8 October 2019

Emmanuel Hauptmann

The RAM (Lux) Systematic Funds - Global Sustainable Income Equities Fund ended September up 2.99%* (Ip USD class - net of fees), underperforming the MSCI World High DY TRN index which returned 3.41%. 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 markets). Central Bank 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. 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. Portfolio losses were contained within our North America selection model, with U.S. Health Care and IT stocks and Canadian Financials outpacing our models over the month, while our underweight to the Materials sector helped to cauterize losses here. Elsewhere we also suffered from selection within our Asia model, with Japanese Health Care and Industrials picks offsetting a helpful overweight allocation effect. On the positive side, our European model generated alpha across Sweden and the UK. Within the former it was our significant relative underweight here which proved helpful, while our selection of Financials names helped drove returns.

*Sources : RAM Active Investments.