Commentaries

30 April 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund returned 1.31%* (Ip USD Class – net of fees), vs the MSCI Emerging Markets TRN$’s return of 2.11%. April saw a continuation of the strong start to 2019, as this longstanding growth cycle, fuelled in part by Central Banks’ dovish tone, have 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 continuing their dominance over their small cap counterparts. A strong start to April flattened and turned negative, as China, which is bracing itself for multiple upcoming headwinds amid signs from the PBOC that it’s contemplating reducing its stimulus. Elsewhere the turmoil in Turkey and Argentina failed to dampen broader EM’s enthusiasm, but remains a useful reminder of the complacency which is rife amongst some investors. With expectations of a disappointing Q1 earnings season, investors were surprised on the upside with a slew of positive earnings reports, which hamstrung our Momentum engines, thus they were the month’s worst-performer. Elsewhere, given the risk-on nature of the market, our Defensive engine was also a relative laggard, despite rallying strongly at month-end. The month’s relative outperformer was our Value engine, while despite our Machine Learning engine lagging, it remains our year-to-date’s strongest performer. From a country perspective, stock selection to and a negative allocation effect within China detracted markedly. Here, high-beta names across both IT and Financials detracted, particularly within our Momentum and Value engines. We also felt losses from our Taiwan and South African picks. On the positive side, our pure selection effect within Brazilian boosted returns, as did stock selection within Malaysia and Thailand. From a sector perspective, Communication Service and IT names weighed the most, while our Real Estate selection also had a negative effect. Conversely, picks in Energy and Industrials names contributed positively. Lastly, the EM small and mid-cap space continues to remain attractive to our models, partly owing to many of the headwinds which dampened return in 2018 have been priced into valuations or are likely to recede this year.

*Sources : RAM Active Investments