Commentaries

6 December 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds – European Equities Fund returned 3.47%* (Ip-EUR class – net of fees) outperforming the MSCI Europe TRN by 77bps. A perceived lull in wider geopolitical frictions boosted equities over the period, with European exchanges trading at highs last seen in 2015 as hopes were bolstered that the U.S. and China were close to signing an initial deal that would end a two-year-old trade war.       Market sentiment is significantly improving despite still worrying underlying economic data. The market’s complacency is illustrated by the level of the VIX Index (a measure of equity volatility) subsiding at a seven-month low. Meanwhile, Germany’s export-dependent manufacturing sector continues to contract, albeit at a slower pace, for a second consecutive month, with a PMI reading of 44.1 (a five-month high). Elsewhere, Britain’s economy grew by 0.3% in the last quarter, after shrinking in Q2, but annual growth slowed to just 1%. These (largely) negative economic updates where overlooked in favour of the positive trade talks. While factor volatility persisted into November, with Momentum continued to be sold in favour of Value, this trend failed to derail our positive performance. Indeed, from a Strategy perspective, Momentum performed strongly as did our Value and Machine Learning strategies, while only Defensive underperformed the wider market (largely owing to the clear risk-on sentiment). We saw positive contributions across all our market cap segments, in a strong month for alpha generation. At the country level, picks across UK (Value), Italy (Value) and Germany (ML) were all highly alpha generative. Within the UK, the continued rotation out of Defensive sectors and into Cyclicals ones continued unabated, with our engines able to profit. Here, IT, Industrials and Consumer Discretionary picks were strong positive contributors.

*Sources : RAM Active Investments