Commentaries

13 January 2020

Thomas de Saint-Seine

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

The RAM (Lux) Systematic Funds - Long/Short Global Equities Fund returned -0.44%* (PI USD class – net of fees) in December. Equity markets globally ended the year at record highs as investor sentiment improved on a phase one trade deal between the U.S. and China, and political certainty in the UK surrounding a concrete Brexit solution for PM Boris Johnson’s Conservative Party. The upbeat mood, coupled with relatively robust economic data and loose monetary policy by the world’s most influential central banks, sent global equity markets to record levels with the index’s 2019 return the best year since the 2009 rally that followed the Global Financial Crisis. The market’s exuberance from a beta-neutral perspective proved immeasurably difficult to match, with our approach on the short side suffering from the significant upside performance of low-quality, high-risk names within the index. We also witnessed a degree short covering, with many hedge funds trimming their exposure moving into year end. On the long side, our Value and Momentum engines were positive, while naturally our Low Risk/Defensive style weighed. Our short strategies all struggled, with Momentum and Value (the latter to a lesser extent) outstripping the wider market, and thus detracting. We saw Hong Kong, UK and South Korean longs produce tangible positive alpha, but this was eroded by our U.S. shorts (which accounted for over half of our negative contribution). On a sector basis, IT and Materials longs offset some of the losses we felt in Energy and Health Care picks. As we move into 2020, we hope to see a continuation of Value’s nascent revival, although it has a long way to go. Additionally, we expect an uptick in volatility, given the lack of room for maneuver or central banks and rising geopolitical frictions.  

*Sources : RAM Active Investments