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*
$ 12.10
Inception
October 19, 2016
ISIN
IE00BWT3P316
Benchmark
MSCI Emerging Markets in USD
Minimum investment
$1,000,000
Total expense ratio
1.25%
*As of February 19, 2020

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 -5.3%-5.3%1.1%5.1%4.9%
MSCI Emerging Markets in USD -4.7%-4.7%4.2%8.3%7.5%
QTD YTD 1 year3 years Since inception
Fund -5.3%-5.3%1.1%5.1%4.9%
MSCI Emerging Markets in USD -4.7%-4.7%4.2%8.3%7.5%
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 January 31, 2020)

Benchmark:
Asset Allocation
Fund
Stocks 97.9%
Cash 2.1%
Fund Characteristics
Fund Benchmark
Holdings 130
Weighted avg. market cap (US $MM) $92,088 $0
NTM price/earnings 9.4 0.0
Price/book value 1.4 0.0
NTM EPS revision (wtd. avg.)
Net assets $1,557,043.90 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Samsung Electronics Co., Ltd. South Korea 1.9%
China Construction Bank Corp. China 1.9%
Lukoil Russia 1.6%
Investimentos Itau Brazil 1.5%
JBS SA Brazil 1.4%
Tencent Holdings Ltd. China 1.3%
Anhui Conch Cement Co., Ltd. China 1.2%
Gazprom PJSC Russia 1.2%
Sberbank Russia 1.1%
Ping An Insurance Group Co Of China 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
Financials 23.0% 23.8%
Information Technology 20.0% 16.1%
Consumer Discretionary 12.9% 14.3%
Communication Services 11.8% 11.4%
Energy 9.2% 7.1%
Consumer Staples 6.2% 6.5%
Materials 5.6% 7.3%
Industrials 3.7% 5.2%
Real Estate 2.3% 2.8%
Health Care 2.1% 3.0%
Utilities 1.1% 2.7%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 35.0% 34.2%
South Korea 13.4% 11.6%
Taiwan 13.0% 11.7%
Brazil 10.3% 7.3%
India 8.6% 9.0%
Russia 8.1% 4.0%
Thailand 2.3% 2.5%
Mexico 1.8% 2.4%
South Africa 1.2% 4.5%
Turkey 1.0% 0.5%
Regional Allocation
  • Emerging Asia 73.2%
  • Emerging Latin America 12.9%
  • Emerging Europe, Middle East, Africa 11.8%

Commentary (As of December 31, 2019)

Highlights

  • Buoyed by optimism surrounding the US-China trade deal, emerging markets (“EM”) equities outperformed developed markets in December.
  • The US-China trade dispute took a positive step forward as both sides agreed on a phase one deal, which is scheduled to be formally signed on January 15th. In addition to bolstering Chinese equities, US-China trade optimism helped push the yield on the 10-Year US Treasury Note higher. An upward sloping yield curve generally indicates a positive macroeconomic backdrop for EM assets.
  • While our value factor lagged in 2019, it has outperformed in recent months. Interestingly, the MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index during the fourth quarter. The return differential between our value factor and the MSCI indices can be attributed in part to the strong performance of a few large cap growth stocks.

Portfolio Attribution

Causeway Emerging Markets UCITS Fund - USD Share Class (“Fund”) underperformed the Index in December 2019. 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 value factor was our strongest performing bottom-up indicator in December, but it has been the weakest indicator over the year-to-date (“YTD”) period. Our bottom-up price momentum and earnings growth factors were both positive indicators in December and the YTD period. Of our top-down factors, macroeconomic and sector were positive indicators during the month. While our country and currency factors were negative during the month, our four top-down factors were all positive indicators in 2019.

Investment Outlook

MSCI EM small capitalization (“cap”) stocks underperformed their large cap peers in 2019, continuing their multi-year underperformance since 2016. Our overweight to mid-and small cap stocks in the Fund has detracted from relative performance. Despite rebounding late in the year,our contextual weighting scheme also underperformed in 2019. When calculating a stock’s expected alpha, our model assigns the relative weight to each bottom-up stock-specific factor for a particular company depending on its classification. We remain confident in this approach, which we believe has benefitted the strategy compared to a uniform weighting scheme since the strategy's inception in 2007.

While our value factor lagged in 2019, it has outperformed in recent months. Interestingly, the MSCI Emerging Markets Value Index underperformed the MSCI Emerging Markets Growth Index during the fourth quarter. The return differential between our value factor and the MSCI indices can be attributed in part to the strong performance of a few large cap growth stocks. While the Index is capitalization-weighted, we use equally-weighted returns for our factor in order to avoid assigning a handful of stocks a disproportionate weight. Secondly, our value factor has a sector-relative component while MSCI’s style classification schemes do not include sector adjustments. We continue to emphasize value factors in our investment process, and the Fund’s three largest country underweights – South Africa, Saudi Arabia, and Indonesia –are all attributable in part to valuation 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: