Commentaries

11 April 2019

Thomas de Saint-Seine

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

The RAM (Lux) Systematic Funds – European Equities Fund returned 1.11%* (Ip-EUR class – net of fees) vs 2.03% for the MSCI Europe TRN. European equities recorded their strongest quarter in over four years in March, as a perceived decline in geopolitical risk, in particular around U.S.-China trade relations, helped provide a better backdrop for risk assets. The Fed’s dovish tones have also contributed to this risk-on sentiment, and perhaps serves to highlight that investors may be becoming complacent about the hidden risks, with their potential to roil markets if they crystalize. One example of this complacency being shaken were March’s Europe manufacturing PMIs, which fell to just 45 (50 indicates stability), with forward-looking indicators suggesting that growth could be even weaker in the second quarter. The month’s key underlying theme was the stark underperformance of Value vs Growth stocks, with the latter continuing to trade at stretched levels, our Strategy has an inherent value bias, thus this was the root of our relative underperformance. From an engine perspective, aside from our Value and ML styles lagging, our Momentum style performed broadly in-line with the wider index, while our Defensive engine bucked the trend, comfortably the month’s relative outperformer. On a sector basis, we saw the bulk of our underperformance come from the two consumer sectors (Staples and Discretionary), as well as Industrials to some extent. On the positive side, Financials contributed strongly, as did our picks within Energy names. Country-wise, we saw our UK pics struggle, as did stock selection in France and Switzerland. Conversely, we saw prudent stock selection across Germany and Italy, with both benefitting from a helpful allocation effect. Finally, while a number of investors continue to see poor quality stocks as an attractive opportunity, our Fund remains committed to its fundamental philosophy; remaining well positioned to outperform given the higher level of risk we see in the market. Following this strong new risk-on phase, we now expect investors to be more focussed on companies’ fundamentals, which should be favourable for us.

*Sources : RAM Active Investments