Commentaries

9 August 2019

Thomas de Saint-Seine

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 0.40%* (I EUR class – net of fees) in July.  European markets were busy digesting central banks’ rhetoric and failing to produce much over the month for equities, as the signs were indicative of an end to this low volatility environment. A lack of progress on the trade war between the U.S. and China also sedated markets, but President Trump’s threat of an additional 10% tariff on a further $300bn of Chinese goods stoked markets at the end of the period. Elsewhere, the ECB kept their powder dry for now, maintaining rates, but signaling its intention to introduce a comprehensive easing package, including rate cuts and restarting of asset purchases (QE). Europe continues to ride the wave of a booming U.S. equity market, as the ignorance of the stark contrast between the real economy and stock market performance becomes increasingly visible. Nothing illustrates this better than the recent manufacturing data which continues to fall below expectations, together with the PMI dropping to its lowest level in seven years across Germany and the eurozone. However, the month-end’s spike in volatility created a relatively fertile backdrop for our short engines to prosper as we witnessed a palpable dispersion effect between our shorts and long picks. This sudden jolt in volatility, created by a combination of the Fed’s disappointing move amid a cautious outlook and Trumps’ renewed verbal attack on China, served to highlight the complacency in risk terms in investor portfolios. From a strategy perspective, we again saw the growth vs value gap continue to widen, negatively impacting our Value strategy. However, the sharp increase in volatility acted as a catalyst for both our Machine Learning and Defensive/GARP engines, as well as our shorter-term Momentum-based strategies. Elsewhere, on the short side, our Short Value was highly alpha generative, as was our Short Momentum engine. Country-wise, the UK was the strongest positive contributor, with alpha generated across both sides of our book. Elsewhere, both Germany and Italy picks contributed nicely to performance. Negatives were confined to longs in Finland within our Value engine, and our Spanish longs within our Momentum engine.  

*Sources : RAM Active Investments