Commentaries

17 September 2018

Emmanuel Hauptmann

RAM (LUX) SYSTEMATIC FUNDS – LONG/SHORT GLOBAL EQUITIES

The RAM (Lux) Systematic Funds - Long/Short Global Equities Fund returned 0.57%* (PI USD class – net of fees) in August.  Over the month we witnessed positive contributions within our Long Momentum and GARP engines, delivering solid alpha. We also witnessed some positive alpha generated by our Short engines; with our Momentum and Value engines undercutting the wider market (generating positive performance). On a country basis, North America (via the US and Canada) were the primary drivers of our Fund’s positive return. Within the former we witnessed alpha generated by our long engines, which was slightly weakened by our shorts’ outperformance of the wider market (a theme we’ve witnessed throughout 2018). Canada showcased our beta-neutral approach, with alpha generated across both sides of the book. The month’s primary detractors were in South Korea and Sweden. Sector-wise both Consumer Discretionary and IT picks were alpha generative, particularly in our long engines. Conversely in Energy we witnessed our alpha generated in the short book completely eroded by our longs. The primary detractor at the sector level was the Utilities sector, which suffered primarily on the long side. Changes to our models at the country level revealed a net reduction in our exposure to Australia and Canada, at the expense of the UK and US. Our Japan exposure was also trimmed. Sector changes include our models moving further net short on both Health Care and Materials. These moves came at the expense of IT and Telecommunications which saw their net exposure increased.

Vulnerable Emerging Markets countries were under pressure once again in August. The Argentinian peso and the Turkish lira lost one-third of their value against the greenback in one month. Trade war tensions between the US and China escalated one notch higher, with the prospect of tariff on USD 200 billion Chinese goods starting to become a near term reality. In Europe, Italy continued to be a source of concern due to negative opinions on budgetary discipline. In this context, equity markets across the globe had different fortunes; with the US closing comfortably in positive territory thanks to strong corporate results overall, whereas European equities namely suffered from the Italian political situation. With respect to fixed income, Italian government bonds sold off and the German Bund played well its safety asset role. The US 10y Treasury yield declined 10 bps to close the month at 2.86%, supported by dovish comments from the Fed Chairman. Credit markets depicted a similar picture than equities, less marked though. US IG and HY bonds enjoyed a positive performance while European IG was broadly flat and HY negative. Finally, local and hard currency Emerging Markets bonds were down, with the only pocket of positive performance being Emerging Markets Asia.

*Sources : RAM Active Investments