30 April 2019

Olivier Mulin

RAM (Lux) Tactical Funds - Convertibles Europe

Market environment

The markets rose unabatedly amid easing financial conditions, a reassuring global macroeconomic context and encouraging first quarter corporate results (from companies representing nearly a third of the global stock market value). Against this backdrop, cyclical and financial stocks outperformed defensive names over the month. Regarding the Euro credit market, spreads continued to tighten with an outperformance from the high yield segment.

 Portfolio commentary

The PI EUR Class of RAM (Lux) Tactical Funds-Convertibles Europe saw a net underperformance of -19 bps vs the benchmark (Exane ECI Europe) and delivered an overall performance of +1.23% for the month.

Relative to its benchmark, the overweight positions in Construction (Buzzi, St Gobain), Industrials (Siemens) and specific names like Michelin and Carrefour were an edge over the period. These companies released better-than-expected Q119 earnings. Nevertheless, the main headwinds came from our Fund’s lower exposure to the Growth stocks thematic: LVMH, Sika, Takeaway and Cellnex.

On the technical side, the convertible bond implied volatility rebounded to 29.4%, after reaching an attractive entry point (28%) at the end of last month. The spread of implied volatility between convertible and listed options widened at 6.5 points. It is interesting to note that the short-term options’ implied volatility reached an historical low level over the month (i.e. V2X which traded below the 13 level).    

There were two new issues on the primary market for a global amount of 500 M € : Sacyr 3.75% 2024 and Sirius Minerals 5% 2027. We stayed away from what we considered issuers with weak fundamentals.

*Sources : RAM Active Investments