Fixed Income Monthly Comments - December 2024

Global Bond Total Return

Incoming economic data remained resilient in the US and still on the weak side in Europe, with current inflation still above the 2% target. As a consequence, and after cutting rates by 100bps in 2024, ECB and US Federal reserve opted for a more cautious message for 2025 at their December meeting, generating a move higher in global yields. Following the recent repricing, policy rates are now expected to bottom around 4% in US and UK, and 2% in Europe, keeping monetary policies in restrictive territories, and importantly the disinflation process on track.

We slightly extended our duration in GBP by receiving swaps. We have kept our credit exposure broadly unchanged and liquid, HY remaining at 8%. Rates had a negative contribution, while credit spreads contributed positively.

We have kept our steepeners strategies as yield curve should continue to normalise with central banks progressively reducing policy rates further. UK rates are still trading at wide levels in general, particularly against Europe, as well as US treasuries against swaps. The contribution of our Long/Short strategies was a small negative this month, as well as our FX portfolio.

At the end of the month, the RAM (Lux) Tactical Funds – Global Bond Total Return Fund’s (Class B USD) duration stood at 4.37 years and the average credit quality was AA-.

For a complete overview of the fund performance, please click on the above-mentioned links in this document.

*The performance is gross of management fees and operational costs (0.60% management fee and 0.40% of operational costs, for a TER of approximately 1%).
** Credit Rating: is a parameter used by banks and lending institutions to determine whether an applicant is deserving of the confidence necessary for the granting of a loan. This parameter makes it possible to measure the risk of consumer default and determine the economic conditions applicable to consumers. The highest rating is indicated by the letters: AAA. This is the indication of highest financial security. This is followed by: AA, A, BBB, BB, etc. The lowest credit rating corresponds to the letter C. This letter identifies a high risk of financial default and is a figure taken into great consideration by each lending institution.

RAM Asia Bond Total Return

Outlook and Portfolio Performance

Asia credit ended 2024 down 0.8% for the month due to a sharp reversal in US rates. The US Treasury yield curve steepened, with the 10- and 30-year Treasury curve rising by 40-42bps, taking the 2Y10Y spread to +33bps from -37bps inversion at the start of the year. Despite this, Asia credit spreads tightened by 5bps to 137bps. The shift in US Fed policy expectations caused hesitation among Asia central banks, awaiting clarity on the implications of Trump 2.0 for global trade. China's Central Economic Work Conference failed yet again to deliver new stimulus, leading to a 2.3% drop in China's stock market post-meeting, though it was still up 16.2% for the year. Korea's CDS jumped 7bps to 41bps after President Yoon declared martial law, which was later lifted by the National Assembly, leading to his impeachment. Korea's CDS is now at 38bps, up 4bps from pre-martial law levels, and the KOSPI is up 4.1% year-to-date. Asia's primary credit market was active, with USD13.8bn in new supply in the last month, bringing the total new issue for the year to USD141.5bn, exceeding market expectations. In terms of portfolio performance, the RAM (Lux) Tactical Funds II - Asia Bond Total Return Fund’s (Class PI USD net of fees****) returned negative 0.28% last month but outperformed the JACI by 52bps due to selection of higher yielding credits and lower duration relative to the index. For the full year 2024, the portfolio returned 4.8% compared to the index's 5.7%, maintaining a modest duration position and a yield of 6.3%, 40bps higher than the index. Cash level was 0.4% of portfolio value.    

For a complete overview of the fund performance, please click on the above-mentioned links in this document.

*** The fund is managed without reference to a specific benchmark. The Index used is not intended to be a restrictive definition of the investment universe. The composition of the fund's portfolio may differ significantly from that of the benchmark index.

**** All fees and expenses, except subscription and redemption fees, are taken into account

Important Information

The RAM (Lux) Tactical Funds – Global Bond Total Return is a Sub-Fund of RAM (Lux) Tactical 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).
The RAM (Lux) Tactical Funds II – Asia Bond Total Return is a Sub-Fund of RAM (Lux) Tactical Funds II, a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC). 

Please note that the share classes mentioned in this document may not be registered in your country of domicile. 

This marketing document is only provided for information purposes to professional clients, and it does not constitute an offer, investment advice or a solicitation to subscribe shares in any jurisdiction where such an offer or solicitation would not be authorised, or it would be unlawful. In particular, the Fund is 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).

This document is confidential and is intended only for the use of the person to whom it was delivered; it may not be reproduced or distributed.

There is no guarantee that the holdings shown will be held in the future. The investment described concerns the acquisition of shares in the Sub-Fund and not in a specific underlying asset.

Past performance is not a guide to current or future results. There is no guarantee to get back the full amount invested. The performance data do not take into account fees and expenses charged on subscription and redemption of shares nor any taxes that may be levied. As a subscription fee calculation example, if an investor invests EUR 1000 in a fund with a subscription fee of 5%, the investor will pay to his financial intermediary EUR 50.00 on the investment amount, resulting with a subscribed amount of EUR 950.00 in fund shares. In addition, potential account keeping costs (by investor’s custodian) may reduce the performance. Some shares in the Sub-Fund apply a performance fee. Leverage intensifies the risk of potential increased losses or returns.

The Management Company may decide to terminate the marketing arrangement in place in any given country in accordance with Article 93a of Directive 2009/65/EC.

Changes in exchange rates may cause the NAV per share in the investor's base currency to fluctuate.

Particular attention is paid to the contents of this document but no guarantee, warranty or representation, express or implied, is given to the accuracy, correctness or completeness thereof.

Prior to any transaction, clients 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.

Please refer to the Key Information Document and prospectus with special attention to the risk warnings before investing. Global Bond Total Return Fund is classified as art.8 SFDR. Asia Bond Total Return Fund is classified as art.6 SFDR. For further information on ESG, please refer to

https://www.ram-ai.com/en/regulatory-information and the relevant Sub-Fund webpage, section "Sustainability-related disclosures".

The prospectus, constitutive documents and financial reports are available in English and French while IIDs are available in the relevant local languages. These documents can be obtained, free of charge, from the SICAVs’ and Management Company’s head office and www.ram-ai.com, its representative and distributor in Switzerland, RAM Active Investments S.A. and the relevant local representatives in the distribution countries.

A summary of Investors’ rights is available on: https://www.ram-ai.com/en/regulatory-information

Issued in Switzerland by RAM Active Investments S.A. which is authorised and regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). Issued in the European Union and the EEA by the authorised and regulated Management Company, Mediobanca Management Company S.A. 2 Boulevard de la Foire, 1528, Luxembourg, Grand Duchy of Luxembourg.

The source of the above-mentioned information (except if stated otherwise) is RAM Active Investments and the date of reference is the date of this document.