Commentaries

7 November 2019

Emmanuel Hauptmann

The RAM (Lux) Systematic Funds - Global Sustainable Income Equities Fund ended October up 3.19%* (Ip USD class - net of fees), outperforming the MSCI World High DY TRN index which returned 2.41%. A perceived de-escalation in U.S.-China tensions and Brexit optimism continued to drive up risk assets, yet a slew of weakening macroeconomic indicators acted as an undercurrent throughout October. Despite signs that weakness caused by a protectionist push is spreading beyond manufacturing and casting a shadow on the global growth backdrop, markets preferred instead to focus on central banks’ supportive actions where global central banks have delivered an unusual late-cycle dovish pivot in 2019, helping to extend an already-long economic expansion. The Fed’s rate cut at the end of the period was the latest instalment of this dovish push. The issue for central banks remains the spectre of inflation, which continues to creep higher, while growth softens. In Europe, economic activity remains subdued, with German manufacturing PMI in contraction territory and UK productivity falling at its fastest pace in five years. In EM, China and India both offered a glimpse at the health of their economy, with the former’s manufacturing activity shrinking for the sixth straight month. In the U.S., manufacturing and business investment continues to decelerate markedly. Despite this backdrop, our positive performance was generated across both our North America and Asia selection models, while Europe struggled. Country-wise, the U.S. was highly alpha generative, with higher beta names within the IT and Health Care sectors proving helpful, as was our Utilities underweight. In Japan, Health Care names were positive, while China’s Utilities sector also proved to be a fertile hunting ground. Conversely, we felt losses from an unhelpful GBP exposure in the UK, offsetting positive gains made on a stock selection basis. Elsewhere, German Consumer Discretionary and Industrials picks weighed.    

*Sources : RAM Active Investments.