1.8
NTM EPS revision (wtd. avg.) 9.57 -0.62
Net assets $2,341,639.36 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 2.0%
Hindalco Industries India 1.5%
JBS SA Brazil 1.4%
Samsung Electronics Co., Ltd. South Korea 1.4%
Banco do Brasil SA Brazil 1.2%
Kia Corp. South Korea 1.2%
Fubon Financial Holding Co Taiwan 1.1%
PetroChina Co., Ltd. China 1.1%
PICC Property & Casualty Co., Ltd. China 1.1%
Sun Pharmaceutical Industries Ltd. India 1.1%

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
Information Technology 24.5% 20.5%
Financials 21.4% 22.2%
Materials 13.9% 9.2%
Industrials 9.9% 5.4%
Energy 7.3% 5.0%
Consumer Discretionary 6.4% 12.7%
Consumer Staples 6.3% 6.0%
Communication Services 5.5% 10.3%
Health Care 2.4% 3.8%
Utilities 0.9% 2.7%
Real Estate 0.0% 2.2%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 27.5% 30.6%
Taiwan 17.7% 15.4%
South Korea 16.1% 12.5%
India 14.7% 13.6%
Brazil 5.1% 5.3%
South Africa 3.9% 3.7%
Saudi Arabia 3.5% 4.7%
Thailand 2.9% 1.9%
Indonesia 1.9% 1.9%
Mexico 1.8% 2.2%
Regional Allocation
  • Emerging Asia 81.4%
  • Emerging Europe, Middle East, Africa 9.9%
  • Emerging Latin America 7.1%

Commentary (As of February 28, 2022)

Highlights

  • The Russian stock market collapsed in late February as President Vladimir Putin ordered the invasion of Ukraine and the west leveled multiple sanctions against Russia, including freezing assets of the Central Bank of Russia.
  • Federal Reserve (“Fed”) Chair, Jerome Powell, has noted that the Fed intends to continue its tapering program and to move forward with interest rate increases beginning in March despite elevated market volatility and uncertainty related to the Russia-Ukraine conflict’s impact on global growth. While tightening monetary policy in the US poses a headwind for EM assets, many central banks have raised interest rates in anticipation of the Fed’s actions.
  • While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. Buoyed by rising interest rates, we believe that select EM value stocks offer outperformance potential, particularly if global growth headwinds remain manageable.

Portfolio Attribution

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

Investment Outlook

Earnings growth upgrades for EM equities continue to lag those in developed markets. EM sectors with the strongest earnings upgrades were information technology, financials, and industrials. All three cyclical sectors reflect analyst optimism that global growth is still improving. We are overweight information technology stocks in the Fund due primarily to attractive growth characteristics. The sectors with the weakest net upgrades were communication services, consumer discretionary, and real estate. We are underweight each of these sectors in the Fund due in part to growth and price momentum considerations. From a country perspective, the major EM countries with the strongest net upgrades were Turkey, Taiwan, and United Arab Emirates. Turkish companies, particularly those in the export sector, should likely benefit from the Turkish lira’s depreciation. Taiwan continues to benefit from demand for semiconductor chip manufacturing and UAE’s oil-linked economy has benefitted from rising commodity prices. The countries with the weakest net upgrades include China and Brazil. The Chinese economy is continuing to reflect the effects of deleveraging in the real estate sector and economic restrictions related to Covid-19 policies. In Brazil, high real interest rates are weighing on growth prospects. While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. Buoyed by rising interest rates, we believe that select EM value stocks offer outperformance potential, particularly if global growth headwinds remain manageable.

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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