Commentaries

Patience

15 March 2019

Gilles Pradère

RAM (Lux) Tactical Funds - Global Bond Total Return fund - Gilles Pradère Senior Fund Manager, Fixed Income

February confirmed January rebound of risky assets, as stable rates in both US and Europe benefitted equities and corporates.

The minutes of the January Federal Reserve meeting confirmed the patient and flexible approach that was suggested in early January by its chairman. A combination of low inflation, and growing economic risks, particularly outside the US, allow the Federal reserve to have a wait-and-see attitude, and pause for now.

Newsflows on various topics at the source of markets anxieties in 2018 have also been slightly positive. President Trump postponed the March 1st deadline on china tariffs, as discussions are said to go in the right direction. The risk of a no deal Brexit has become a low probability event, as the parliament will have to approve it, which seems unlikely.

Economic data confirmed a still relatively solid US economy, while there were some tentative signs of stabilization elsewhere, with overall slightly easier financial conditions due to central banks patience. In this environment, we continue to run a balanced portfolio that benefit from some spread compression, but with discipline in order to maintain a good diversification and robustness.

Our USD portfolio benefitted from tighter spreads in our high grade and emerging exposures, while stable rates allowed its high-quality component to have a small positive contribution (0.22% gross of fees). We book profit on some senior bank that have performed and invest into more stable agencies. Our Euro portfolio benefitted also from the spread compression (+0.32% gross of fees). We reduced some insurance senior and expanded into EM in euros that offers an attractive spread. Our traditional portfolio delivered +0.56% gross of fees.

With US asset swaps tighter, we increased our exposure this month on the strategy as spread moved close to zero. With a moderate steepening in USD, our steepening strategy performed somewhat. Our non-traditional portfolio delivered -0.02% gross of fees.

We took advantage of CAD bounce to book some profits at the end of the month, as we look to capitalize on volatility. The SEK has stayed relatively weak, but with decent numbers and some undervaluation, there is some scope of appreciation. Our Fx portfolio delivered +0.08% gross of fees.

At the end of the month, the RAM (Lux) Tactical Funds – Global Bond Total Return Fund (Class B USD) delivered +0.55% net of fees. Duration stands at 3.15 years years and the average credit quality was A+.

 *Sources : RAM Active Investments