Commentaries

14 November 2018

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund fell by -9.15%* (Ip USD Class – net of fees), marginally underperforming the MSCI Emerging Markets TRN$ by 44bps. Our Fund was comfortably outperforming its benchmark during the early stages of October, before the tide turned on some of our key country and sector bets, wiping out these gains. Pivotal to our underperformance was the small & mid cap effect (with these segments severely below their large cap counterparts). Despite our Fund producing significant outperformance relative to their respective market cap segment, our overweight allocation to smid cap stocks detracted markedly. From a strategy perspective both our Defensive and Machine Learning (ML) engines outstripped the market, while it was primarily our Value engine which cost us, with Momentum also weighing. October was a month where a risk-off mood dominated triggered by declines in U.S. equities, amid various uncertainties including U.S.-China trade frictions and the Fed’s tightening path, presenting our models with an extremely challenging landscape. Our strongest contributors at the country level over the month where China (Consumer Sectors), South Africa and Russia (both Materials). Within China, our significant relative underweight, as well as prudent stock selection, drove gains. Conversely we witnessed detractors emanating from Taiwan (Materials) and off-benchmark Australia, the latter one of the weakest-performing countries globally, recording its worst monthly fall in three years with every single sector finishing the month in the red. Sector-wise our overweighting of the Energy sector proved extremely beneficial, generating gains across several countries including Brazil and China. Within IT a positive stock selection effect also boosted returns. Our significant underweight to and stock selection within Financials detracted markedly, while stock selection was weak within Industrials. Changes to our models at the country level included modest increases to China, India and Russian names, the latter now representing one of our biggest relative overweight bets, South Korea and Taiwan were reduced. Changes at the sector level include an increase in our Energy and Consumer Discretionary exposure, which came at the expense of Consumer Staples and Real Estate.

*Sources : RAM Active Investments