Commentaries

6 December 2019

Emmanuel Hauptmann

RAM (LUX) SYSTEMATIC FUNDS – LONG/SHORT GLOBAL EQUITIES

The RAM (Lux) Systematic Funds - Long/Short Global Equities Fund returned -0.43%* (PI USD class – net of fees) in November. Markets remained at the mercy of the sentiment surrounding the latest trade deal, with 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 indicates that both the U.S. and Chinese economies have begun to experience negative effects related trade war, with growth in China slowing to a 30-year. Perhaps more worryingly, China’s default level has already equaled last year’s total ($17.1bn), providing a prime example of the credit tensions and corporate struggles here. This unprecedented debt mountain helps to explain our positioning on the short side here. In Europe, markets touched highs last seen in 2015 while the economic situation paints an immeasurably different picture. Broadly both sides of our Momentum engine dissolved the alpha generated by our Value books. Within Momentum, U.S. bio tech stocks rallied strongly on the back of November’s risk-on sentiment, with the sector amongst the best performers globally, despite the idiosyncratic weakness of their underlying fundamentals. Elsewhere, we also witnessed a potential structural shift out of highly overvalued Growth names and back into Value. With Value becoming increasingly selective, our engines performed strongly across both sides of the book with longs across Germany, Canada and Sweden offsetting our shorts in the UK and Japan. Elsewhere, the positive alpha generated by our U.S. longs, were completely eroded by our shorts, with a negative net result.

*Sources : RAM Active Investments