Commentaries

15 May 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 +1.39%* (I EUR class – net of fees) in April. World equities posted their best monthly advance since April 2009 as investors welcomed news of slowing coronavirus deaths in Italy, France, and Spain and signals of moves to lift some economic restrictions. However, the ECB’s decision not to inject more stimulus into the economy eroded gains. What was originally perceived as a containable health crisis has morphed into a financial liquidity challenge, with companies receiving cash to keep their lights on through the significant support to credit markets. Central banks were the driver of April’s strong gains as, despite the alpha generation in our long book, our shorts detracted markedly owing to the massive short covering witnessed in the market. After the March dislocation and a backdrop of high valuation dispersion, April also saw the much-welcomed return to performance across Value and Small Cap segments, which were the primary drivers of our Long book significant outperformance, hopefully a start of a broader recovery after their major last two years’ underperformance. Our long engines’ performance was driven by Value, ML and Momentum, while Defensive naturally lagged. Our Short engines, which have delivered significant alpha since the turn of the year, suffered as the most shorted names in our book outperformed during April’s rally. Our ML and Momentum suffered the most. Within our latter engine certain Consumer Discretionary and Health Care names rebounded strongly owing to an extremely unhelpful combination of credit tightening and continued central bank intervention. However, a lot of these names remain fundamentally exposed, and are a potential strong source of alpha for us if volatility resurfaces. At a country level, long UK and Sweden names led gains, while shorts in Germany and the UK detracted. We believe that the currently high dispersion in valuations and the high dispersion in returns in the market (particularly within the Small/Mid-cap segments) should present very attractive investment opportunities for our Value/ML and our Momentum/Low-Risk engines respectively.

*Sources : RAM Active Investments