9 April 2020

Thomas de Saint-Seine

The RAM (Lux) Systematic Funds - Global Sustainable Income Equities Fund finished February down -17.36%* (Ip USD class - net of fees), with the MSCI World High DY TRN index falling -11.52%. As investors digested a number of developments around the monetary and fiscal policy responses to the spread of the Coronavirus, global equity markets tumbled. Worries mounted on the short, mid and longer-term implications on the global economy, as macroeconomic indicators tumbled and the VIX recorded its most volatile month, ever. While policymakers scrambled to respond to the growing number of cases, the Fed announced it would uncap the amount of assets it could purchase, widened the scope of eligible securities. Congress passed a $2.2 trillion fiscal package to help offset the financial toll on businesses and consumers. Elsewhere, data showed initial unemployment claims skyrocket to 3.3 million, breaking the previous record of 695K in 1982, and flash U.S., Japan and euro area PMIs for March are in deep contraction. We are in unprecedented times, as the sheer speed and velocity of March’s sell-off left fundamentally-driven (and especially systematic managers) over exposed to markets. The market dynamics we observed clearly pointed to a deleveraging and search for cash across investors’ portfolios, with some of the pre-existing imbalances (Value and Mid & Small Caps underperformance) further pushed to extreme levels. In such an indiscriminate stock selection environment and given the Fund’s all-cap approach coupled with its exposure to Value stocks, our Fund was negatively impacted. Our Value biases cost us dearly over the month, especially in the U.S. where higher beta sectors detracted markedly. Additionally, we suffered from our inherent Quality biases, which despite performing strongly in the latter part of the month, struggled during a panicked sell-off. Elsewhere, we recorded losses across Italy, Switzerland and Canada. Conversely, we delivered alpha owing to our overweights in Japan and South Korea. Sector-wise, Utilities, Consumer Discretionary and Financials all weighed on returns.

*Sources : RAM Active Investments.