Commentaries

30 August 2019

Maxime Botti

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 0.51%* (I EUR class – net of fees) in August. The havoc which occurred in the first part of the month eventually moderated, as where previously stocks were a little less sensitive to the trade war noise, seemingly found a floor. While the month’s sell-off has now put cyclical names at their lowest relative level to defensive peers in over three years. Markets appeared back to “risk-off” mode as the resumption of the U.S./China trade war, a less dovish Fed and decidedly underwhelming economic data pushed markets lower. However, a late August rally, as trade hopes increased, signaled a return to “risk on” again, creating a challenging stock picking environment for our Fund. European markets continued to display a premium on a mega-cap quality stocks, with these household defensive names producing a stellar month their valuations have risen in tandem, and coupled with our Fund’s natural diversification, it meant we were unable to capture this performance trend in its entirety. Broadly, it was our short book which were the driver of our Fund’s positive performance, with our Short Momentum and Short Quality engines particularly alpha generative. On the short side we wait to see the merits of our positioning, with financing costs remaining remarkably low, further downside stress could be potentially disastrous for those highly geared firms, who would find it costlier to roll over their debt. On a country basis, short picks across Ireland, Spain and Austria were highly profitable, all underperforming the wider market, while we felt losses stemming from our Netherlands picks. Sector-wise, long Utilities and Consumer Staples helped drive portfolio returns, while our losses were contained in our Financials exposure.

*Sources : RAM Active Investments