Fixed Income Monthly Comments - October 2024

Global Bond Total Return

Supporting growth

Rates adjusted higher during the month, with credit spreads tighter. Market expectations have recently shifted towards a Trump victory in next presidential election, fueling the narrative of a higher than expected growth and inflation mix, combined with a still loose fiscal stance. 
We reduced USD duration early in the month, then later the EUR one as rates remain low in a global context of resilient economies. We increased UK exposure as spread versus Europe moves towards 200 bps wide. Our credit exposure has been maintained with high-yield exposure at 8%. While credit spreads contributed positively, rates detracted globally in our traditional portfolio.
Concerns of loose fiscal policies amid resilient economies impacted negatively our steepeners strategies. UK vs Europe spread remain at the wide after the budget announcement, despite an initial positive reaction.
We closed our long IDR early in the month as it held well against USD. Our currency positions are long NOK, BRL, MXN, SEK, against USD, EUR, and SGD. Overall, the USD strength impacted negatively our FX portfolio this month.
At the end of the month, the RAM (Lux) Tactical Funds – Global Bond Total Return Fund  duration stood at 4.06 years and the average credit quality was A+
.

* The performance is gross of management fees and operational costs (0.60% management fee and 0.40% of operational costs, for a TER of approximately 1%).
** Credit Rating: is a parameter used by banks and lending institutions to determine whether an applicant is deserving of the confidence necessary for the granting of a loan. This parameter makes it possible to measure the risk of consumer default and determine the economic conditions applicable to consumers. The highest rating is indicated by the letters: AAA. This is the indication of highest financial security. This is followed by: AA, A, BBB, BB, etc. The lowest credit rating corresponds to the letter C. This letter identifies a high risk of financial default and is a figure taken into great consideration by each lending institution.

RAM Asia Bond Total Return

Asia's credit market experienced a negative return last month, with Asia IG returning -1.3% and Asia Non-IG returning +1.1%. However, Asia credit outperformed US HY, which returned -0.6%, and US IG, which saw a return of -2.3%. The primary driver for this performance was the tight US Presidential election race on November 5th, which reinvigorated the 'Trump trade'. In China, we await the upcoming fiscal policy announcement. Since the September monetary policy update, Chinese equities have risen by 24%, though the rally has moderated as subsequent policy meetings fell short of market expectations. Currently, the market anticipates RMB6tn in local government debt swaps and RMB2tn in fiscal support for property and consumption, but the specifics will be crucial. Chinese policymakers have strategically timed their National People's Congress Standing Committee meeting to coincide with the US elections, allowing for potential adjustments based on the outcome. Rates volatility has dampened activity in the Asia primary market, with new issuances slowing to USD13bn, -22.6% m/m and YTD total new issuance to USD143bn, a 43% increase year-over-year. Overall, we remain optimistic about the fundamentals and technical of Asia credit. Primary issuance is expected to slow, although liquidity remains sufficient to pursue investment opportunities. Our portfolio continues to maintain an underweight position in the long end of the curve relative to the index, a strategy we find appropriate given the steepening bias in the US Treasury curve. At this juncture, we anticipate China’s policies to be credit supportive, although we do not expect a significant fiscal stimulus.

*** The fund is managed without reference to a specific benchmark. The Index used is not intended to be a restrictive definition of the investment universe. The composition of the fund's portfolio may differ significantly from that of the benchmark index.

**** All fees and expenses, except subscription and redemption fees, are taken into account

Important Information

The RAM (Lux) Tactical Funds – Global Bond Total Return is a Sub-Fund of RAM (Lux) Tactical 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).
The RAM (Lux) Tactical Funds II – Asia Bond Total Return is a Sub-Fund of RAM (Lux) Tactical Funds II, a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC). 

Please note that the share classes mentioned in this document may not be registered in your country of domicile. 

This marketing document is only provided for information purposes to professional clients, and it does not constitute an offer, investment advice or a solicitation to subscribe shares in any jurisdiction where such an offer or solicitation would not be authorised, or it would be unlawful. In particular, the Fund is not offered for sale in the United States or its territories and possessions, nor to any US Person (citizens or residents of the United States of America).

This document is confidential and is intended only for the use of the person to whom it was delivered; it may not be reproduced or distributed.

There is no guarantee that the holdings shown will be held in the future. The investment described concerns the acquisition of shares in the Sub-Fund and not in a specific underlying asset.

Past performance is not a guide to current or future results. There is no guarantee to get back the full amount invested. The performance data do not take into account fees and expenses charged on subscription and redemption of shares nor any taxes that may be levied. As a subscription fee calculation example, if an investor invests EUR 1000 in a fund with a subscription fee of 5%, the investor will pay to his financial intermediary EUR 50.00 on the investment amount, resulting with a subscribed amount of EUR 950.00 in fund shares. In addition, potential account keeping costs (by investor’s custodian) may reduce the performance. Some shares in the Sub-Fund apply a performance fee. Leverage intensifies the risk of potential increased losses or returns.

The Management Company may decide to terminate the marketing arrangement in place in any given country in accordance with Article 93a of Directive 2009/65/EC.

Changes in exchange rates may cause the NAV per share in the investor's base currency to fluctuate.

Particular attention is paid to the contents of this document but no guarantee, warranty or representation, express or implied, is given to the accuracy, correctness or completeness thereof.

Prior to any transaction, clients should check whether it is suited to their personal situation, and analyse the specific risks incurred, especially financial, legal and tax risks, and consult professional advisers if necessary.

Please refer to the Key Information Document and prospectus with special attention to the risk warnings before investing. Global Bond Total Return Fund is classified as art.8 SFDR. Asia Bond Total Return Fund is classified as art.6 SFDR. For further information on ESG, please refer to

https://www.ram-ai.com/en/regulatory-information and the relevant Sub-Fund webpage, section "Sustainability-related disclosures".

The prospectus, constitutive documents and financial reports are available in English and French while IIDs are available in the relevant local languages. These documents can be obtained, free of charge, from the SICAVs’ and Management Company’s head office and www.ram-ai.com, its representative and distributor in Switzerland, RAM Active Investments S.A. and the relevant local representatives in the distribution countries.

A summary of Investors’ rights is available on: https://www.ram-ai.com/en/regulatory-information

Issued in Switzerland by RAM Active Investments S.A. which is authorised and regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). Issued in the European Union and the EEA by the authorised and regulated Management Company, Mediobanca Management Company S.A. 2 Boulevard de la Foire, 1528, Luxembourg, Grand Duchy of Luxembourg.

The source of the above-mentioned information (except if stated otherwise) is RAM Active Investments and the date of reference is the date of this document.