Commentaries

13 January 2020

Thomas de Saint-Seine

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

The RAM (Lux) Systematic Funds - Long/Short European Equities Fund returned +0.08%* (I EUR class – net of fees) in December. Equity markets ended the year at record highs as global 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 European equity markets flying to their best year since the global financial crisis. Naturally this context is extremely difficult for beta-neutral managers like us, but relative to our peers in this space out performance remains robust. Broadly, it was our long engines that generated the positive alpha, with Value continuing its recent revival and Momentum also contributing while Machine Learning (ML) also adding. Naturally, given the market context, our Defensive Low/Vol weighed. On the short side, it was our short ML and Momentum engines which detracted heavily. Illustrating the struggles for short stock pickers were two German consumer discretionary names which destroyed much of the positive alpha generated by our longs. Here, one of the country’s biggest food delivery firms announced plans to expand its business into Asia, propelling its performance despite extremely weak underlying fundamentals. Our naturally diversified portfolio enabled us to stem losses here, while our peers suffered. Elsewhere from a country perspective long picks in the UK and Sweden were alpha generative. Sector-wise, our winners were well diversified, with all but one sector contributing positively (Communication Services). 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