Systematic Equities Monthly Comments - September 2024

RAM Emerging Markets Equities

The environment turned more favourable to Emerging Equities in September, as the first rate cut of the cycle by the Fed and the announcement of a new Chinese stimulus supported the asset class, still trading at an attractive valuation discount to developed peers and to historical valuations.

Emerging Markets outperformed global equities significantly last month, led upwards by China, the lower reserve requirement ratios for banks coupled with budgetary stimulus boosting Chinese stocks higher.

The RAM (Lux) Systematic Funds - Emerging Markets fund’s (hereinafter ‘the Fund’) (Class-IP USD net of fee*)  blend of strategies had strongly increased exposure to Chinese Equities in the weeks leading to the stimulus announcement, and ended the month of September with a close to in-line allocation with the MSCI Emerging Markets index, helping the fund capture the full Chinese stock upside at the end of the month. Our Value and Agnostic selections were the best performers over the month.

Best contributors to relative performance were the underweight allocation to India, which lagged in the upside. Given the very stretched valuations of most Indian companies relative to their industry peers across EM, India remains our strongest underweight in the fund.

Our value-focused selection in Brazil, which is overweight in the fund, delivered strong performance and contributed positively to the spread over the index. As our strategies increased allocation to select Chinese stocks, exposure to Taiwanese picks was reduced during August and September, making the country's underweight position a positive contributor for the month. The strategies have identified a significant number of attractive consumer stocks, resulting in an overweight in both consumer staples and discretionary sectors, as well as industrials, while maintaining a significant underweight in financials.

*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 Market Neutral Equity

In a context of elevated dispersion of valuations across European stocks, the RAM (Lux) Systematic Funds –European Market Neutral Equity fund’s (Class-I EUR net of fee*)  progressed again in September despite a sharp rotation in momentum across European stocks.

The Fed’s first rate cut of the cycle and the Chinese stimulus announcement in September led to a rotation in momentum, which was particularly marked in the short covering that occurred at the end of the month.

The strong style diversification of the fund helped mitigate the end of the month downside, as our Value and short-term mean reversion strategies contributed positively.

Strong short picks in Information Technology and our long selection in Industrials were the best performance contributors over the month.

After a few months of positive contribution our Consumer Discretionary short selection, comprising a number of luxury names, detracted as the names saw large upside after the Chinese stimulus announcement.

The fund remains overall net Long in Healthcare and Financials while net short Consumer Discretionary and Utilities.

*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 European Equities

September was highly volatile in Europe, marked by weaker-than-expected economic activity in Germany (Volkswagen symbolically announcing factory layoffs) and ongoing political instability coupled with a worsening budget deficit in France. The first half of the month saw defensive sectors, such as Consumer Staples and Utilities, outperform the benchmark (MSCI Daily Net TR Europe Euro). However, the end of the month was characterised by a significant support package from the Chinese Central Bank, which led to a sharp rally in European Cyclical stocks that had been negatively impacted in previous months due to their exposure to the Chinese market. The ECB and the SNB cut their respective financing rate in this period too, further stimulating the stock market. Lower than expected European inflation figures further strengthened the market’s expectations for strong rate cuts in the next few months.

Our Momentum portfolio underperformed in the first half of the month but rallied in the second half, ultimately outperforming the benchmark (MSCI Daily Net TR Europe Euro). Our other portfolios slightly outperformed the benchmark by month’s end, leading to the fund marginally outperforming the benchmark over the period.

Our selection in the UK and Germany, our two largest allocated countries, lagged but was slightly offset by our underweight in both countries. Our relative underperformance was due to our picks in British Financials and German Industrials and Financials. Our Danish, Norwegian and Dutch selection strongly overperformed, while our French and Swedish picks lagged.

The RAM (Lux) Systematic Funds – European Equities fund’s (Class-IP EUR net of fee*)decreased its German and French allocations and increased its Swiss exposure, making Switzerland a larger allocation than France by the end of the month.

Our Industrials and Health Care picks overperformed, despite our lag in the former in Germany and France. Our Financials, Communication Services and Consumer Discretionary selection lagged, although our overweight position in Communication Services offset the underperformance, resulting in a positive contribution to the fund’s relative performance. The fund’s Energy and IT picks overperformed, the former resisted well in the downside while the latter ended the month up, the benchmark’s allocation in the sector being down over the period.

The fund decreased its allocation in Industrials and Energy and increased the share of its Health Care and Financials.

The fund ended the month up in the Small Cap. segment and down in both the Large- and Mid-Cap. segments. Our Large-Cap. picks overperformed, further helped by our underweight in the segment. The Mid-Cap. segment was the worst performer over the month, our overweight in the segment also detracted its relative contribution.

