8 October 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds – European Equities Fund returned 2.95%* (Ip-EUR class – net of fees) vs +3.76% for the MSCI Europe TRN. A rebound in bond yields in early September led to a significant rotation in global equity market factor returns. Stocks with positive price momentum and low volatility witnessed a sudden reversal of investor flows, simultaneous with a global rebound of interest rates (U.S. 10-year yield went from 1.46% to 1.66%, with similar moves across developed markets). Central Banks continued to dictate the market’s mood, with eight of the top 10 developed market central banks meeting in the month of September. While only the ECB, Fed and Australia reduced their target policy rates, the forward guidance from other central bankers suggests broad-based easing in the months ahead as the global economic outlook continues to deteriorate. The ECB announced a new quantitative easing program which will see €20bn per month of net asset purchases for as long as deemed necessary. It also cut the rate on its main deposit facility by 10 basis points to -0.5%, a new record low, and introduced tiering measures to mitigate damage to banks’ balance sheets. In terms of the wider economic health, global manufacturing data experienced its sharpest and most geographically widespread downturn in over six years, as the US-China trade war weighed. On a strategy basis, aside from Momentum’s travails, our Defensive/Low Vol also underperformed, while Value and Machine Learning performed strongly. Country-wise, picks Sweden and France where the primary detractors. Within the former country, weak stock selection in Consumer Staples and Industrials names hurt. On the positive front, both Switzerland (Consumer Staples) and Norway (Energy) were highly alpha generative. From a sector perspective, we felt losses emanating from our Financials picks, and weak selection within Materials. Meanwhile, Consumer Discretionary & Staples picks within our Value engine helped to mitigate portfolio losses elsewhere owing to a combination of a helpful stock selection and positive allocation effect across both sectors.

*Sources : RAM Active Investments