9 April 2020

Thomas de Saint-Seine


The RAM (Lux) Systematic Funds - Long/Short Global Equities Fund returned -2.89%* (PI USD class – net of fees) in March, as the MSCI World TRN was down -13.2%. As investors digested developments surrounding the monetary and fiscal policy responses to the spread of the Coronavirus, global equities 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. The Fed announced it would uncap the amount of assets it could purchase, and Congress passed a $2.2 trillion fiscal package. We are in unprecedented times, as 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 market dynamics observed in March were indicative of 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. The equity sell-off was indiscriminate and its violence was reminiscent of late 2008, impacting small caps disproportionately as active fund managers’ unwinds and outflows outpaced passive ones. While our long engines generally failed to deliver alpha, our shorts proved to be highly alpha generative in a market which fell by 13%. Our short Momentum and Short Value identified those names exhibiting negative cash flow and earnings dynamics, helping to drive returns, particularly across Canada (Health Care) and U.S. (Energy, Industrials) names. However, this positive alpha was not enough to offset losses in our long book, as an unhelpful short-selling ban coupled with Central Bank’s intervention led to short covering in the market, and thus limiting 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