Portfolio attribution

Causeway Emerging Markets Fund (“Fund”) performed in-line with 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 Fund’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. 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.