Emerging Markets & European Equities in the Current Market Environment

Marketing Material - For Professional Investors Only

Emerging Markets Equities.

The recent tariff crisis created by the Trump administration is causing market turmoil but doesn’t totally change the picture for Emerging Markets (EM). In a context of historically high stock concentration and historical cheapness of EM versus developed markets (see the Market Concentration & Opportunities article published in Q1), EM equities offer a wealth of attractively valued, quality growth opportunities, which our process is well positioned to capture. The recent flow-driven market volatility, as always, tends to lead to higher dispersion of valuations and attractive relative-value opportunities across markets.

EM were negatively impacted by the tariffs announcement on April 2nd, but they went down close to in-line with developed markets, the market estimating that the potential tariff ‘tax’ on the US consumer is at least as worrying as the hit on EM exports. From the announcement of the tariffs on April 2nd, until April 8th, before Trump’s volte-face on the tariff’s pause, the MSCI EM TRN index was down 9.75% while the MSCI World TRN index corrected 11.3% (the time-window encapsulates all the negative news and the reopening of all markets temporarily on holidays, eg. Taiwan and China at the end of last week). In this volatile environment, the RAM EM fund performed 50bps above the market, and it has performed 1.3% ahead of the MSCI EM TRN index as of April 9th, month-to-date. On a year-to-date basis, the fund has performed 1.75% above the index and 37.07% (cumulative return) above the index over five years.

Past performance is not a reliable indicator of future performance. Performance data is net of fees.

The fund’s underweight position in China and Taiwan contributed positively month-to-date. It has been significantly underweight China since October last year, after briefly matching the MSCI EM index allocation to the country ahead of the stimulus (see Navigating China with an Active Stock Selection). The fund’s selection in Brazil, which was increased at the end of last year on the back of attractive value and income opportunities, was also a positive contributor. The strategies have now significantly exited their Brazilian picks, the model portfolio being now close to in-line on the country.

In recent days, the strategies have identified more attractive opportunities within the technology sector, arising from its sharp correction. IT stocks in South Korea and greater China namely saw their model weight increase, which should lead to a reduction of our underweight in these countries in the next weeks. The two most significant underweights in the fund relative to the concentrated MSCI EM index remain China and India.

European Market Neutral Equities.

European Equities were equally penalised by the tariffs, giving back their Q1 gains, despite still significantly outperforming US equities since the beginning of the year.

The high dispersion of valuations across European Equities after years of flows from active to passive and the market concentration already flagged in our Market Neutral Opportunities in Europe paper still prevail, making relative-value strategies attractive for diversification.

The RAM European Market Neutral Equity fund held very well in this environment, being up 0.22% month-to-date as of April 10th. It is now up 3.9% year-to-date, after a performance of 19% in 2024.

Past performance is not a reliable indicator of future performance. Performance data is net of fees.

The low level of short interest in European single names and the stock dispersion we are experiencing create favourable conditions for the strategy.

Since the beginning of the month, the fund had a strongly positive net selection within Industrials, Materials and Consumer Staples while being negatively impacted by its net long Healthcare exposure.

After a strong start to the year, the statistical arbitrage strategy in the book gave back some returns during the correction, partly recouped in the April 10th rebound.

The low correlation of the statistical arbitrage strategy with our systematic fundamental book has helped smooth the fund returns, the fund having a volatility below 5% over the last year.

Important Information

The sub-funds mentioned above are Sub-Funds of RAM (Lux) Systematic Funds, a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC). Mediobanca Management Company S.A. 2 Boulevard de la Foire 1528, Luxembourg, Grand Duchy of Luxembourg is the Management Company.

The information and analyses contained in this document are based on sources deemed to be reliable. However, RAM Active Investments S.A. cannot guarantee that said information and analyses are up-to-date, accurate or exhaustive, and accepts no liability for any loss or damage that may result from their use. All information and assessments are subject to change without notice.

This document has been drawn up for information purposes only. It is neither an offer nor an invitation to buy or sell the investment products mentioned herein and may not be interpreted as an investment advisory service. It is not intended to be distributed, published or used in a jurisdiction where such distribution, publication or use is forbidden, and is not intended for any person or entity to whom or to which it would be illegal to address such a document. In particular, the investment products are not offered for sale in the United States or its territories and possessions, nor to any US person (citizens or residents of the United States of America). The opinions expressed herein do not take into account each customer’s individual situation, objectives or needs. Customers should form their own opinion about any security or financial instrument mentioned in this document. Prior to any transaction, customers should check whether it is suited to their personal situation, and analyse the specific risks incurred, especially financial, legal and tax risks, and consult professional advisers if necessary.

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