Commentaries

15 March 2019

Thomas de Saint-Seine

RAM Active Investments  RAM (Lux) Systematic Funds - European Equities Maxime Botti Partner & Senior Systematic Equity Fund Manager

After having outperformed in January, the RAM (Lux) Systematic Funds – European Equities Fund underperformed its benchmark, returning 2.34%* (Ip-EUR class – net of fees) vs 4.15% for the MSCI Europe TRN. The Federal Reserve’s U-turn since December continued to support equities, enabling the continuation of their upwards trajectory for a second consecutive month. This continuation, despite data emanating from Europe being particularly poor, have matched the pace of their U.S. counterparts. ETFs have also continued to ride these positive waves, with these liquidity-hunting passive investors continuing to flood the index’s largest names on the one hand, while selling indiscriminately on realized gains with the other. This strong market rebound is most unhelpful for our diversified style, focusing on high-quality names, and as such our relative underperformance was stark. From an engine perspective, our Defensive and particularly our Value Strategies were the month’s clear laggards, while Momentum also fared poorly, only our Machine Learning (ML) Strategy outperformed the wider market. From a sector perspective, our losses stemmed from weak stock selection in high-beta names across both Financials and Health Care. Within the former, our overweight to UK and Italian names, weighed heavily. Conversely, stock selection by our ML Strategy of Swiss Information Technology names certainly helped to stem losses. Country-wise both stock selection in and an underweight to Switzerland detracted, while weak Swedish picks also weighed. Elsewhere, Consumer Discretionary picks in the UK were extremely positive over the month. Finally, we think that the difficulty over the last 6-months for fundamental stock pickers has largely contributed to a further increase in the dispersion of valuations within the market, thus creating a positive situation for our strategies to benefit from convergence valuation.

*Sources : RAM Active Investments