Commentaries

2 July 2019

Emmanuel Hauptmann

RAM Active Investments RAM (Lux) Systematic Funds - Long/Short Emerging Markets Equities funds Maxime Botti Partner & Senior Systematic Equity Fund Manager

The RAM (Lux) Systematic Funds - Long/Short Emerging Market Equities Fund returned +2.14%* (I USD class – net of fees) in June. Trade concerns, political indecision and slowing growth all abated in June, as markets were increasingly focused on the rhetoric surrounding the world’s central banks. The Fed reinforced investor expectations for an interest rate cut later this year, while the ECB suggested additional eurozone stimulus could be necessary. China’s market rallied on news that Beijing and Washington officials would resume their negotiations, after talks faltered in May. Brazil rose strongly, as the increasing likelihood of lower domestic and overseas interest rates in the coming months bolstered investor sentiment, sending stocks to fresh all-time highs. However, there appears a palpable disconnect between the central bank-led rally with investors unwilling to price in their downside risks, and the fact that leading indicators continue to soften; not a good omen for the business cycle nor corporate profits. Further downside risks to the global economy could thus translate into an outright earnings recession, a scenario which is not reflected in investor’s portfolios. Our beta-neutral approach showcased its unique qualities in June, generating alpha across both sides of the book. While our long Value and Low Risk suffered, the latter owing to the growth vs value performance gap which widened in June (also negatively impacting our Machine Learning (ML), our Momentum strategy was the key driver of positive performance, especially over the latter stages of the month. Amongst our shorts, Value and Momentum undercut the wider market, and thus were highly alpha generative. Within our Short Value engine, Chinese and Taiwanese technology names contributed nicely, with our ability to identify those highly leveraged names which struggled over the month. Elsewhere, long and short positions in South Korea’s IT and Industrials names were also positive for the Fund overall.

*Sources : RAM Active Investments