Risk Matters
Advisers need to know their portfolio and diversify. The goal is to match portfolio risk with your client’s risk level. Knowing your stock risk is key to the equation.
Use Risk Lens to know your stock portfolio and diversify
Risk Lens looks forward – many other tools don’t
Causeway Fiduciary ESG Scores Are Now Available
And It's Free
“Love the comparative nature of it. It is nice and easy to use.”
Head of Manager Selection and Due Diligence, Large Trust Company, Boston
Do You Really Know
Your Portfolio?
For stock portfolios, you need style, sector and geographic exposures. Top risk exposures and stock weights are critical. You need forecast risk measures – like predicted tracking error, volatility and beta. And you need to know if future returns of your stock funds will be correlated or not. That’s why you need Risk Lens.
Know Your Portfolio – Use Risk Lens 
Risk Lens is an analytics tool that shows active style, sector and geographic exposures for stock funds. It shows top risk exposures and stock weights. It shows forecast risk measures and predicts fund return correlations.
For illustrative purposes only.
Use Risk Lens to know your stock portfolio and diversify. Align stock risk with your client’s risk level. It’s web-based, easy to use and continuously enhanced with popular new features. And it’s free.
“Risk Lens is a useful tool for quickly evaluating a fund’s historical exposures and management style. The style factor exposures are very helpful, as are the active correlation statistics, as a starting point in determining complementary funds.”
Partner-Investment Management, Investment Management Firm, Seattle
For illustrative purposes only.
Find Complements and Substitutes
Our risk model forecasts critical stock portfolio risk measures. Risk Lens is an extension of our model. In 2013, we developed the calculation of predicted active return correlation, which shows complementary and substitute funds. This forecasts correlation between two funds to avoid overlap and help ensure diversification. It also shows if substitute funds – used to replace funds for tax loss harvesting, high fees, etc. – are predicted to be highly correlated.
We crunch funds’ historical returns to their style, country, sector and currency exposures to forecast correlations from –1 to +1, ranging from exact opposite correlation to no correlation to exact correlation.
For illustrative purposes only.
“We use it for underlying portfolio exposures and manager comparisons. We have primarily used it to identify complementary managers from a style standpoint.”
Anonymous
We know that our risk model and formula for predicted active return correlation can help advisers build portfolios. Risk Lens looks forward – many other tools don’t. They focus on historical not forecast risk measures. They don’t show predicted fund correlations. Or they’re too expensive.
Risk Lens Is Holdings-Based and Forward-Looking
We look at current fund holdings to calculate forecast risk measures and help predict fund return correlations. Most other tools are returns-based and tell you a fund’s past risk exposure. We forecast a fund’s future risk. You would have to pay thousands of dollars to get this holdings-based analysis from other institutional tools. With Risk Lens, you get it free.
Causeway Fiduciary ESG Scores
Your clients want ESG-managed portfolios and investment performance. Now you can login to Risk Lens to access Causeway Fiduciary ESG Scores. We assess a company on environmental, social and governance (E, S and G) issues that are material for the company, considering its country and sector. Our research shows that firms with top quartile Causeway Fiduciary ESG Scores outperformed firms with lower scores and the global market over time. We call our scores “fiduciary” because they focus on material ESG issues that affect performance.
We Focus On What Matters For Investments
Unlike some other ESG ratings, Causeway focuses on ESG issues that we believe are material – affecting financial performance and shareholder value. High-scoring companies are likely mitigating future ESG risks which can lower costs. And they’re positioned to capitalize on ESG business opportunities which can create higher future profits. We believe our scores can help fiduciaries find investment value in ESG.
How Do We Do It?
Causeway’s quantitative model assesses a company’s performance on material ESG issues considering its country and company characteristics. To calculate an overall ESG score, we assign E, S and G weights for a company. Currently, G is the highest weight and stays the same across sectors because we believe G applies equally to all companies. E is the next highest weight followed by S, and these weights are assigned based on their materiality in the company’s sector. A company’s overall score is the weighted average of its E, S and G scores, and we aggregate the scores of companies in a fund to calculate the fund’s overall ESG scores. To perform all these calculations, the model uses a wide variety of data from government and non-government sources.
The Results Can Be Surprising
For example, take these four index funds. They all have "ESG" in their names, so they should have favorable ESG characteristics. But according to our scores, well, some don't.
