Commentaries

15 May 2020

Thomas de Saint-Seine

The RAM (Lux) Systematic Funds - Global Sustainable Income Equities Fund finished April up 8.73%* (Ip USD class - net of fees), with the MSCI World High DY TRN index returning 8.08%. Global equities closed out April with their biggest monthly gain since 2011 as talk of cautiously re-opening economies and central banks’ action was enough to push markets higher. The Federal Reserve took unprecedented action to save the economy during April with a series of rate cuts and a slew of credit and lending programs that could inject more than $6 trillion into the economy, while Congress also passed $2 trillion in rescue efforts. Central banks, not fundamentals, were the driver of April’s strong gains as EU leaders agreed on the need for an emergency fund of at least 1 trillion euros. The disconnect between the stock market and the wider economy couldn’t be starker; while markets produced strong gains, indicators such as business activity across the U.S., Europe and Japan collapsed following the tightening of restrictions on movement and social interaction aimed at limiting the spread of the coronavirus, according to surveys of purchasing managers. Economic data continues to point to a downturn which will likely be deeper than the recession that followed the 2008 GFC, but consensus continues to lag the reality on the ground. Consumer spending dropped to the worst ever on record (3.5x worse than the previous record set in January 1987). Our Fund’s relative outperformance was largely attributable to our small and mid-cap segments, while our selection effect was entirely responsible for our relative outperformance. Additionally, and perhaps more importantly, the inherent Value, led gains. Elsewhere, and on a regional basis our overweight to Asia (Japan and South Korea) and subsequent underweight to Europe (Belgium and Italy) contributed positively. Conversely, our slight underweight to North America eroded our gains slightly, despite sterling performance from our Canada picks. At a sector level, Consumer Discretionary and IT picks were highly profitable, while Consumer Staples names further boosted performance. Conversely, our significant relative underweight to Financials detracted markedly.

*Sources : RAM Active Investments.