Commentaries

30 August 2019

Maxime Botti

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 4.79%* (Ip USD Class – net of fees) in July, outperforming the MSCI Emerging Markets TRN which dropped by -4.88%. On trend with summer’s past, August proved a demanding month for equity markets. Persistent Trade War clouds continued to linger, hamstringing markets while we saw Argentina’s economy take a pounding, Germany’s economy faltering, a step-up in the intensity of the Hong Kong protests and the inversion of part of the U.S. Treasury curve sparking recession fears. This resurgence in geopolitical tensions has raised concerns about downside risks to the economic outlook, reflected in a selloff in equities and a rally in prices of developed government bonds. Our Fund was comfortably ahead of its benchmark before stocks rebounded on trade hopes, signalling a “risk on” mode again for investors, as markets enjoyed their best week in nearly three months. These moves undermined our models, given the breadth and brevity of the rally. Our Fund did, however, produce significant alpha on the downside prior to this rally. Our Fund’s slight outperformance was generated across South Africa, Brazil and China picks. Within the former, prudent picks within Materials and Financials were largely responsible for outperformance. Our biggest detractor was Argentina. Here, the country’s president lost by a wider-than-expected margin during the election process, sending a shockwave through markets and our relative overweight exposure cost us. This overweight although quickly trimmed by our models, penalised us, but was partially mitigated by our broader underweight to Latin America.

*Sources : RAM Active Investments