*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 Stable Climate Global Equities

The RAM (Lux) Systematic Funds - Stable Climate Global Equities Fund’s (hereinafter the ‘Fund’) (Class-PI USD net of fee*)was up 1.93% in September.

In a pattern reminiscent of August, global equity markets started the month with a correction, largely driven by concerns over the labor market, which likely weighed on consumer confidence in September.

However, markets rebounded to end the month generally in positive territory as the anticipated rate cuts by the Fed began to materialize, long-term rates eased slightly, and the PBOC in China announced significant stimulus to support economic recovery.

In this context, cyclical sectors outperformed, as did utilities, with a rebound in clean energy producers. Value and Low Volatility factors underperformed, while Growth and Momentum factors outperformed.

All sectors except Healthcare finished the month in positive territory. The strategy identified strong picks in Materials, Industrials, and Consumer Discretionary.

The mid-cap allocation of the fund (~11%) returned over 3%, outperforming the large-cap segment.

The Asia Pacific allocation, particularly Hong Kong, was a major driver of fund performance, while the European selection underperformed.

In the latest rebalancing, the strategy increased allocations to Consumer Discretionary and Financials, while reducing positions in Utilities and Materials.

The fund's carbon footprint aligns with its sustainability goals, with GHG intensity (Scope 1, 2, & 3) representing less than a quarter of the global equity market average (~165 vs. ~1000 TCO2/MEUR Sales).

Companies with stronger ESG ratings and firms with low carbon intensity performed in line with the main index.

*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.

**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’).

RAM Global Equity Income

The RAM (Lux) Global Equity Income Fund’s (hereinafter the ‘Fund’) (Class-IP USD net of fee*) finished in line with its benchmark, the MSCI World High Dividend Yield, both rising 1.62% for the month. In comparison, the MSCI World index was up 1.83%.

In a pattern reminiscent of August, global equity markets began the month with a correction, largely driven by concerns over the labor market, which likely weighed on consumer confidence in September.

However, markets rebounded to end the month in positive territory as anticipated rate cuts by the Fed began to take effect, long-term rates eased slightly, and the PBOC in China announced significant stimulus to aid economic recovery.

In this context, cyclical sectors outperformed, as did utilities, with a rebound in clean energy producers. Value and Low Volatility factors underperformed, while Growth and Momentum factors outperformed.

The top quintile of companies by dividend yield and the top quintile by shareholder yield underperformed the rest of the market by 70 basis points.

Asia was a strong contributor to relative performance, with Japan adding 27 bps due to good stock selection, and Hong Kong performing notably well due to an overweight allocation. Europe’s performance was mixed; the Netherlands and Switzerland contributed positively, while the UK and Denmark underperformed.

For the third consecutive month, the fund benefited from its energy exposure, due to both stock selection and an underweight allocation in the sector. Conversely, an underweight in Materials negatively impacted performance as the sector outperformed.

Small and mid-cap companies performed in line with large-caps overall, with all allocations finishing in line with their respective market segments.

During the most recent rebalancing, the strategy reduced allocations to Utilities and Health Care, while increasing exposure to Financials and IT.

*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.

RAM Global Market Neutral Equity

The RAM (Lux) Global Market Neutral Equity Fund (Class-PI USD net of fee*)

was up 1.28% in September.

In a pattern reminiscent of August, global equity markets started off the month with a correction, largely driven by concerns over the labor market, which probably weighed on consumer confidence in September.

But they rebounded to finish the month generally in positive territory, as the expected rate cuts by the Fed were finally coming through, long-term rates eased a little, and the PBOC in China announced significant stimulus to help revive the economy.

In this context, cyclical sectors outperformed, as well as utilities, with a rebound in clean energy producers

Both the long and the short books contributed positively to the performance. The top contributing sector was IT, with long picks involved in US communications equipment companies and US software outperforming, and short picks among Japan IT names underperforming.

The mid-frequency strategy, which focuses on short-term mean reversion opportunities, had another good month as it benefited from the higher levels of realized volatility.

The Fund remains net long IT and Communication Services (the net long in Financials having been significantly reduced), and net short Utilities and Energy.

The sectors with the biggest gross exposure in the Fund are industrials and IT, which exhibit significant valuation dispersion.

*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. 

Important Information

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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Please refer to the Key Investor Information Document and prospectus with special attention to the risk warnings before investing. 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 PRIIPs KIDs 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.
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Authority. Issued in Switzerland by RAM Active Investments S.A. (Rue du Rhône 8 CH-1204 Geneva) 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 SA, 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 SA and the date of reference is the date of this document, end of the previous month.