Commentaries

6 December 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds - Long/Short Emerging Market Equities Fund returned -1.20%* (I USD class – net of fees) in November. 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 Fed’s decision to cut interest rates three times helping to avert a nascent recession. 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. 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 positioning on the short side. Strategy-wise, Momentum again was the primary laggard, while Machine Learning faded, elsewhere Value was broadly in-line and Defensive outperformed. Broadly, it was these long engines which were responsible for negative performance. On the short side, we witnessed positive alpha generated by our Short Quality and Value engines. The former, was identified names in the universe with low quality of earnings, especially across LATAM and MENA. The latter was particularly alpha generative in Asian names, with highly levered companies trading in ranges above their peers were captured efficiently. On a country basis, losses were contained in long picks across China, South Korea and short picks in Australia and Taiwan.

*Sources : RAM Active Investments