Commentaries

6 December 2019

Emmanuel Hauptmann

RAM Active Investments RAM (Lux) Systematic Funds -Emerging Markets Equities

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund finished slightly down -0.55%* (Ip USD Class – net of fees), slightly underperforming the MSCI Emerging Markets TRN$ return of -0.14X%. Markets were again at the mercy of the sentiment surrounding the latest Sino-U.S. trade deal. Investors remaining hungry for evidence of progress on the finalisation of a so-called “phase one trade deal”. The current narrative suggests that everything is rosy in global equity markets, with the Federal Reserve’s decision to cut interest rates three times helping to avert a nascent recession. Bizarrely, market sentiment appears to be improving even as the underlying economic data appears to be worsening. Economic data over the month indicates that both the U.S. and Chinese economies have begun to experience negative effects related to the two-year-old trade war, with economic growth in China slowing to a 30-year low. More worryingly, China’s default level has already equaled last year’s total ($17.1bn), and is likely to break that record, providing a prime example of the credit tensions and corporate struggles here. This unprecedented debt mountain helps in part to explain our consistent underweight to China. Emerging markets vastly underperformed their developed counterparts (in dollar terms) over the month, with the strengthening of the U.S. dollar the primary factor here. On a strategy basis, Momentum again was the primary laggard, while Machine Learning also faded, Value was broadly in-line and Defensive outperformed the wider market. Country-wise, China’s Communication Services and Consumer Discretionary sectors were the cause of our relative underperformance. Cyclical sectors’ strong relative performance was also a key theme for our Fund, with the rotation out of Defensive sectors into Cyclical a source of pain. Elsewhere, we also witnessed IT names in Taiwan weigh. Conversely, stock selection in Brazil helped to stem losses, providing a positive source of alpha, especially within Financials and Health Care names. South African materials picks also contributed positively.

*Sources : RAM Active Investments