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 [email protected] for a Fund Application.

Nav*
$ 13.40
Inception
October 19, 2016
ISIN
IE00BWT3P316
Benchmark
MSCI Emerging Markets in USD
Minimum investment
$1,000,000
Total expense ratio
1.24%
*As of November 27, 2020
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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 2.1%-1.2%6.4%-1.1%5.1%
MSCI Emerging Markets in USD 2.1%1.1%8.6%2.3%7.7%
QTD YTD 1 year3 years Since inception
Fund 2.1%-1.2%6.4%-1.1%5.1%
MSCI Emerging Markets in USD 2.1%1.1%8.6%2.3%7.7%
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 October 31, 2020)

Benchmark:
Asset Allocation
Fund
Stocks 98.2%
Cash 1.8%
Fund Characteristics
Fund Benchmark
Holdings 123 1391
Weighted avg. market cap (US $MM) $176,555 $148,993
NTM price/earnings 10.8 13.1
Price/book value 1.5 1.8
NTM EPS revision (wtd. avg.)
Net assets $1,668,441.47 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Tencent Holdings Ltd. China 2.0%
Samsung Electronics Co., Ltd. South Korea 2.0%
China Construction Bank Corp. China 1.6%
Kweichow Moutai Co China 1.3%
Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 1.2%
Anhui Conch Cement Co., Ltd. China 1.1%
Kia Motors Corp. South Korea 0.9%
Wuliangye Yibin Co China 0.8%
Baidu China 0.8%
Dr. Reddy's Laboratories Ltd. India 0.8%

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
Information Technology 22.3% 18.4%
Consumer Discretionary 18.6% 20.9%
Financials 15.5% 17.1%
Communication Services 14.9% 13.2%
Materials 7.0% 6.8%
Consumer Staples 6.9% 5.9%
Energy 4.6% 4.9%
Health Care 3.3% 4.3%
Industrials 2.9% 4.3%
Real Estate 1.8% 2.3%
Utilities 0.2% 1.9%
UNKNOWN 0.1% 0.0%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 41.5% 43.2%
South Korea 15.6% 11.9%
Taiwan 14.4% 12.7%
India 9.5% 8.1%
Brazil 5.0% 4.4%
Russia 3.9% 2.7%
South Africa 2.1% 3.5%
Mexico 1.8% 1.6%
Malaysia 1.3% 1.7%
Thailand 1.0% 1.7%
Regional Allocation
  • Emerging Asia 83.9%
  • Emerging Europe, Middle East, Africa 7.3%
  • Emerging Latin America 7.0%
  • Pacific 0.0%

Commentary (As of October 31, 2020)

Highlights

  • Buoyed by Chinese stocks, emerging markets (“EM”) equities outperformed most developed markets in October.
  • A “blue wave” – Democratic victory in the presidential election combined with a majority in the Senate - would likely be the most positive outcome for EM stocks. We believe this outcome would lead to the most US fiscal spending and higher US debt levels. This would likely stimulate global growth and support EM equities while pressuring the US dollar relative to EM currencies. However, even in other election scenarios, we do not envision a strong US dollar given the fact that fiscal and monetary stimulus will likely continue to be accommodative in the US.
  • We continue to emphasize value factors in our multi-factor investment process. We believe that EM value stocks are poised to rebound given the valuation discount, the anticipated resumption of global growth in 2021, and the likely reduction, ultimately, in uncertainty following the US election.

Portfolio Attribution

Causeway Emerging Markets UCITS Fund - USD share class (“Fund”) performed in-line with the Index in October 2020. 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. After underperforming over most recent periods, our bottom-up value factor rebounded during the month. Our bottom-up earnings growth and price momentum factors were also positive indicators in October. Of our top-down factors, currency was a positive indicator while our macroeconomic, country, and sector factors were negative.

Investment Outlook

Earnings growth prospects have been improving for many EM companies. Earnings growth upgrades have exceeded downgrades in all but three sectors. The information technology, materials, and consumer discretionary sectors have experienced the strongest net upgrades. Information technology companies continue to benefit from increased technological adoption during the pandemic as well as strong demand related to 5G. Materials companies have experienced net upgrades as commodity prices have stabilized amid improving global growth. Consumer discretionary companies have also benefitted from a resumption of global growth as well as exposure to e-commerce. From a country perspective, companies in the technology-orientedeconomies of South Korea and Taiwan experienced the strongest net upgrades. Brazil, India, South Africa, and Russia have also experienced strong net upgrades as economic activity has resumed after declining significantly in the early stages of the pandemic. India and Brazil have also seen sharp rallies in their OECD Leading Economic Indicators. Net upgrades for Chinese companies have declined over the past three months as the country’s economic growth recovered relatively early and many companies already experienced an upgrade cycle. In Thailand, net upgrades have been weak due in part to limited tourism amid the pandemic.

Uncertainty surrounding the COVID-19 pandemic continued to weigh on EM value stocks in October. While our value factor delivered positive performance during the month, the MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index. The MSCI EM Value Index is trading near record low valuations based on both price-to-earnings and price-to-book value ratios. We continue to emphasize value factors in our multi-factor investment process. We believe that EM value stocks are poised to rebound given the valuation discount, the anticipated resumption of global growth in 2021, and the likely reduction, ultimately, in uncertainty following the US election.

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: