Systematic Equities Monthly Comments - April 2024

RAM Emerging Markets Equities

A good upside in Chinese Equities, up 7% over the month, helped the index stay above water.

The RAM (Lux) Systematic Funds - Emerging Markets fund (hereinafter ‘the Fund’) (Class-IP USD net of fee*) was in line with the index, up 0.46%, over the month and close to it since the beginning of the year, progressing by a little more than 2.5% versus 2.8%.**

The slight underweight of the fund in China detracted some performance, which was offset by the positive impact of our good selection in Taiwan and Hong-Kong.

Our underweight position in South Korea was the most positive contribution to the month’s return, as South Korean stocks remained extremely volatile, down close to 6% in April.

The fund’s Machine Learning and Value selections outperformed over the month while the Low-Risk lagged.

In a mirror to the reallocations which occurred in Q4 last year, the allocation of our strategies to China decreased, in favour of South Korea, whose underweight was reduced in the fund.

The fund participated well in the recent EM upside, but remains relatively defensively positioned, with overweight in the Consumer Staples and Healthcare sectors.

*Note: IP USD share class currently registered in LU, AT, CH, DE, DK, ES, FI, FR, UK, IT, NL, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

** The portfolio is actively managed on a discretionary basis with reference to a benchmark. While the product compares its performance against the Index, it does not try to replicate this benchmark and freely selects the securities that it invests in. The deviation with this benchmark can be significant.

RAM European Equities

April was a turbulent month for RAM (Lux) Systematic Funds – European Equities fund (Class-IP EUR net of fee*) stirred by releases of European and American CPI (Consumer Price Index) data. UK inflation exceeded expectations month-on-month, while American inflation also surpassed forecasts. Significant dispersions remain, particularly in the SMID market cap. Segment (see below).

The European Central Bank (ECB) is signalling a rate cut in June, which is progressively priced by the market, leading to more opportunities in the coming months. Our fund concluded the month with a 0.28% increase, overperforming its benchmark, down 0.75% over the month.

All our books overperformed over the month, our value book performing the best. Our momentum book strongly overperformed in the first half of the month, but the various Macro Economic released led to a slight momentum break, and it underperformed in the second half. Conversely, our defensive book strongly overperformed the benchmark in the second half, compensating for the negative contribution of the moment book over the same period.

Our fund underperformed in the UK, its biggest allocation. Our selection lagged, and our underweight in the country further detracted the fund’s relative performance. Our German, French and Dutch selection strongly overperformed, their substantial weight in the fund strongly contributed to the fund performance over the month. The Nordics also strongly contributed, our selection in Norway and Finland strongly overperformed, especially in Norwegian Industrial stocks. The fund lagged in Italy due to a slight overweight position, which impacted its relative performance.

The fund is currently increasing its concentration in Germany and France, its second and third allocated countries, while reducing its allocation in Spain and Ireland, with Nordic allocations remaining steady.

The fund’s selection strongly performed in Industrials and Consumer Staples. Our strong overweight in both sectors further enhanced the fund’s relative performance. The fund also strongly overperformed in the IT and Consumer Discretionary, and our underweight helped the fund’s performance, both sectors being among the worst performers in the benchmark. The fund lagged in Healthcare, missing the sector’s upside over the month and our underweight also penalising the fund’s relative performance.

The fund is currently Increasing its allocation in Communication Services and Financials while reducing exposure to Utilities and Materials.

Our fund recuperated from the negative contribution of the small and mid cap segments of February, our mid cap selection being the best performer over the month, followed by our small cap selection. Our large cap book also overperformed, while still being down over the month. However, the fund's significant underweight in large caps contributed positively to relative performance. The allocation in mid cap stocks has been slightly increased from the small cap book, while the large cap weight remains stable.

