Commentaries

12 June 2019

Thomas de Saint-Seine

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

The RAM (Lux) Systematic Funds – European Equities Fund returned 3.38%* (Ip-EUR class – net of fees) vs 3.77% for the MSCI Europe TRN. European equities notched healthy gains in April despite several leading economic indicators at odds with the underlying fundamentals, as market participants focused their attention on the quarterly earnings reporting season. While macroeconomic woes have seemingly been put behind us (for now), mid and small cap stocks broadly outperformed their large cap counterparts over the month. Elsewhere, corporate earnings, which has been expected to contract in the first quarter, got off to a strong start, as fears over margin pressure failed to materialize. Indeed, with many expecting a disappointing Q1 earnings season, investors embraced a slew of positive earnings reports, which suggested that growth isn’t slowing just yet. The significant momentum switch initiated by central bank actions have continued to negatively impact our Momentum engines, thus they were the month’s worst-performer. Given the continuation of this risk-on phase, we also witnessed the underperformance of our Defensive Strategy; a theme which has been realized over the last five months. Our Machine Learning Strategy was the month’s strongest positive contributor, while Value also outperformed the wider market. Sector-wise we felt losses stemming from Financials and IT picks, where higher beta names which have continued to ride this fundamental-agnostic rally we’ve witnessed since December, rallied. Elsewhere, Materials picks also detracted particularly within German and Italian names, with both our Momentum and Defensive strategies bearing the brunt of this underperformance. On the positive front, our Health Care picks and positive allocation effect combined nicely, as our models were able to find and capture alpha generative names. Picks within the Communication Services sector also contributed nicely. From a country perspective, we felt losses emanating from Germany and Italy, while the UK and Switzerland saw strong alpha generation. Finally, we suggest investors pay heed to the prevailing economic backdrop and potential catalysts including European elections in May, Brexit pushback until October and the choice of the new ECB president.

*Sources : RAM Active Investments