Commentaries

Commentaries

6 June 2024

Systematic Equities Monthly Comments - May 2024

RAM Emerging Markets Equities

In May, EM markets significantly underperformed developed markets, with South America and the Middle East experiencing declines. In contrast, Eastern Europe, Hong Kong, and Taiwan outperformed the rest of the EM market.

In this market environment, all the RAM (Lux) Systematic Funds - Emerging Markets fund’s (hereinafter ‘the Fund’) (Class-IP USD net of fee*) underlying strategies outperformed the benchmark. Momentum selection dominated the performance, followed by our Machine Learning book.

Malaysia was the top contributor in May, with an outperformance driven by an overweight position and strong picks. The South Korea position (which had been increasing in recent weeks) and the China position were also notable contributors, with respective contributions of 0.23% and 0.26%. Conversely, the Indian market still shows adverse conditions for our strategy and detracted 0.17%.

From a sector perspective, Industrials contributed significantly, with a total attribution of 0.53%, primarily due to stock selection. The Information Technology sector also added 0.39%, driven by strong selection in Information Technology Services.

The strategy was positive in all market cap segments. While the allocation effect was negative for small and mid-cap allocation, this was compensated by strong picks. The mid-cap and small-cap segments added 0.22% and 0.33%, respectively.

Year to date, the fund is up 4.33% (versus 3.41% for the benchmark) and remains relatively defensively positioned, with overweights in the Consumer Staples and Health Care 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

European Equities were up in May, with a strong first half whereas equities fluctuated in the second half. The month saw some of the dispersion realise, yielding strong results in RAM (Lux) Systematic Funds – European Equities fund (Class-IP EUR net of fee*).

Our momentum book was the best performer, followed by our Value and Defensive books.  Our Machine Learning book performed well too, also overperforming the benchmark.** In the European universe, the growth style underperformed while the momentum style overperformed, in line with our selection.

Overall, we notice in Europe a decreasing spread in the P/E ratio across all market cap segments (see below). This sharp movement helped the fund’s overperformance over the month, the market normalising the spreads accumulated and which reached in April levels not seen since 2010. However, these spreads remain high, and the SMID segment still exhibits way more dispersion than its large cap counterpart: our fund remains well positioned in this context, with an overweight in the SMID segment compared to its benchmark.

P/E Ratio Spreads by Market Cap Segment

Our fund ended the month in line with its benchmark in Germany, our largest allocation. Our UK and French selections strongly overperformed. The fund also strongly performed in the Nordics, our Swedish and Danish picks overperforming. Our selection lagged in the Netherlands and Italy, but our overweight in Italian stocks slightly offset our selection’s underperformance. The fund is increasing its allocation to Germany and France, and reducing its allocation to Italy, Norway and Denmark.

Our Industrials picks (our strongest allocation) were in line with the benchmark, but our overweight in the sector yielded a positive relative contribution. Our Consumer Staples, Energy and Healthcare picks strongly overperformed. Our selection lagged in Financials, our Financial Services industry picks underperforming the most. Besides, our underweight in the sector further detracted the fund’s relative performance, with Financials being the best performer in the benchmark. The fund is increasing its allocation to Financials and reducing its allocation to the Consumer Discretionary and Information Technology sectors.

Our selection strongly performed in all the market cap segments. Our SMID selection overperformed our large selection, which itself overperformed the benchmark. Our Small selection performed the best, but our mid-cap selection contributed the most to the fund’s performance, followed by the large and small contributions. Overall, the fund’s overweight in the SMID cap segment helped the fund’s relative performance. Our allocation remains stable, with a slight increase in our large-cap allocation from the small-cap segment. 

 

*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

European markets were up more than 3% in May, driven by momentum stocks, as strong earnings and the Fed's interest rate outlook remained supportive of the market. Only the Energy sector ended the month negative.

Low-volatility and pure growth names lagged.

European small caps outperformed large cap in May, and came back in line with large caps year-to-date.

Best picks were in the Consumer Staples sector, where long picks with positive earnings momentum outperformed, while short picks among food delivery names underperformed. The RAM (Lux) – European Market Neutral Equity fund (Class-I EUR net of fee*) is slightly net long and has continued to increase its gross exposure in that sector.

The Fund remains net long Financials and Communication Services, and net short Materials and Utilities.

*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

Global markets were up roughly 4.5% in May, driven by momentum stocks, as strong earnings and the Fed's interest rate outlook remained supportive of the market.

