Systematic Equities Monthly Comments - July 2023

RAM Emerging Markets Equities
Emerging Markets posted positive returns in July, outperforming global Equities over the month after lagging in prior quarters despite attractive valuation levels.
Some of the Emerging Markets upside was alimented by new announcements by Chinese authorities of support to the economy, helping Chinese Equities to outperform over the month. 
It is yet to be seen if the recent announcement will have any more success than prior attempts to revive an economy burdened by excess corporate leverage, a distressed real-estate market and sluggish consumer demand.
The fund gave back some of its YTD advance to MSCI Emerging Markets, being up 5% while the market progressed by 6.2%, explained by the underweight position of the strategies to Chinese equities, the bounce in consumer discretionary stocks explaining most of the relative lag.
Good IT picks in Taiwan partly offset the negative contribution of the Chinese underweight, as well as positive South African and Turkish selections. 
Across our blend of selection strategies, names from our Growth/Momentum engines performed the best over the month, while our Low-Risk selection logically detracted in the sharp upside.
The fund remains relatively defensively positioned, with the largest overweight positions in Consumer Staples and Healthcare, while being underweight Materials and Energy.
From a country perspective, the strategies reduced exposure to Thailand over the month, while increasing exposure to South Korea and India, reducing our underweights in both countries.  

RAM European Equities
European Equities joined global Equities in making a new high for the year, despite a string of negative economic surprises in the region.
In disconnect with current earnings dynamics, Low Quality stocks led the upside last month, as short sellers seemed to capitulate on their fundamental shorts, high short interest names bouncing up (the UBS EU high short interest basket was up 8% over the month). 
The quality bias of the fund detracted across market cap segments, and the fund progressed by 0.83% while the MSCI EU TRN gained close to 2%. 
Across our blend of strategies, our momentum engines lagged the most as we witnessed a remarkable divergence between earnings momentum dynamics and returns over the last weeks.
The underweight position of the fund to banks and our picks within the Asset Management industry contributed negatively to the performance of the fund, Financials detracting the most relative performance versus MSCI Europe across sectors.
The fund remains significantly overweight Consumer Staples and Communication Services stocks, both lagging on the upside last month.     

RAM Long/Short European Equities
European Equities joined global Equities in making a new high for the year, despite a string of negative economic surprises in the region.
In disconnect with underlying economic trends, Low Quality stocks led the upside last month, as short sellers seemed to capitulate on their fundamental shorts, high short interest names bouncing up (the UBS EU high short interest basket was up 8% over the month). 
The quality bias of the fund detracted across long and short positions, the fund ending the month down 2.2%, but the disconnect was particularly strong on the short side of the book, amidst a stark divergence between earnings momentum dynamics and returns over recent weeks.
As an illustration, names within semiconductors or specialty chemicals have in the last weeks seen their revenue and earnings potentials for the next quarters greatly diminished and revised lower amidst weakening demand. Weak names in these industries have nonetheless had large upside moves over the month of July, further propelled by short covering. It is very likely that we will see some significant reversal of these moves given their disconnect from actual fundamental trends.
Internet retail and delivery companies also greatly appreciated in recent weeks despite their very stretched market valuations and the current uncertainty of the state of European retail demand after numerous signs of weakening economy (S&P Global Eurozone Composite PMI trending lower below 49).
The largest net long position in the fund is on pharmaceutical companies, which have relatively resilient earnings momentum dynamics and risk characteristics in this late phase of the cycle, and the fund is net long automobile manufacturers, given the very attractive valuation levels of some names in the industry relative to the rest of the market.
Internet retail, semis and electrical equipment industries are among the ones where the most short opportunities are identified by the strategies, combining negative earnings trends and high levels of valuations.

