Commentaries

15 May 2020

Thomas de Saint-Seine

RAM Active Investments RAM (Lux) Systematic Funds -Emerging Markets Equities

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund finished the month up 11.22%* (Ip USD Class – net of fees), while the MSCI Emerging Markets TRN$ returned 9.16%. Emerging-market central banks continued to cut interest rates at a brisk clip in April as policymakers battled the fallout from the COVID-19 pandemic. These moves, coupled with improving investor sentiment surrounding the news of a slowing infection rate, especially from China, helped markets rebound. Despite slowing global trade, which is expected to fall by up to 30% this year and the steepest monthly decline in oil prices on record, markets were buoyed by central banks’ actions which saw South Africa and Turkey notably cut rates contributing to weaker currencies which reached new lows against the dollar. With China’s recovery gradually reopening, first-quarter real GDP declined by 6.8% year-on-year. But since March, there has been a recovery in production, retail sales and investment. Elsewhere, South Korea’s containment of the contagion also enabled it to post a strong month. April also saw return to performance across Value and Small-Cap segments, which were the primary drivers of our significant outperformance. From an engine perspective, we also witnessed our Momentum and Machine Learning contribute strongly, while naturally in these phases, Defensive/Low Vol lagged. From a market cap perspective, our models outperformed across all segments, but the majority of our alpha was found in the Small-Cap space, which sprung to life in April (mainly emanating from Momentum and Value names), hopefully the start of a broader recovery after years of Small Caps’ underperformance. On a country basis, selection across China (IT and Financials), Taiwan and South Korea where the primary performance drivers over the month, while India weighed. Sector-wise, IT and Financials names were highly alpha generative, while Consumer Discretionary picks added to performance. As our Value/ML engines chase valuation opportunities and our Momentum/Low-Risk have turned increasingly defensive, we believe we are well positioned to profit from the current market’s dispersion.

Source: RAM Active Investments