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Commentaries

8 October 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds – Emerging Markets Equities Fund finished up 1.31* (Ip USD Class – net of fees), underperforming the MSCI Emerging Markets TRN$’s return of 1.91%. Emerging markets underperformed their developed counterparts in September, as investors in the region continued to wrestle with trade and political uncertainty. September witnessed Central Bank’s continuing to dictate the market’s mood, with eight of the top 10 developed market central banks meeting over the month. 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. Elsewhere, the price of crude oil soared mid-month following a drone attack on Saudi Arabia’s oil production facility. In terms of economic health, global manufacturing data experienced its sharpest and most geographically widespread downturn in over six years, as the US-China trade war weighed. Our Fund’s performance was hurt by Momentum’s significant underperformance. Here, a perceived lull in U.S.-China trade tensions eased market fears about an economic downturn, prompting a rebound in bond yields. The result was a shift in equity factor leadership; while value recovered, momentum stumbled. From a strategy perspective, our Momentum and Machine Learning styles were the month’s weakest performers, while Defensive was broadly in-line and our Value style outpaced the wider market. Both Thailand and South Korea picks (primarily in Momentum) were our biggest detractors, the latter underwhelming within IT names as the market shunned lower volatility names. On the positive side, we saw China and Australia’s Consumer Discretionary sector drive performance. On a sector basis, cyclicals rallied strongly while defensives lagged. Industrials, IT and Communication Services were the month’s biggest detractors, while Health Care and Consumer Discretionary names, produced positive performance.

*Sources : RAM Active Investments