RAM Long/Short Global Equities    
Global Equities are making a new high for the year, despite a string of negative economic surprises in Asia and Europe in the last weeks.
Low Quality stocks led the upside last month, as short sellers seemed to capitulate on their fundamental shorts, high short interest names bouncing up (the UBS high short interest basket of Russell 3000 names was up 16% over the month). The quality bias of the fund detracted on short positions. Names within automotive retail, biotech or semiconductors with large negative cashflows have had large upside moves over the month of July, squeezing shorts and leading to short covering on the names. It is very likely that we will see some significant reversal of these moves given their disconnect from fundamental trends.
On the long side of the book, picks within regional US banks with solid balance sheets and profitability contributed very positively last month, as the banks are still recovering from the spring downside post Silicon Valley and Signature banks liquidity crises.
Good US software picks also contributed positively, helping the long book outperform MSCI World over the month.
The fund is net long Application Software and Pharmaceutical stocks, while being net short specialty chemicals, utilities and biotech names.

RAM US Sustainable Equities
The fund concluded the month with a 3.32% increase, aligning closely with its benchmark's growth of 3.44% over the same period. Notably, Communication Services, Energy, and Financials exhibited strong performance, particularly in the second half of the month.
Regarding our selection process, the fund demonstrated significant overperformance in key sectors, namely Financials, Real Estate, Industrials and Information Technology. In particular, the contributions from Banks, Capital Goods and Tech. Hardware resulted in the most substantial overperformance. The fund's asset allocation remained in line with the benchmark, with a slight overweight position in Financials and Information Technology, while showing a slight underweight in the Industrials sector, particularly in Capital Goods.
Conversely, the Utilities, Energy and Consumer Staples sectors underperformed. The underperformance in Utilities is associated with the negative performance of our taxonomy-aligned book. Moreover, our overweight allocation in the Utilities sector further detracted from the fund's relative contribution. Regarding Energy, while our selection showed only slight underperformance, the fund's deliberate underweight position, driven by our sustainable bias, also affected its overall performance. Similarly, the underperformance in Consumer Staples was mainly attributed to the selection within the Household & Personal Products segment.
In the Large Cap segment, our stock selection demonstrated a slight underperformance, while the Small Cap selection stood out as the best performer throughout the month, contributing positively to the fund's overall results.

RAM Stable Climate Global Equities
Global Equities made new highs for the year in July, ending the month on a high note, propelled by US Tech companies and the current AI boom, despite a new rate hike by the Fed.
The fund progressed by 2.44% in July, advancing thanks to good performance of financial and consumer discretionary picks.
The large exposure of the fund to healthcare companies weighed down on performance as the sector was close to flat over the month, while taxonomy-aligned renewable energy picks detracted.
The overweight position of the fund to low carbon emitters in Europe contributed negatively as companies in the region underperformed significantly in a context of marked economic slowdown.
After the recent bout of strong growth out-performance, we expect the value and quality biases of the fund to help it resist better than the market if the current historical hiking cycle led to higher market volatility.

RAM Global Sustainable Income Equities
The fund concluded the month with a 2.71% increase, underperforming the benchmark, at 3.58%. During the initial week, the high dividend universe experienced a temporary dip, but it subsequently rebounded strongly, primarily buoyed by the financials and energy sectors.
In our largest allocation region, North America, the fund underperformed, largely attributed to our deliberate underweight position in Canada, a country that exhibited exceptional performance in the benchmark. Despite a slight underperformance in our US selection, a slight overweight position helped mitigate the impact on the relative contribution.
In contrast, the fund's selection in Asia Pacific demonstrated a noteworthy overperformance, particularly in Japan and Australia. Additionally, our investments in South Korea also yielded favourable results. However, due to our underweight position in the region, the overall impact of these successful picks remained somewhat restrained.
Strong performance was observed in the Communication Services, Information Technology and Materials sectors, with our overweight position in Communication Services significantly contributing to the fund's relative performance. Although the fund's selection in Financials, which was the most robust contributor in the universe, exhibited lag, our substantial overweight allocation effectively bolstered the relative contribution.
Currently, the fund maintains its underweight positions in Consumer Staples, Energy and Materials, while displaying overweight positions in Consumer Discretionary, Financials and Utilities. Additionally, the fund retains an underweight allocation in the large-cap segment.
 

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