Commentaries

2 July 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds - Long/Short European Equities Fund returned -0.03%* (I EUR class – net of fees) in June. European markets embraced the dovish tone from the world’s central banks, with interest rate cuts from the Fed expected as soon as next month and the ECB’s comments also propelling markets higher as almost all sectors enjoyed this rally. Trade concerns, political indecision and slowing growth (as well as severe weakness amongst economic indicators), issues that have continued to plague global markets at various points in 2019, continue to linger, yet European bourses are up 16% in 2019. Nothing illustrates this disconnect between economic reality (a deteriorating macro backdrop with German PMI contracting for a sixth consecutive month, and UK PMI sinking to a six-year low) and risky assets performance. This detachment provides us with sustained widespread opportunities and hence significant upside potential in our beta-natural approach, with a glut of names which indicate both our long and short engines could deliver significant alpha if investors return their attention to company fundamentals again. While Value continued to struggle, our Momentum engine delivered on the long side, helping to compensate losses. For us, a diversified approach in terms of strategy and positioning is imperative in generating outperformance over the medium-to-long-term, when market returns are driven by fundamentals and not central banks rhetoric. With lower-quality names trading above (or at least in-line with) quality peers, our short engines weighed, as these shorted names got “squeezed” amidst the strong rally we witnessed. Within our short engines, our Machine Learning (ML) and Quality were the relative laggards, outpacing the market. However, we did see alpha generated by our Short Value engine, providing support for the overall performance. At a sector level, Financials and Industrials picks both worked well, as did our selection of Consumer Discretionary names. We also witnessed positive contribution emanating across both sides of the book within our Consumer Staples allocation.

*Sources : RAM Active Investments