Commentaries

12 June 2019

Thomas de Saint-Seine

RAM Active Investments RAM (Lux) Systematic Funds - Emerging Markets Core Equities Maxime Botti Partner & Senior Systematic Equity Fund Manage

The RAM (Lux) Systematic Funds – Emerging Markets Core Equities Fund fell -3.58%* (Ip USD Class – net of fees) in May, markedly outperforming the MSCI Emerging Markets TRN which was fell -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. (it is no-longer considered a developing economy) and Saudi Arabia’s entrance into the MSCI EM Index (much 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. Our selection within large and mid-cap defensive sectors provided significant alpha, with our engines able to position themselves away from the aforementioned “hot spots” which suffered.  On a country basis, China and Australia were incredibly alpha-generative, while we also witnessed additional positive performance from our picks in Russia and Taiwan. Sector-wise highly cyclical names across IT and Communication Services were all highly positive for the Fund, while selective picks in Energy names also boosted performance.

*Sources : RAM Active Investments