8 September 2023
Multi-Asset Monthly Comment - August 2023
RAM Global Multi-Asset
Market volatility increased during the first part of August, driven by a deteriorating situation in the Chinese real sector and higher government bond yields. In the second part of the month, central banks' dovish comments and positive corporate earnings announcements drove up the prices of risk assets. On the macroeconomic data front, further weakness was observed in China and Europe. In the US, both Manufacturing and Services PMIs deteriorated. The main message at the Jackson Hole symposium was data dependency for additional interest rate hikes. Given this backdrop, investors began to question the expectations for a Goldilocks scenario that had been building up over the past months. As a result, Equities ended the month lower, with Emerging Markets (specifically China) and the Mid & Small Cap segment lagging broader indices. IG and HY credit spreads widened across regions, while in rates, the USD curve steepened, and the EUR curve saw smaller movements. Finally, the USD was bolstered by higher rates.
The Traditional Equity book had the most significant negative impact on performance. In Diversified Equities, the shareholder retribution theme and European exposures were the primary negative contributors over the month. Chinese Tech exposures suffered due to the risk aversion to the region, despite encouraging earnings announcements. We remain convinced of substantial medium-term upside potential for these portfolio holdings, as they trade at a significant discount compared to international peers and have yet to benefit from the AI boom. That said, we have partially hedged this exposure while waiting for authorities to clearly address deflationary fears in the economy. The Tactical Fixed Income bucket generated marginally negative returns due to EU HY and Asian IG exposures. Equity Market Neutral, Macro Systematic and Fixed Income Long/Short helped bring the Liquid Alternative category into positive territory. Despite the Euro Stoxx 50 Index falling by 3.90% over the month, equity volatility decreased. This marked another month of disconnection in this space, which continued to exert pressure on option-based Risk Reducing strategies. We believe the behaviour of the equity volatility is not adequately reflecting the end of the cycle, and we anticipate significant volatility spikes in the coming months as the lagged effects of higher rates begin to impact the economy.
RAM (Lux) Systematic Funds -Global Multi-Asset Fund is a Sub-Fund 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).
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