Systematic Equities Monthly Comments - June 2024

RAM Emerging Markets Equities

In June 2024, Emerging Markets significantly outperformed Developed Markets, largely driven by large-cap stocks in the Information Technology sector, in particular Taiwan Semiconductor and Samsung Electronics, which were up 17.66% and 10.88% respectively, and represented a combined close to 15% of the Index.

In this market environment, the RAM (Lux) Systematic Funds - Emerging Markets fund’s (hereinafter ‘the Fund’) (Class-IP USD net of fee*) Momentum engines outperformed the index. The machine learning strategy finished slightly below, while Value and Defensive lagged further.

Taiwan was by far the worst contributor in terms of country performance, mainly due to the underweight in Taiwan Semiconductor (3.3% in the fund with the ADR and local lines combined, vs. 10% for the Index), leading to an underperformance of 1.12%. On the positive side, China underweight benefitted the performance, and the strategy identified good picks in Turkey and South Africa.

From a sector perspective, the negative Information Technology attribution was partially compensated by good picks in Consumer Staples and Materials.

Large caps dominated market performance, leading to a strong negative allocation effect on small and mid-cap allocation, partially compensated by good selection. The mid-cap and small-cap segments detracted -0.71% and -0.29%, respectively.

The strategy is currently increasing IT and Consumer Discretionary exposure, while reducing Financials and Industrials. In terms of countries, the models increased their exposure to Taiwan, Hong Kong, Mexico, and Turkey, while reducing exposure to Southeast Asia (Malaysia, Indonesia, Philippines).

*Note: IP USD share class currently registered in LU, AT, CH, DE, DK, ES, FI, FR, UK, IT, NL, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

** The portfolio is actively managed on a discretionary basis with reference to a benchmark. While the product compares its performance against the Index, it does not try to replicate this benchmark and freely selects the securities that it invests in. The deviation with this benchmark can be significant.

RAM European Equities

European Equities were very volatile in June 2024, with markets reacting to the European Parliamentary election results and the announcement of the French snap election. June saw a strong underperformance of SMID and Value stocks against their respective Large and Growth counterparts. June also saw Nvidia become the world’s most valuable company, this rally also included European IT stocks.

Our RAM (Lux) Systematic Funds – European Equities fund’s  (Class-IP EUR net of fee*) momentum book was in line with the benchmark in the first half of the month, but lagged in the second half, penalising the fund’s relative performance. Our Machine Learning book slightly underperformed and our Defensive book was the worst performer over the month.

The fund’s selection overperformed in Germany (the second largest country allocation), Sweden and Finland. It strongly underperformed in Denmark, France and the Netherlands. It the latter, the underperformance was mainly due to our underweight in ASML and BE Semiconductor which both surged in the first half of the month following Nvidia’s performance in the US. The lag of our selection’s performance in France was offset by our underweight in the country.

Our selection strongly overperformed in Industrials, Financials and Consumer Staples. However, our overweight in Consumer Staples detracted the fund’s relative performance, but our underweight in Financials further contributed to our relative performance. Our Healthcare and IT selections strongly lagged, the two only sectors up in the benchmark. Our underweight in both sectors also penalised the fund’s relative performance.

The fund ended the month down in all the market cap segments. Our large cap selection performed the best, slightly overperforming the benchmark. Our underweight in the segment further helped the relative contribution to the fund’s relative performance. Our SMID selection was strongly down over the month, our overweight in these segments also penalised the fund’s performance.

Looking at the evolution of the Operating Cash Flows to Market Cap Ratio spread in our European Universe (Europe All Cap), we see a strong widening of the dispersion in EU countries. This surge in the dispersion explains the poor performance of the value style in Europe in June, as investors rotated towards stocks with higher valuations. This movement was stronger in the SMID Cap segment than in our entire European Universe, explaining the performance of the fund’s SMID selection.

Given this higher valuation dispersion, especially in the SMID cap segment, our fund is well positioned on the back of a dispersion normalisation.

*Note: IP EUR share class currently registered in LU, AT, CH, DE, DK, ES, FI, FR, IT, NL, UK, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

**The portfolio is actively managed on a discretionary basis using a benchmark. Although the product compares its performance to that of the MSCI Daily Net TR Europe Euro, it does not seek to replicate this benchmark and is free to choose the securities in which it invests. The difference with this benchmark may be significant.

RAM European Market Neutral Equity

Global equity markets rose by around 2% in June 2024. The Fed's preferred inflation measure, the PCE, remained unchanged in May, sparking hopes for a rate cut in September, in the context of weak US GDP foundations – as highlighted in the latest US GDP report for Q1 2024 – and declining consumer confidence.

Such anticipations particularly benefitted growth and large-cap stocks in the Information Technology sector.

However, on average, European equity markets declined by approximately 1%, as they reacted to the European Parliamentary election results and the announcement of the French snap elections, which are currently ongoing.

In this volatile market context, the RAM (Lux) Systematic Funds –European Market Neutral Equity fund’s (Class-I EUR net of fee*) Short book contributed positively to the performance, with good short picks in the Industrials sector, on which the Fund currently has a notable gross exposure on the back of elevated valuation dispersion.

