Commentaries

11 April 2019

Thomas de Saint-Seine

The RAM (Lux) Systematic Funds - Global Sustainable Income Equities Fund fell -0.32%* (Ip USD class - net of fees), underperforming the MSCI World High DY TRN index which returned 1.29%. Global equities produced a continuation of their rally, marching solidly higher and extending their upward momentum, coming off their best quarter in nearly a decade. Broadly, it was Financials and IT companies which helped to power the rally. This strong month was in part owing to a lack of negative newsflow and to optimism about U.S.-China trade talks. In addition, the Fed’s dovish tones also contributed to this risk-on sentiment. 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. One example of this weakening macroeconomic data was March’s Europe manufacturing PMI, which fell to just 45 (where 50 indicates stability), with forward-looking indicators suggesting that growth could be even weaker in the second quarter. Our Fund’s most significant negative was indeed our Value bias in our European model, where, given the underperformance of value stocks, we severely lagged the market. On a country basis, the U.S. was the primary detractor, with our significant underweight to IT names detracting markedly, as did stock selection within Consumer Staples. We saw some alpha generated from our Asian model, with a helpful overweight to and stock selection within Australian and New Zealand names contributing nicely. At a sector level, losses were contained within our weak Consumer Staples selection. We also suffered from an adverse stock selection effect in Communication Services, but this was dampened by our relative underweight here. Elsewhere, our strong stock selection effect in Consumer Discretionary names was almost entirely eroded by our weak allocation effect.

*Sources : RAM Active Investments.