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 Marketing@causewaycap.com for a Fund Application.

YTD Return*
+9.89%
Nav*
$ 9.89, +0.06
Inception
October 19, 2016
ISIN
IE00BWT3P316
Benchmark
MSCI Emerging Markets in USD
Minimum investment
$1,000,000
Total expense ratio
1.25%
*As of September 19, 2019

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

QTDYTD1 year3 yearsSince inception
Fund-6.9%1.2%-9.1%0.0%2.7%
MSCI Emerging Markets in USD-5.9%4.2%-4.0%6.2%12.7%
QTDYTD1 year3 yearsSince inception
Fund-6.9%1.2%-9.1%0.0%2.7%
MSCI Emerging Markets in USD-5.9%4.2%-4.0%6.2%12.7%
20182017
Fund-18.3%38.1%
MSCI Emerging Markets in USD-14.2%37.8%
20182017
Fund-18.3%38.1%
MSCI Emerging Markets in USD-14.2%37.8%

Portfolio (as of August 31, 2019)

Benchmark:
Asset Allocation
Fund
Stocks97.8%
Cash2.2%
Fund Characteristics
FundBenchmark
Holdings 142 1201
Weighted avg. market cap (US $MM)$60,279$50,699
NTM price/earnings8.911.3
Price/book value1.31.6
NTM EPS revision (wtd. avg.)
Net assets$1,426,391.65-
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
Tencent Holdings Ltd.China2.2%
China Construction Bank Corp.China1.9%
JBS SABrazil1.5%
Samsung Electronics Co., Ltd.South Korea1.5%
Ping An Insurance (Group) Co. of China Ltd.China1.4%
LukoilRussia1.3%
Investimentos ItauBrazil1.3%
Gazprom PJSCRussia1.3%
Anhui Conch Cement Co., Ltd.China1.1%
Banco do Brasil SABrazil1.0%

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
Financials25.1%24.6%
Information Technology16.7%14.4%
Communication Services12.3%11.6%
Consumer Discretionary11.1%13.9%
Energy9.5%7.4%
Consumer Staples7.1%6.9%
Materials5.6%7.4%
Industrials5.0%5.3%
Real Estate2.4%2.9%
Health Care1.9%2.7%
Utilities1.2%2.9%
TOP 10 COUNTRIES
Country Strategy Benchmark
China34.5%32.3%
South Korea13.1%11.5%
Taiwan10.5%11.2%
Brazil10.0%7.5%
India9.7%8.7%
Russia7.1%3.9%
Thailand3.1%3.0%
Mexico2.1%2.5%
South Africa1.6%5.4%
Indonesia1.4%2.2%
Regional Allocation
  • Emerging Asia 72.8%
  • Emerging Latin America 13.1%
  • Emerging Europe, Middle East, Africa 11.8%
  • Multi Region Emerging (ETF) 0.0%

Commentary (As of July 31, 2019)

Highlights

  • While the US Federal Reserve’s July interest rate cut supported emerging market (“EM”) equities, slowing growth in select countries weighed on the asset class during the month.
  • Accommodative policy from the US Federal Reserve ("Fed") also enables EM central banks to pursue more growth-oriented policy agendas. In addition to accommodative Fed policy, benign inflation in most EM economies has also contributed to a more pro-growth agenda.
  • Our price momentum factor continued its resurgence in July and it is our strongest performing factor YTD. Uncertainty in markets generally presents a challenging environment for a momentum approach. While we would be hard pressed to assert that global uncertainty has diminished, momentum appears to be rebounding after being oversold in late 2018 and early 2019.

Portfolio Attribution

Causeway Emerging Markets UCITS Fund - USD share class ("Fund") underperformed the Index in July 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. Our value factor was a negative indicator during the month and has been the weakest of our three bottom-up factor categories year-to-date (“YTD”). Our earnings growth factor was neutral during the month. Our price momentum factor continued its resurgence in July and is our top performing bottom-up factor indicator YTD. Of our top-down factors, sector and currency were negative indicators during the month. The macroeconomic and country factors were positive in July.

Investment Outlook

Our price momentum factor continued its resurgence in July and it is our strongest performing factor YTD. Uncertainty in markets generally presents a challenging environment for a momentum approach. While we would be hard pressed to assert that global uncertainty has diminished, momentum appears to be rebounding after being oversold in late 2018 and early 2019. In contrast to momentum’s improved performance, our contextual weighting scheme continued to detract from performance in July. When calculating a stock’s expected alpha, we first classify it as value, growth, or momentum and then assign weights that we believe are appropriate for that classification. This contextual approach underperformed a uniform approach in July and has also detracted over the YTD period. We are closely monitoring the performance of our contextual weighting scheme but we remain confident in this methodology, which we believe has benefitted the strategy compared to an equal-weighted approach since the strategy's inception in 2007.

 

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: