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Commentaries

8 October 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds - Long/Short European Equities Fund returned -0.62%* (I EUR class – net of fees) in September. 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 in recent weeks, simultaneous with a global rebound of interest rates (U.S. 10-year yield went from 1.46% to 1.66%). Momentum’s sell-off was correlated to a large deleveraging by a number of market participants and accompanied by heightened levels of short covering in the market. Elsewhere, Central Banks continued to dictate the market’s mood, with eight of the top 10 developed market central banks meeting in September. Only the ECB, Fed and Australia reduced their target policy rates, while the former announced a new quantitative easing program which will see €20bn per month of net asset purchases for as long as deemed necessary. On a strategy basis, our Momentum engine was the single largest detractor (across both sides of the book), while our long Defensive/Low Vol engine also lagged. Elsewhere, our Value and Machine Learning engines performed strongly, generating alpha on the market’s upside. On the short side, aside from Momentum’s travails, our shorter-term signals also suffered, but we witnessed our Value engine hold firm and deliver alpha over the month. Country-wise, our UK long pics generated positive performance, as did our selection in France across both sides of the book. Longs in Switzerland were also highly alpha generative, but performance here was eroded by our shorts in pharma names. Positive longs in German Industrials names were more than offset by negative contributions from our short engines. On a sector basis, Materials and Industrials shorts weighed heavily, while Financials and Consumer Discretionary longs helped to deliver positive performance.

*Sources : RAM Active Investments