Commentaries

8 October 2019

Emmanuel Hauptmann

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

The RAM (Lux) Systematic Funds - Long/Short Emerging Market Equities Fund returned -0.60%* (I USD 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. Fund performance was damaged by a combination of our short engines and Momentum’s significant underperformance. Momentum was our weakest relative performer across the long and short side as 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. On the positive side, our Short Quality underperformed the market and was able to generate substantial alpha, but elsewhere both Short Value and Momentum detracted. Strong stock picking on the long side across South Korea and Taiwan proved extremely helpful, as did longs in Brazil and South Africa. Conversely, shorts in Australia (Materials and Consumer Staples) detracted, with both sectors enjoying strong positive performance. At a sector level long in Financials and IT stocks were highly alpha generative, but we suffered from our Industrials and Materials shorts.

*Sources : RAM Active Investments