Commentaries

11 April 2019

Thomas de Saint-Seine

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

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund returned 0.55%* (Ip USD Class – net of fees), vs the MSCI Emerging Markets TRN$’s return of 0.84%. Markets appear caught between incoming data that suggests decelerating global growth, the Fed’s dovish tones and a potential trade deal between China and the US, which continue to be supportive of risk assets. We believe that the sustained neglect to a slew of weakening macroeconomic data points to an extremely complacent market. March’s key underlying theme was the stark underperformance of Value vs Growth stocks, with the latter continuing to trade at stretched levels particularly across both the IT and Communication Services sectors in Asia, our models were naturally diversified away from these hot-spots. Our Fund’s slight underperformance was largely attributable to our value biases, which suffered relative to growth over the month. However, we saw strong positive contributions from our Momentum and Defensive engines. A significant correction which occurred mid-month enabled our Fund to outperform its benchmark, with our Defensive and ML engines particularly alpha generative here, before a late surge impacting the Fund’s relative performance. On a country basis, we saw positive contributions from pics in South Korea and China, the latter’s positive return eroded by a negative currency and allocation effect here. Meanwhile picks in India and Poland detracted markedly, as did selection within Indonesia. Sector-wise, we saw Communication Services and Energy names weigh negatively, especially within our Momentum engine, while our Industrials selection and our underweighting to Financials contributed nicely, as did stock selection in IT. 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. In this month’s editorial, we elaborate further on the current opportunities that could be captured in EM by being more diversified in terms of risk, all caps exposure and the importance of being value exposed at this stage of the economic cycle.

*Sources : RAM Active Investments