Commentaries

30 April 2019

Emmanuel Hauptmann

RAM Active Investments RAM (Lux) Systematic Funds - Long/Short Emerging Markets Equities funds Maxime Botti Partner & Senior Systematic Equity Fund Manager

The RAM (Lux) Systematic Funds - Long/Short Emerging Market Equities Fund returned -1.06%* (I USD class – net of fees) in April. April saw a continuation of the strong start to 2019, as this longstanding growth cycle, fuelled in part by Central Banks’ dovish tone, continued to support risky assets. While the US/China trade deal has taken a back seat, investors continued to ride the fundamentally-agnostic trade, with large caps maintaining their dominance over their small cap counterparts. With expectations of a disappointing Q1 earnings season, investors were surprised on the upside with a slew of positive reports, which had a negative impact on both our long and short Momentum engines, thus they were the worst-performer. Elsewhere, given the risk-on nature of the market, our long Defensive engine was also a relative laggard, despite rallying strongly at month-end. On the long side, April’s relative outperformer was our Value engine, while despite our Machine Learning engine lagging, it remains our year-to-date’s strongest performer. Broadly, our short engines were the primary performance detractor as cyclical, highly leveraged, cashflow destroying names saw pressure abate. Another way to illustrate it is through credit spreads tightening (broadly in-line with where they were in 2017) globally for BBB and BB rated bonds, highlighting the generalized risk-on mood. These low-quality names have performed strongly year-to-date, a continuation of the fundamentally-agnostic trade which has worked well thus far. On the short side, our Momentum and Value engines suffered, while Quality undercut the wider market, thus generating positive alpha. From a country perspective, our short picks in China detracted as high-beta, cyclical names across IT and Financials outpaced the market. Shorts in off-benchmark Australia also weighed, eroding helpful gains within our long selection engine. On the positive side, our pure long selection effect within South Africa boosted returns, as did long picks across both Malaysia and Thailand. Finally, we’ve observed correlations across the factors we use to construct our models that have begun to ease, this could prove to be a catalyst for performance for both our long and short engines in the coming months.

*Sources : RAM Active Investments