Short picks among utilities and capital goods companies involved in renewable energies and energy storage contributed particularly positively, as their valuation levels have continued to normalise, which accelerated on the back of political uncertainties in Europe.

The Fund’s exposure to French equities slightly cost the Fund in June, as the Fund retains a net long bias there, but this was mitigated by the good behaviour of the short selection in that country.

The Fund is net long Industrials, Financials and Communication Services, and net short Utilities and Consumer Discretionary.

*Note: I EUR share class currently registered in LU, AT, CH, DE, ES, FR, UK, IT, NL, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

RAM Global Market Neutral Equity

Global equity markets rose by around 2% in June 2024. The Fed's preferred inflation measure, the PCE, remained unchanged in May, sparking hopes for a rate cut in September, in the context of weak US GDP foundations – as highlighted in the latest US GDP report for Q1 2024 – and declining consumer confidence.

Such anticipations particularly benefitted growth and large cap stocks in the Information Technology sector, on which the RAM (Lux) Global Market Neutral Equity Fund (Class-PI USD net of fee*) has a significant net long bias.

The Fund’s short positions made a significantly positive contribution in June 2024, as low quality companies with negative earnings momentum corrected, across a variety of sectors.

Short picks among European utilities and capital goods companies involved in renewable energies and energy storage contributed particularly positively, as their valuation levels have continued to normalise, which accelerated on the back of political uncertainties following the European Parliamentary election results and the announcement of the French snap elections, which are currently ongoing.

The short term daily-rebalanced statistical arbitrage engines also performed in line with the lower frequency engines in June.

The VIX statistical arbitrage strategy delivered small incremental gains on the back of the absence of realised volatility in US equity markets.

The Fund remains net long Financials and IT, is net short Energy and Utilities, and turned net short on Healthcare.

* Note: PI USD share class currently registered in LU, CH, DE, DK, ES, FI, UK, IT, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns. 

RAM Stable Climate Global Equities

Global equity markets rose by around 2% in June 2024. The Fed's preferred inflation measure, the PCE, remained unchanged in May, sparking hopes for a rate cut in September, in the context of weak US GDP foundations – as highlighted in the latest US GDP report for Q1 2024 – and declining consumer confidence.

Such anticipations particularly benefitted growth and large-cap stocks in the Information Technology sector. Value names suffered in this market environment.

The RAM (Lux) Systematic Funds - Stable Climate Global Equities Fund’s (hereinafter the ‘Fund’) (Class-PI USD net of fee*) sector performance was mixed, with IT & Communication services strongly outperforming the rest of the market. As a reversal from last month, the EU Taxonomy book of the fund significantly underperformed, particularly renewable energy names such as Brookfield Renewable Corp.

Large cap companies outperformed mid caps by more than 3% over the month, negatively impacting the mid cap allocation of the fund.

The US was the best-performing country. Europe detracted from the fund’s performance despite good picks in Denmark. European equity markets overall declined by approximately 1%, reacting to the European Parliamentary election results and the announcement of the French snap elections, which are currently ongoing.

The Healthcare sector is still the largest sector allocation of the fund with 21.5%, ahead of Financials. In June 2024, IT represented 14.5% of the fund.

The fund's carbon footprint aligns with its sustainability goals, with a GHG Intensity (scope 1, 2, & 3) representing less than a third of the global equity market average (~260 vs. 930 TCO2/MSales).

Companies with stronger third-party ESG scores and firms with low carbon intensity slightly outperformed the global developed equity market.

*Note: PI USD share class currently registered in LU, AT, BE, FI, UK, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

RAM Global Equity Income

Global equity markets rose by around 2% in June 2024. The Fed's preferred inflation measure, the PCE, remained unchanged in May, sparking hopes for a rate cut in September, in the context of weak US GDP foundations – as highlighted in the latest US GDP report for Q1 2024 – and declining consumer confidence.

Such anticipations particularly benefitted growth and large cap stocks in the Information Technology sector. Value names suffered in this market environment.

The top 20% of companies in terms of dividend yield outperformed the bottom 20% by more than 2%, while the top 20% in terms of shareholder yield outperformed the bottom 20% by close to 1%.

Good selection effect in the US helped the RAM (Lux) Global Equity Income Fund’s (hereinafter the ‘Fund’) (Class-IP USD net of fee*) performance. In contrast, stock selection in Europe detracted from performance. European equity markets overall declined by approximately 1%, reacting to the European Parliamentary election results and the announcement of the French snap elections, which are currently ongoing.

The underweight in Materials and Energy helped the fund’s relative performance. The strategy also benefitted from positive selection in those two sectors, as well as in Industrials. The main detractor was Healthcare, suffering from both an underweight position and adverse stock selection.

Despite adverse allocation effects, the fund's small & mid cap segment was overall positive for performance, thanks to good selection.

The fund continues to favour the Financials and Consumer Discretionary sectors with overweight positions and maintains underweight positions in Materials and Energy.

*Note: IP USD share class currently registered in LU, AT, CH, DE, DK, ES, FI, FR, IT, NL, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

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.
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