Commentaries

9 April 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 -5.67%* (I EUR class – net of fees) in March, as the MSCI Europe TRN Index was down -14.35%. Europe became the epicenter of the Coronavirus pandemic with the largest numbers of confirmed cases in Italy, France and Spain. As the death toll continued to rise so too did the need for significant affirmative action by governments and central banks. The impact on Europe’s economy has been seismic, with the business activity falling to record lows and steep declines across manufacturing and services. The speed and velocity of March’s sell-off left fundamentally-driven (and especially systematic managers) exposed in what was a purely liquidity driven market. The sharp spikes in volatility coupled with worst first quarter for European equity markets since the 1987 crash, left little place to hide. The Equity sell-off was indiscriminate and its violence was reminiscent of late 2008, impacting the deleveraging of small caps disproportionately as active fund managers’ unwinds and outflows outpaced passive ones. On the long side, our book’s net mid-cap biases detracted markedly during this indiscriminate selling period, while our Value and Machine Learning engines suffered as the former’s capitulation reached unprecedented levels. Momentum’s performance was initially encouraging, but the strength of the sell-off ensured this engine also detracted. On the short side, we produced significant alpha where all our engines undercut the wider market, our short ML (UK) and Momentum (Spain, Norway) the strongest relative performance. However, we expected much greater alpha from these engines, but an unhelpful short-selling ban coupled with Central Bank’s intervention led to short covering in the market, and thus limited the downside potential of some of our short plays. Going forward, the dispersion this violent sell-off has created coupled with our attractive fundamental positioning, should enable us to begin to deliver positive alpha in the coming weeks and months. 

*Sources : RAM Active Investments