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*
$13.92
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 26, 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 0.6%-1.2%15.8%9.9%7.1%
MSCI Emerging Markets in USD 1.0%0.0%17.3%12.7%9.5%
QTD YTD 1 year3 years Since inception
Fund 0.6%-1.2%15.8%9.9%7.1%
MSCI Emerging Markets in USD 1.0%0.0%17.3%12.7%9.5%
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, 2021)

Benchmark:
Asset Allocation
Fund
Stocks 98.8%
Cash 1.2%
Fund Characteristics
Fund Benchmark
Holdings 133 1417
Weighted avg. market cap (US $MM) $108,003 $95,202
NTM price/earnings 8.9 11.8
Price/book value 1.5 1.9
NTM EPS revision (wtd. avg.) 13.8 3.53
Net assets $2,758,203.32 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 1.9%
Hindalco Industries India 1.6%
Samsung Electronics Co., Ltd. South Korea 1.5%
Gazprom Pjsc Russia 1.4%
Tencent Holdings Ltd. China 1.3%
JBS SA Brazil 1.2%
Fubon Financial Holding Co Taiwan 1.1%
Kia Corp. South Korea 1.1%
Sberbank Of Russia Pjsc Russia 1.1%
Hon Hai Precision Industry Co., Ltd. Taiwan 1.0%

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 25.0% 20.6%
Financials 19.6% 19.6%
Materials 12.3% 8.5%
Consumer Discretionary 11.3% 15.5%
Communication Services 8.9% 10.6%
Energy 7.5% 5.8%
Industrials 5.9% 4.7%
Consumer Staples 5.7% 5.8%
Health Care 2.6% 4.6%
Real Estate 0.0% 2.0%
Utilities 0.0% 2.2%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 29.8% 34.7%
Taiwan 18.8% 14.7%
South Korea 16.6% 12.2%
India 12.9% 12.0%
Russia 5.4% 4.1%
Brazil 4.6% 4.0%
Mexico 2.8% 1.9%
Saudi Arabia 2.6% 3.4%
South Africa 1.7% 3.1%
Thailand 1.5% 1.7%
Regional Allocation
  • Emerging Asia 80.1%
  • Emerging Europe, Middle East, Africa 11.0%
  • Emerging Latin America 7.7%

Commentary (As of September 30, 2021)

Highlights

  • Emerging Markets (“EM”) stocks declined in September as supply chain disruptions and concerns related to leverage in China’s real estate sector weighed on the overall asset class.
  • China’s real estate sector remained under pressure in September with one of its largest developers, China Evergrande, teetering on the edge of bankruptcy. Real estate is a critical component of China’s economy and regulators are trying to ringfence the issue given systemic risk concerns. We have been underweight the Chinese real estate sector in the Fund due primarily to bottom-up considerations. We recently sold all Chinese real estate holdings in the Fund based on feedback from our fundamental colleagues who believe that there will be continued stress in the sector.
  • Our value-orientation is reflected in our positioning in South Korea, one of the Fund’s largest country overweights. While the Fed’s tapering program could pose a challenge for EM currencies, we believe the Korean won should fare relatively well due to the country’s current account surplus, low inflation, and strong fiscal situation. We remain overweight South Korean stocks in the Fund due in part to valuation and macroeconomic considerations.

Portfolio Attribution

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

Investment Outlook

Earnings upgrades in EM have lagged developed markets, which have been buoyed by strong upgrades in the US. Within EM, the strongest sectors were energy, materials, and information technology. All three cyclical sectors reflect analyst optimism that the economic reopening will continue globally. From a country perspective, the major countries with the strongest net upgrades were Russia, Saudi Arabia and UAE, which are benefitting from rising oil prices. We are overweight Russian stocks in the Fund due in part to favorable valuation, growth, and price momentum characteristics. China, Thailand, and Indonesia have experienced the weakest earnings revisions. Supply chain issues related to Covid-19, leverage in the real estate sector, and regulatory scrutiny have weighed on Chinese stocks.

The MSCI EM Value Index outperformed the MSCI EM Growth Index in the third quarter and YTD. While our valuation factor performed well during the quarter, our exposure to stocks in the metals and mining industry detracted from relative performance. These stocks are attractive on most valuation metrics, but they were negatively impacted by weak commodity prices related to the slowdown in China. Our value-orientation is also reflected in our positioning in South Korea, one of the Fund’s largest country overweights. While the Fed’s tapering program could pose a challenge for EM currencies, we believe the Korean won should fare relatively well due to the country’s current account surplus, low inflation, and strong fiscal situation. We remain overweight South Korean stocks in the Fund due in part to valuation and macroeconomic considerations.

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: