Commentaries

15 March 2019

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 -1.53%* (I EUR class – net of fees) in February. Fundamental factor investors, such as ourselves, suffered greatly in February as confused investor sentiment coupled with market volatility took their toll on performance. The continuation of January’s risk-on environment as the Fed’s U-turn continued to be highly supportive of high risk and low-quality stocks, turned out to be unaccommodating for fundamentally-driven investors, with the dispersion between good and bad stocks converging greatly. High beta names continued to outperform, while Value, Momentum and Defensive struggled for traction. From an engine perspective, on the long side our Defensive and particularly our Value Strategies lagged, only our Machine Learning (ML) Strategy outperformed the wider market. Given the lack of dispersion evidenced in February, it provided a difficult hunting ground for our short engines. Despite this, our short engines did generate some meaningful alpha, with both the Momentum and Quality engines undercutting their markets, while our losses where contained within our Machine Learning engine which continued to behave well since implementation in May last year. From a sector perspective, we saw losses emanating from weak short selections in both Consumer Discretionary and high-beta IT names. Within the latter, our overweight to UK and names, weighed heavily. We also felt losses within our Financials short picks, but these were more than offset by strong selection effect via our longs. Conversely, both Industrials and Consumer Staples were alpha generative within our long engines. Country-wise, we suffered in across German and Austria picks, with the latter country struggling on both sides of the book. On the positive side, long picks in UK and France were extremely alpha generative, more than offsetting the underperformance of our shorts here. The question remains, how long will value, low volatility stocks lag for? Market commentators are increasingly questioning the historic valuation spreads across the different regions. RAM’s funds are well positioned to benefit from a recovery of companies which exhibit low-volatility characteristics with strong balance sheets.

*Sources : RAM Active Investments