Commentaries

30 August 2019

Maxime Botti

RAM Active Investments RAM (Lux) Systematic Funds -Emerging Markets Equities

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund fell -4.90* (Ip USD Class – net of fees), performing in line with the MSCI Emerging Markets TRN$’s return of -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. On a strategy basis, the Defensive engine was the month’s best performer, followed by Momentum, while Value’s relative underperformance continues unabated. Our Fund’s biggest detractor was its exposure to Argentinian names in our GARP/Momentum selection engine, as the country’s president lost by a wider-than-expected margin during the election process, sending a shockwave through markets. Our overweight here penalised us but was partially mitigated by our broader underweight to Latin America. On the positive side, our selection effect in China (Communication Services) and Brazil (Financials, Healthcare) helped to created positive performance. Within our selection of China’s communication services names, our avoidance of several high-profile names which suffered, and our Fund provided an attractive diversification effect in a falling market.

*Sources : RAM Active Investments