 *Note: IP EUR share class currently registered in LU, AT, CH, DE, DK, ES, FI, FR, IT, NL, UK, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

**The portfolio is actively managed on a discretionary basis using a benchmark. Although the product compares its performance to that of the MSCI Daily Net TR Europe Euro, it does not seek to replicate this benchmark and is free to choose the securities in which it invests. The difference with this benchmark may be significant.

RAM European Market Neutral Equity

Global equities corrected last month as the global economy gave signs of a slowdown, in particular in the US where latest employment numbers point to a weakening job market.

The RAM (Lux) Systematic Funds –European Market Neutral Equity fund (Class-I EUR net of fee*) progressed by 2% while the MSCI Europe TRN gave up 0.9% over the month. **

Both sides of the book were positive contributors last month, with Longs generating the bulk of the alpha, driven by good picks within Value and Momentum-biased stocks mostly.

Longs in the industrial sector, machinery companies with positive earnings momentum, were among the most positive contributors.

Value plays within maritime transport names were also among the best long picks.

Our short single name engines performed well also, some expensive growth picks in the Nordics contributing significantly to the month’s return.

Short semiconductor positions which had provided strong alpha in the book in prior months detracted last month as the names bounced back.

The strategies increased the net long exposure to Asset Managers over the month, and reduced net Long in Industrial Machinery names.

Short in Specialty Chemicals were cut back while the net short exposure to Electrical Components stocks was increased after the stocks’ recent outperformance.

*Note: I EUR share class currently registered in LU, AT, CH, DE, ES, FR, UK, IT, NL, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

RAM Global Market Neutral Equity

The RAM (Lux) Global Market Neutral Equity Fund (Class-PI USD net of fee*) was down 0.32% while global markets corrected, the MSCI World Index returning -3.71% in April.

Consumer confidence weakened in April, affected by ongoing inflation and rising fuel prices over the previous quarter.

On the other hand, consumer spending and economic activity in the US remained robust in Q1 2024, the industrial production index increased in March, having maintained levels near record highs over the past eighteen months.

The recent uptick in inflation, alongside the broader economic indicators, suggests that interest rate cuts will be delayed.

Market reaction to this backdrop was an increase in long-term rates and a correction in global equity markets, small caps and growth stocks underperforming, in particular non-profitable tech stocks.

The Short book was roughly in line with the market, in particular, Healthcare short picks (among biotechnology companies) contributed positively to the fund’s performance.

The Long book was a small drag, as the Fund retains a net long bias in Consumer Discretionary and Information Technology stocks, those two sectors being in the bottom performing sectors (with Real Estate) in April.

The VIX statistical arbitrage strategy continued to deliver incremental gains since its deployment in January, now being up roughly 2% year-to-date.

The fund significantly reduced its long bias in Industrials, and remains long IT and Financials, while being short Utilities, Energy and Materials.

* Note: PI USD share class currently registered in LU, CH, DE, DK, ES, FI, UK, IT, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns. 

RAM Stable Climate Global Equities

The RAM (Lux) Systematic Funds - Stable Climate Global Equities Fund (hereinafter the ‘Fund’) (Class-PI USD net of fee*) was down 3.6% in April.

In April, consumer confidence dipped due to persistent inflation and escalating fuel costs from the previous quarter. Conversely, the first quarter of 2024 witnessed sustained robustness in U.S. consumer spending and economic activity. Notably, the industrial production index saw an uptick in March, consistently hovering near record levels for the last eighteen months. This persistent inflation, coupled with robust economic indicators, signals potential delays in anticipated interest rate cuts.

The market responded to these mixed economic signals with an uptick in long-term interest rates and a broad correction across global equity markets. Specifically, small caps and growth-oriented stocks bore the brunt of the downturn, with non-profitable tech stocks experiencing particularly sharp declines.

Low-risk factors, such as high dividend yield and low volatility, outperformed the rest of the market. In contrast, growth and momentum underperformed.

