16 May 2020

April 2020 - Reversal in April for our funds’ Value & Small Cap selections - Systematic Fund Manager's Comments


Reversal in April for our funds’ Value & Small Cap selections

While the first quarter of 2020 witnessed the worst performance since the fourth quarter of 2008 and the height of the Global Financial Crisis. April’s bounce saw global equities post their best monthly return since April 2009.

Value outperforms the market

We saw after years of under-performance our Value selection outpace the wider market in April, as anticipated our Value and Machine Learning selections are capturing in the rebound some of the opportunities created by the March dislocation and are likely to do well if the recovery continues. The Quality bias of our Value engine Value, tilted towards attractive free-cash-flow names should help if the market were not to hold at current levels.

On the other side of the book, our Momentum engines are still capturing the negative earnings dynamics that keep building up for a lot of companies and have turned significantly more defensive in anticipation of potentially resilient volatility and a potential further leg down for equity markets.


Source: RAM AI as of 30.04.2020

Small Cap outperformance

Small caps also enjoy a profitable month, and given their significant underperformance in recent years, it’s an encouraging for an all-cap manager like us to see. Not only this segment offers strong opportunities given the current dispersion observed, this relative outperformance of small and mid-cap names is an encouraging sign, where we believe that these stocks tend to be more sensitive to economic fluctuations and are among the first areas of the market to reflect both downturns and rebounds.

 We’ve shown below the contribution by market cap segment in April, across both Europe and Emerging Markets.


Source: MSCI indices, RAM AI as of 30.04.2020

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