Portfolio attribution

Causeway Emerging Markets Fund (“Fund”) underperformed the Index in October 2019. We use both bottom-up and top-down factor categories to seek to forecast alpha for the stocks in the Fund’s investable universe. After rebounding in September, our value factor resumed its underperformance in October and it has been the weakest bottom-up indicator over the year-to-date (“YTD”) period. Our price momentum and earnings growth factors were both positive indicators in October. Our four top-down factors, macroeconomic, country, sector, and currency, were positive indicators during the month.

Investment outlook

EM small capitalization (“cap”) stocks lagged large caps in October and have trailed over the YTD period, continuing their multi-year underperformance. We have been overweight small and mid-cap stocks in the Fund, which has detracted from relative performance. After a brief rally in September, EM value stocks resumed their decline in October. Factor performance has diverged recently between EM, where value has lagged, and developed markets, where value stocks have outperformed since the beginning of September. In developed markets, inverted yield curves and negative interest rates have been the norm recently. Therefore, any yield curve steepening or rise in interest rates can lead to value rallies. In EM, central banks are still pursuing relatively orthodox monetary policy and yield curves are generally positively sloped. Therefore, interest rate reversals are less likely to boost value stocks in EM. Furthermore, positive trade deal developments disproportionately help growth stocks by reducing China’s impetus for infrastructure stimulus, which typically benefits old economy value stocks. Trading at a significant discount to growth stocks and offering relatively high dividend yields, EM value stocks tend to be more economically cyclical. We believe that EM value stocks would perform relatively well if global growth improves, which should benefit the portfolio given our emphasis on the value factor in our portfolio construction process.

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. The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund's gains or losses. Investing in ETFs is subject to the risks of the underlying funds. International and emerging markets investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets and smaller companies involve additional risks and higher volatility.