The strategy continues to identify strong names within the Financials (e.g., Hang Seng Bank Ltd) and Information Technology sectors (Dell Technologies, TD SYNNEX Corp). Communication Services was the largest detractor with picks such as Meta Platforms and Comcast.

The fund's investment in small & mid cap stocks was slightly increased during the month, from 12% to 15%. The overall contribution of these segments has been slightly negative. Reverting a trend initiated at the beginning of the year, the US detracted from the overall performance, while Hong Kong and Japan contributed positively.

The Healthcare sector was further reduced from 18% to 17%, and Financials remains the highest exposure. The fund's carbon footprint (317 TCO2 per MUSD Sales, scope 1, 2 & 3) aligns with its sustainability goals, boasting significantly lower greenhouse gas intensity compared to the global equity market average (999 TCO2 per MUSD Sales, scope 1, 2 & 3).

Companies with stronger ESG ratings and low carbon profiles underperformed the broader market by respectively 20bps and 40bps.

*Note: PI USD share class currently registered in LU, AT, BE, FI, UK, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

RAM Global Equity Income

The RAM (Lux) Global Equity Income Fund (hereinafter the ‘Fund’) (Class-IP USD net of fee*) was down 2.93% in April, slightly underperforming its benchmark, the MSCI World High Dividend Yield Index TRN$, which dropped by 2.84%. The Global Equity Market Index finished the month down 3.69%.**

In April, consumer confidence dipped due to persistent inflation and escalating fuel costs from the previous quarter. Conversely, the first quarter of 2024 witnessed sustained robustness in U.S. consumer spending and economic activity. Notably, the industrial production index saw an uptick in March, consistently hovering near record levels for the last eighteen months. This persistent inflation, coupled with robust economic indicators, signals potential delays in anticipated interest rate cuts.

The market responded to these mixed economic signals with an uptick in long-term interest rates and a broad correction across global equity markets. Specifically, small caps and growth-oriented stocks bore the brunt of the downturn, with non-profitable tech stocks experiencing particularly sharp declines.

Low-risk factors, such as high dividend yield and low volatility, outperformed the rest of the market. In contrast, growth and momentum underperformed. The top 20% of companies within the MSCI World in terms of dividend yield outperformed the market by more than 1.5%, while the top 20% in terms of shareholder yield underperformed by close to 0.5%.

Similar to March, the investment strategy uncovered strong selections in Europe, particularly in the Netherlands and Italy. The selection in Asia also performed well, led by Hong Kong and Japan. Conversely, stock selection proved challenging in the US and detracted from the performance.

The Financial sector was the most significant contributor, mainly thanks to the Investment Managers industry where the strategy identified strong names such as Victory Capital Holdings, Inc. The Healthcare sector was also profitable, particularly through an underweight position in the major Pharmaceutical Industry. As it did last month, the underweight exposure in Energy, particularly in the Integrated Oil industry due to the fund's decarbonisation targets, led to a negative allocation effect.

Allocations in the mid cap segment was positive, while the small cap was flat.

The fund continues to favour the Financials and Consumer Discretionary sectors with overweight positions and maintains underweight positions in Materials and Energy.

*Note: IP USD share class currently registered in LU, AT, CH, DE, DK, ES, FI, FR, IT, NL, NO, SE, SG (foreign restricted recognised scheme). Please click on the above link to access the fund factsheet and obtain a global overview of performance since inception. Past performance is not a reliable indicator of future returns.

** The portfolio is actively managed on a discretionary basis using a benchmark. Although the product compares its performance to that of the MSCI World High Dividend Yield Net Index, it does not seek to replicate this benchmark and is free to choose the securities in which it invests. The difference with this benchmark can be significant.

Important Information
Important Information: The sub-funds mentioned above are Sub-Funds of RAM (Lux) Systematic Funds, a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC). RAM Active Investments (Europe) S.A., 51 av. John F. Kennedy L-1855 Luxembourg, Grand Duchy of Luxembourg is the Management Company.
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