Commentaries

7 November 2019

Emmanuel Hauptmann

RAM Active Investments RAM (Lux) Systematic Funds - Long/Short European Equities Maxime Botti Partner & Senior Systematic Equity Fund Manager

The RAM (Lux) Systematic Funds - Long/Short European Equities Fund returned -0.30%* (I EUR class – net of fees) in October. European stocks rose strongly in October, buoyed by the European Union’s decision to grant the UK a three-month Brexit extension, encouraging Chinese manufacturing data, and strong asset inflows into the region. This perceived lull in geopolitical frictions have continued to support risk assets, further detaching European stocks from their fundamentals. Overall our long book was highly alpha generative, with our Value and Machine Learning engines the month’s relative top performers abetted by the market’s dispersion enabling us to seize stocks which exhibited sustainable profitability and cash flow generative qualities. Elsewhere, we saw our Momentum engine weigh following a mid-month correction, while our Defensive engine also lagged. Ultimately, our Fund suffered from volatility in our short engines, closely echoing September’s woes albeit on a lesser scale, where a strong rally due to a partial trade agreement between the U.S. and China pushed investors to indiscriminately buy stocks. Low quality companies (cash flow destroying) were bought back by the market at the expense of those with stronger fundamentals (i.e. quality names). The outcome of this was a mid-month spread widening between the long and short side of Momentum, largely driven by a painful sector rotation where both sides of the book where hit; Consumer Staples, IT and Real Estate all fell, while Energy, Financials and Materials all rose. Elsewhere, our Short Value was the month’s best relative performer. From a country perspective Belgium longs were highly profitable, as was selection across both sides of the book in Finland and the Netherlands. Conversely, shorts across the UK and Germany outperformed and thus detracted from performance overall. 

*Sources : RAM Active Investments