Commentaries

13 January 2020

Thomas de Saint-Seine

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 +0.91%* (I USD class – net of fees) in December. December proved to be a microcosm of 2019; with the market’s optimism continuing to evolve around ongoing stimulative central bank fiscal policies, the de-escalation of trade tensions between the U.S. and China, and a resilient U.S. economy. December also witnessed the unparalleled outperformance of large cap vs small cap stocks, while higher beta names outstripped their defensive counterparts. Emerging markets were the best-performing asset class in December, but still lagging their developed market peers for the year. These types of environments are highly unaccommodative for alpha generation on a fundamental basis; as the market is quick to ignore quality in favour of beta. As a result, both our long and short alpha engines struggled to keep pace in this market environment; with our Long Defensive and Momentum engines lagging, while our Value and Machine Learning (ML) engines performed extremely well. On the short side, our Value engine’s excellent alpha generation was dampened by the positive performance from our Short Momentum, Quality and ML engines (thus detracting). From a country perspective, longs in Taiwan, China and Russia all drove positive alpha, especially within technology and industrials names. Conversely, shorts in Brazil and South Korea hampered our longs, and offset much of this performance. On a sector basis, IT, Energy and Materials picks on the long side contributed positive, benefitting from the positive momentum created by macro developments elsewhere. On the negative side, shorts in Health Care names detracted, as did Industrials picks, although the latter was offset by positive long selections. 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