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*
$ 12.08
Inception
October 19, 2016
ISIN
IE00BWT3P316
Benchmark
MSCI Emerging Markets in USD
Minimum investment
$1,000,000
Total expense ratio
1.24%
*As of September 22, 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 9.0%-3.2%10.9%0.0%4.8%
MSCI Emerging Markets in USD 11.5%0.7%14.9%3.2%7.9%
QTD YTD 1 year3 years Since inception
Fund 9.0%-3.2%10.9%0.0%4.8%
MSCI Emerging Markets in USD 11.5%0.7%14.9%3.2%7.9%
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 August 31, 2020)

Benchmark:
Asset Allocation
Fund
Stocks 98.2%
Cash 1.8%
Fund Characteristics
Fund Benchmark
Holdings 115 1382
Weighted avg. market cap (US $MM) $159,731 $134,825
NTM price/earnings 11.0 13.5
Price/book value 1.5 1.8
NTM EPS revision (wtd. avg.)
Net assets $1,113,014.05 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Tencent Holdings Ltd. China 1.9%
Samsung Electronics Co., Ltd. South Korea 1.7%
China Construction Bank Corp. China 1.4%
Anhui Conch Cement Co China 1.2%
Jd.com China 1.2%
Kweichow Moutai Co China 1.2%
Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 1.0%
JBS SA Brazil 0.9%
Baidu China 0.9%
Kia Motors Corp. South Korea 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 20.4% 17.5%
Consumer Discretionary 17.9% 19.8%
Financials 16.4% 17.8%
Communication Services 15.2% 12.9%
Consumer Staples 7.0% 6.3%
Materials 6.8% 7.1%
Energy 5.9% 5.6%
Health Care 3.4% 4.2%
Industrials 3.0% 4.5%
Real Estate 2.0% 2.4%
Utilities 0.3% 2.0%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 41.2% 42.5%
South Korea 14.5% 11.5%
Taiwan 13.7% 12.5%
India 9.3% 8.3%
Brazil 6.0% 4.8%
Russia 5.4% 2.9%
South Africa 1.7% 3.5%
Mexico 1.6% 1.6%
Malaysia 1.4% 1.7%
Thailand 1.2% 1.9%
Regional Allocation
  • Emerging Asia 82.0%
  • Emerging Europe, Middle East, Africa 8.7%
  • Emerging Latin America 7.5%

Commentary (As of August 31, 2020)

Highlights

  • While emerging markets (“EM”) equities posted positive returns in August, they lagged developed markets stocks during the month.
  • Earnings growth prospects have been improving for many EM companies. Earnings growth upgrades exceed downgrades in more than half of the EM sectors according to analyst forecasts.
  • The MSCI Emerging Markets Value Index is trading near historically wide discounts based on both price-to-earnings and price-to-book value ratios. We continue to emphasize value factors in our investment process and we believe that EM value stocks are poised to rebound once there is a reduction in COVID-19 uncertainty given the discount relative to EM growth stocks.

Portfolio Attribution

Causeway Emerging Markets UCITS Fund - USD share class (“Fund”) outperformed the Index in August 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. Our bottom-up earnings growth and price momentum factors were negative indicators during the month. While performance of our bottom-up value factor has lagged over most recent periods, the factor was a modestly positive indicator in August. Of our top -down factors, our macroeconomic and country factors were negative indicators during the month. Our currency and sector factors were positive indicators.

Investment Outlook

Earnings growth prospects have been improving for many EM companies. Earnings growth upgrades exceed downgrades in more than half of the EM sectors according to analyst forecasts. The consumer discretionary sector posted the strongest net upgrades as second quarter earnings were buoyed by robust e-commerce amid the COVID-19 lockdown. Communication services also experienced net positive upgrades as demand for goods and services offered by internet companies remains strong. Net upgrades were also positive for information technology stocks despite the increased restrictions on Chinese telecom equipment giant, Huawei Technologies Co., Ltd. We are overweight information technology and communication services stocks in the Fund due in part to positive earnings growth estimates. From a country perspective, Taiwanese companies, many of which are heavily exposed to information technology, experienced the most net upgrades. Earnings growth prospects for Chinese stocks have also been resilient, led by companies in the communication services and consumer discretionary sectors. Stocks in Russia, South Africa, and Brazil also experienced net upgrades, indicating that prospects are also improving for companies in these commodity-linkedcountries. Companies in India, one of the countries most severely impacted by the pandemic-induced economic slowdown, are also experiencing net upgrades.

Uncertainty surrounding the COVID-19 pandemic has continued to weigh on EM value stocks. After underperforming in August, the MSCI Emerging Markets Value Index has lagged the MSCI Emerging Markets Growth Index every month this year. Following a poor 2019, the MSCI Emerging Markets Value Index trails the MSCI Emerging Markets Growth Index by 27 percentage points on a local currency basis over the year-to-date period. The MSCI Emerging Markets Value Index is trading near historically wide discounts based on both price-to-earnings and price-to-book value ratios. We continue to emphasize value factors in our investment process and we believe that EM value stocks are poised to rebound once there is a reduction in COVID-19 uncertainty given the discount relative to EM growth stocks. A catalyst for value’s resurgence could be the dissemination of one or more COVID-19 vaccines, many of which are in Phase III trials.

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: