Commentaries

30 April 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds - Long/Short European Equities Fund returned -2.54%* (I EUR class – net of fees) in April. Low-quality, high fundamental risk companies out-performed in April, our Quality and Low-risk biases costing us during this indiscriminate market upside. Our short engines were the primary performance detractor over the month as cyclical, highly leveraged, cashflow destroying names have seen financing pressure abate. A way to illustrate it is through the massive credit spread tightening (back to where they were end-2017 despite the current global economic headwinds) 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 a fundamentals-agnostic trade probably in a large part driven by Short Covering in the market. April also highlighted a decrease in equity correlations, with investors perhaps beginning to pay closer attention to company fundamentals than before. On a strategy basis within the long book, this month’s laggards were Momentum and Defensive, the former owing to better-than-expected Q1 corporate earnings and the latter owing to the risk-on phase we’re experiencing. Our Machine Learning strategy was the month’s strongest positive contributor, while Value also outperformed the wider market. On the short side, Momentum and our Quality engines suffered, while Value underperformed, thus generating alpha. Country-wise, short picks in Germany, Switzerland and Austria detracted from returns, while we saw gains emanating from longs in the UK and Sweden. 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