Global Value Fund

Portfolio Attribution

The Causeway Global Value Fund (“Fund”), on a net asset value basis, underperformed the Index during the month, due primarily to country allocation (a byproduct of our bottom-up stock selection process). On a gross return basis, Fund holdings in the technology hardware & equipment industry group, along with an underweight position in the financial services and automobiles & components industry groups, detracted from relative performance. Holdings in the media & entertainment and banks industry groups, as well as an underweight position in the pharmaceuticals & biotechnology industry group, offset some of the underperformance compared to the Index. The largest detractor was electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea). Additional notable detractors included paints & coatings producer, Akzo Nobel (Netherlands), and multinational luxury conglomerate, Kering SA (France). The top contributor to return was media & entertainment conglomerate, The Walt Disney Co. (United States). Other notable contributors included business process outsourcing services provider, Genpact Ltd. (United States), and banking & financial services company, Barclays PLC (United Kingdom).

Quarterly Investment Outlook

Chinese authorities, recognizing the inadequacy of recent efforts, have introduced aggressive measures to stimulate their economy. We don’t know if China can avoid prolonged stagnation, but its stock market should see bursts of enthusiasm, especially in response to future stimulus. The European Central Bank cut rates by 25 basis points in September, after a June reduction, and the Federal Reserve followed with a 50 basis point cut. In France, an uneasy coalition is poised to address fiscal imbalances, including reversing some of President Macron’s 2017 corporate tax cuts. In the US, despite voter enthusiasm for fiscal spending, rising long-term bond yields should provide effective guardrails to government profligacy. Despite conflict in the Middle East, energy markets have thus far remained stable, likely due to China’s economic weakness.

We believe it is essential to remain valuation-focused and disciplined amid market gyrations. We aim to construct well-balanced Causeway client portfolios with structural winners, cyclical beneficiaries, and unique operational restructuring opportunities. These characteristics typically result in portfolio companies capable of reaccelerating earnings and cash flow growth. We designed our investment process to produce long-term performance independent of market noise, election outcomes, or short-term sentiment. We believe our ability to generate alpha over full market cycles comes from identifying valuation gaps and strong industry fundamentals, and assessing how companies adapt to changing market conditions. As long-term investors we remain committed to these tenets of fundamental value investing.

International Small Cap Fund

Portfolio Attribution

The Causeway International Small Cap Fund (“Fund”), on a net asset value basis, outperformed the Index during the month. To evaluate stocks in our investable universe, our multi-factor quantitative model employs five bottom-up factor categories –valuation, sentiment, technical indicators, quality, and corporate events – and two top-down factor categories assessing macroeconomic and country aggregate characteristics. The strategy’s value factors delivered positive returns in November, and value remains the best-performing factor group over the last twelve months. Our sentiment factors were also positive for the month, over the last twelve months, and year-to-date period. Our quality and technical factors also posted positive returns in the month, and the technical factor category has produced the highest returns year to date. Our corporate events factor, added at the end of February, was flat in November. Returns to our macroeconomic factors were negative as countries exhibiting more attractive characteristics (such as Korea and Sweden) underperformed those with relatively weaker characteristics. Our country aggregate factors were roughly flat in November. All factor groups remain positive on an inception to date basis.

Quarterly Investment Outlook

In the wake of the U.S. presidential election, some potentially significant policy shifts are expected from the next administration. In general, relative to their larger-cap peers, international small caps tend to derive a much higher percentage of revenue from their domestic market and should therefore be better protected from rising barriers to trade or tariffs. 

As global central banks continue cutting rates, improving liquidity should benefit small-cap stocks, especially with small-cap stocks (ACWI ex USA Small Cap Index) trading at a rare discount to their larger-cap (ACWI ex USA Index) peers on a forward P/E basis. In addition to the attractive relative valuation of the asset class overall, Causeway’s International Small Cap portfolio continues to trade at a substantial discount to the Index while, in our view, simultaneously exhibiting more favorable growth, quality, momentum, and positive estimate revisions than the Index. We believe that this highly attractive combination of characteristics better insulates our portfolio from future volatility.

October marked the 10-year anniversary of Causeway’s International Small Cap strategy, and we published The Power of Small Caps: Key Discoveries from a Decade in ISC to mark the occasion.

International Opportunities Fund

Portfolio Attribution

The Causeway International Opportunities Fund (“Fund”) on a net asset value basis, underperformed the Index during the month. On a gross return basis, Fund holdings in the software & services, insurance, and consumer durables & apparel industry groups detracted from relative performance. Investments in the capital goods, automobiles & components, and household & personal products industry groups contributed to relative performance. The largest individual detractors from absolute returns included paints & coatings producer, Akzo Nobel (Netherlands), multinational luxury conglomerate, Kering SA (France), and beverage company, Anheuser-Busch InBev SA/NV (Belgium). The greatest individual contributors to absolute returns included banking & financial services company, Barclays PLC (United Kingdom), print & publishing company, RELX Plc (United Kingdom), and tobacco products company, British American Tobacco plc (United Kingdom).

We use a proprietary quantitative equity allocation model that assists the portfolio managers in determining the weight of emerging versus developed markets in the Fund. Our allocation relative to the weight of emerging markets in the Index is currently overweight. We identify five primary factors as most indicative of the ideal allocation target: valuation, quality, earnings growth, macroeconomic, and risk aversion. Our earnings growth and quality metrics, which include such measures as profit margins and return on equity, are currently positive for emerging markets in our model. Our risk aversion and valuation indicators are neutral. Our macroeconomic indicator is negative for emerging markets.