For illustrative purposes only; actual fund names anonymized. Passive equity index ETFs with ESG in their name selected by Causeway.
Why Do We Believe It Works?
We back-tested companies in the MSCI ACWI Index. Companies with top quartile Causeway Fiduciary ESG Scores from 2013 through 2021 outperformed companies with lower scores and the index. They also outperformed companies with high MSCI ESG scores. For more of Causeway’s ESG insights including videos, articles and webinars, visit this link.
For illustrative purposes only. Should not be relied on as research or investment advice regarding any investment. The universe is the MSCI ACWI Index. Each month, we sorted stocks into quartiles by their Causeway Fiduciary ESG Scores and MSCI ESG scores. We calculated the one month forward capitalization-weighted USD return of each hypothetical quartile portfolio to obtain a return time series for each portfolio. The bar chart on the left (right) shows the average return and volatility for quartile portfolios based on Causeway Fiduciary ESG Scores (MSCI ESG sector-relative Weighted Average Key Issue Scores) from 2013 (inception of relevant MSCI E and S scores) through 2021. Causeway z-scores the ESG scores by sector to make them “sector neutral.” Returns are gross of fees and transaction costs. Past simulated performance is no guarantee of future performance. Sources: Causeway Research; MSCI. See Disclosures for more information.
These views are subject to change, and there is no guarantee that any forecasts made will come to pass. Forecasts are subject to numerous assumptions, risks and uncertainties, which change over time, and Causeway undertakes no duty to update any such forecasts. Information and data presented has been developed internally and/or obtained from sources believed to be reliable; however, Causeway does not guarantee the accuracy, adequacy or completeness of such information.
The returns are derived from back-tested data using a simulated investment process and do not depict actual accounts. There are numerous inherent limitations in the use of simulated information, including that it may not reflect the impact that material economic and market factors might have had on the portfolio managers’ decision making if they were actually managing accounts using that process. The simulated returns do not reflect contemporaneous trading or any transaction costs. Simulated returns may not be indicative of the future returns of any portfolio.
MSCI has not reviewed, approved or produced this piece, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not distribute the MSCI data or use it as a basis for other indices or investment products.
How Do I Get Causeway Fiduciary ESG Scores?
Log into Risk Lens for free access to Causeway Fiduciary ESG Scores plus MSCI ESG data to compare.
For illustrative purposes only; actual fund names anonymized. Passive equity index ETFs with ESG in their name selected by Causeway.
“It’s just interesting . . . another way to view things.”
Vice President-Financial Advisor, Global Brokerage Firm, Washington, DC
Don’t Other Tools Do This?
Risk Lens looks forward – many other tools don’t. They focus on historical not forecast risk measures. They don’t show predicted fund correlations. Or they’re too expensive.
We’ve Helped Investors Understand Risk for Over 8 Years
Causeway manages global stocks, fusing fundamental and quantitative analysis since 2001. In 2013, we launched Risk Lens to bring the power of our risk analytics to clients, introducing the easy-to-use web application in 2019.
Risk Lens currently covers over 9,000 U.S.-registered stock mutual funds and ETFs and over 38 benchmarks and ETFs across all major geographies.
“It’s a fun tool.”
Managing Director, Manager Research Team, Investment Management Firm, New York
Are Causeway Funds Included?
Yes, but when you use our web-based tool, you select your own funds for analysis. You can include Causeway Funds, or leave them out.
Risk Lens is Free-of-Charge
We provide Risk Lens free-of-charge. We think it’s a critical tool for our clients and advisers who use Causeway Funds. Why do we give it away? Because we believe investors make better decisions with better information. We think Causeway Funds compare well using Risk Lens’ forward-looking analysis.
Risk Lens shows active risk exposures, forecasts risk measures and predicts fund return correlations.
Use Risk Lens to know your stock portfolio and diversify. Align stock risk with your client’s risk level. It’s web-based, easy to use and continuously enhanced with popular new features. And it’s free.
“Provides a clean and simple way to review funds from a factor-based perspective in a robust manner.”
Investment Product Analyst, Large Bank, Kansas City
Give Us Your Feedback
We value feedback from users and continuously enhance Risk Lens with popular new features. Use Risk Lens and send your comments to [email protected] or call us at 310-231-6100. If you are not yet a Risk Lens user, request a login below. We are happy to provide introductory training for users.
Know Your Portfolio – Use Risk Lens
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Risk Lens
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