Commentaries

12 June 2019

Thomas de Saint-Seine

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

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund fell -4.14%* (Ip USD Class – net of fees), outstripping the MSCI Emerging Markets TRN$’s return of -7.26%. Following four consecutive months of positive performance for emerging markets, the winds changed abruptly in May, as we witnessed the reignition of the U.S./China trade war. President Trump’s astonishing tweets suggesting that a deal with China was off the table and his plans to increase tariffs and name-shame specific companies, specifically Huawei, completely wrong-footed market participants. Markets also digested Brazil’s Q1 growth numbers (putting it on a path to imminent recession), India’s downgrade by the U.S. (no-longer considered a developing economy) and Saudi Arabia’s entrance into the MSCI EM Index (to the detriment of South Africa). We spoke at length in April’s editorial on the complacency evidenced in the market, the overcrowding effect within a fundamentally agnostic Technology sector and a seemingly never-ending low-quality rally. The market reversal negatively impacted these key themes. Companies with solid fundamentals outpaced their lower quality peers, a key inversion of the prevailing macro/liquidity driven theme. In just one month, our Fund’s significant relative outperformance offset the 2019 underperformance, positioning ourselves in positive performance territory (versus our benchmark). On the surface the move seems to be significant, however, the inefficiencies in the market are still at extreme levels. From a strategy perspective, our Defensive and Machine Learning (ML) engines were the strongest relative performers, while Value also performed well, Momentum was the month’s relative laggard, but still outpaced the wider market. Our ML Strategy has been integrated in the Fund for exactly a year now and proved to be our strongest performer over this period. Overcrowded Tech/Communication Services and Consumer Discretionary names sold-off aggressively, and owing to our fundamental nature, we were able to cauterize losses here, with extremely positive alpha generated from our underweights and stock picking ability. Elsewhere, off-benchmark Australia was extremely positive for the Fund, particularly our Defensive and Value styles. 

*Sources : RAM Active Investments