Quarterly Investment Outlook

Chinese authorities, recognizing the inadequacy of recent efforts, have introduced aggressive measures to stimulate their economy. The People’s Bank of China (PBOC) cut the required reserve ratio for Chinese banks by 50 basis points, a larger reduction than most investors anticipated, freeing up approximately 1 trillion yuan for new lending. We believe additional interest rate cuts, and broader measures to support the Chinese real estate market, are likely. The PBOC also increased financing availability for stock repurchase activity, which we believe will support China’s financial markets. On the consumption side, several Chinese cities and provinces have announced vouchers to bolster spending in a variety of goods and services, including traveling, dine-in, and sports. The Fund remains overweight Chinese stocks due in part to valuation considerations. The European Central Bank cut rates by 25 basis points in September, after a June reduction, and the Federal Reserve followed with a 50 basis point cut. In France, an uneasy coalition is poised to address fiscal imbalances, including reversing some of President Macron’s 2017 corporate tax cuts. In the US, despite voter enthusiasm for fiscal spending, rising long-term bond yields should provide effective guardrails to government profligacy. Despite conflict in the Middle East, energy markets have thus far remained stable, likely due to China’s economic weakness.

We believe it is essential to remain valuation-focused and disciplined amid market gyrations. We aim to construct well-balanced Causeway client portfolios with structural winners, cyclical beneficiaries, and unique operational restructuring opportunities. These characteristics typically result in portfolio companies capable of reaccelerating earnings and cash flow growth. We designed our investment process to produce long-term performance independent of market noise, election outcomes, or short-term sentiment. We believe our ability to generate alpha over full market cycles comes from identifying valuation gaps and strong industry fundamentals, and assessing how companies adapt to changing market conditions. As long-term investors we remain committed to these tenets of fundamental value investing.

Emerging Markets Fund

Portfolio attribution

The Causeway Emerging Markets Fund (“Fund”), on a net asset value basis, outperformed the Index in November 2024. 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 technical (price momentum), growth, competitive strength, valuation, and corporate events factors were positive indicators in November. Our top-down country/sector aggregate was a positive indicator, while macroeconomic and currency were negative indicators during the month.

Quarterly Investment Outlook

During the third quarter, the US Federal Reserve reduced its benchmark interest rate and indicated that additional interest rate cuts are likely. More accommodative central bank policy in the US, and the potential for a weaker US dollar, should be tailwinds for EM assets. Chinese authorities, recognizing the inadequacy of recent efforts, have introduced aggressive measures to stimulate their economy. The PBOC also increased financing availability for stock repurchase activity, which we believe will support China’s financial markets. On the consumption side, several Chinese cities and provinces have announced vouchers to bolster spending in a variety of goods and services, including traveling, dine-in, and sports. The Fund was overweight Chinese stocks due in part to valuation considerations. For the first time in 50 years, South Korea’s President, Yoon Suk Yeol, declared martial law in early December. Hours later, 190 South Korean lawmakers, including 20 from President Yeol’s party, unanimously voted to request the withdrawal of martial law. President Yoon has ended martial law and faces an impeachment motion as his approval rating has been among the lowest of all South Korean presidents to date. The Fund remains overweight South Korean stocks due primarily to attractive valuations and we continue to monitor this very fluid situation.

International Value Fund

Portfolio Attribution

The Causeway International Value Fund (“Fund”), on a net asset value basis, underperformed the Index during the month, due primarily to stock selection. On a gross return basis, Fund holdings in the technology hardware & equipment, consumer durables & apparel, and insurance industry groups detracted from relative performance. Holdings in the capital goods and household & personal products industry groups, as well as an underweight position in the automobiles & components industry group, offset some of the underperformance compared to the Index. The largest detractor was electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea). Additional notable detractors included paints & coatings producer, Akzo Nobel (Netherlands), and banking & financial services company, UniCredit S.p.A. (Italy). The top contributor to return was banking & financial services company, Barclays PLC (United Kingdom). Other notable contributors included print & publishing company, RELX Plc (United Kingdom), and tobacco products company, British American Tobacco plc (United Kingdom).

Quarterly Investment Outlook

Chinese authorities, recognizing the inadequacy of recent efforts, have introduced aggressive measures to stimulate their economy. We don’t know if China can avoid prolonged stagnation, but its stock market should see bursts of enthusiasm, especially in response to future stimulus. The European Central Bank cut rates by 25 basis points in September, after a June reduction, and the Federal Reserve followed with a 50 basis point cut. In France, an uneasy coalition is poised to address fiscal imbalances, including reversing some of President Macron’s 2017 corporate tax cuts. In the US, despite voter enthusiasm for fiscal spending, rising long-term bond yields should provide effective guardrails to government profligacy. Despite conflict in the Middle East, energy markets have thus far remained stable, likely due to China’s economic weakness.

We believe it is essential to remain valuation-focused and disciplined amid market gyrations. We aim to construct well-balanced Causeway client portfolios with structural winners, cyclical beneficiaries, and unique operational restructuring opportunities. These characteristics typically result in portfolio companies capable of reaccelerating earnings and cash flow growth. We designed our investment process to produce long-term performance independent of market noise, election outcomes, or short-term sentiment. We believe our ability to generate alpha over full market cycles comes from identifying valuation gaps and strong industry fundamentals, and assessing how companies adapt to changing market conditions. As long-term investors we remain committed to these tenets of fundamental value investing.