All GICS sectors were positive, with the Energy sector underperforming

Low-volatility and pure growth names lagged.

Most of the underperformance came from the Short book, as some degree of short covering activity was seen across several sectors including Industrials, which was the largest performance detractor as the RAM (Lux) Global Market Neutral Equity Fund (Class-PI USD net of fee*) retains significant gross exposure and a slight net short bias there.

The Fund remains long IT and Financials, and 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

Momentum and growth stocks led a market rally, driven by strong earnings and the Fed's interest rate outlook remaining supportive of the market. Low-volatility and value names lagged.

Most of the sectors finished the month up. The utility allocation proved to be particularly profitable, thanks to some EU Taxonomy-aligned companies. The selection in Financials and Materials sectors was also positive.

Despite a clear underperformance of mid-cap versus large-cap in the global equity market, the strategy identified strong names in this segment.

Europe was the best-performing region, led by the UK and Germany. In the US, adverse stock selection, notably in the Consumer Discretionary sector, detracted from the RAM (Lux) - Stable Climate Global Equities Fund’s (Class-PI USD net of fee*) performance.

The Healthcare sector increased to 19% from 17% and is now the largest sectorial allocation of the fund, ahead of Financials.

The fund's carbon footprint aligns with its sustainability goals, with a GHG Intensity (scope 1, 2, & 3) representing less than a third of the global equity market average (~260 vs 960 TCO2/MSales).

Companies with stronger ESG ratings finished on par with the broader market, while firms with low carbon intensity outperformed by 20bps.

*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

Momentum and growth stocks led a market rally, driven by strong earnings and the Fed's interest rate outlook remaining supportive of the market. Low-volatility and value names lagged.

The top 20% of companies in terms of dividend yield outperformed the bottom 20% by more than 2%, while the top 20% in terms of shareholder yield outperformed the bottom 20% by close to 1%.

The RAM (Lux) Global Equity Income Fund’s (Class-IP USD net of fee*) European exposure contributed significantly, with an overall positive impact of 0.75%, driven by both allocation and selection effects.

The positive selection in the United Kingdom and Spain were key contributors. Strong names were also identified in Japan.

Consumer Discretionary and Consumer Staples stood out with a notable contribution of respectively 0.56% and 0.29%, primarily due to strong selection effects. The underweight position in Energy, resulting from the fund's low-carbon commitment, was also beneficial for the strategy. Conversely, the Industrials sector detracted 0.03% from performance.

Despite adverse allocation effects, the fund's mid-cap segment added 0.24% to the overall performance, thanks to good picks in this market segment.

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.

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.
The information and analyses contained in this document are based on sources deemed to be reliable. However, RAM Active Investments S.A. cannot guarantee that said information and analyses are up-to-date, accurate or exhaustive, and accepts no liability for any loss or damage that may result from their use. All information and assessments are subject to change without notice.
This document has been drawn up for information purposes only. It is neither an offer nor an invitation to buy or sell the investment products mentioned herein and may not be interpreted as an investment advisory service. It is not intended to be distributed, published or used in a jurisdiction where such distribution, publication or use is forbidden, and is not intended for any person or entity to whom or to which it would be illegal to address such a document. In particular, the investment products are 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). The opinions expressed herein do not take into account each customer’s individual situation, objectives or needs. Customers should form their own opinion about any security or financial instrument mentioned in this document. Prior to any transaction, customers 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.
Note to investors domiciled in Singapore: shares of the Sub-Fund offered in Singapore are restricted schemes under the Sixth Schedule to the Securities and Futures (Offers of Investments)
(Collective Investment Schemes) Regulations of Singapore.
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.
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Leverage intensifies the risk of potential increased losses or returns. Changes in exchange rates may cause the NAV per share in the investor's base currency to fluctuate.
Please refer to the Key Investor Information Document and prospectus with special attention to the risk warnings before investing. 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 PRIIPs KIDs 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.
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Authority. Issued in Switzerland by RAM Active Investments S.A. (Rue du Rhône 8 CH-1204 Geneva) 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 Management Company RAM Active Investments (Europe) S.A., 51 av. John F. Kennedy L-1855 Luxembourg, Grand Duchy of Luxembourg. No part of this document may be copied, stored electronically or transferred in any way, whether manually or electronically, without the prior agreement of RAM Active Investments S.A.

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This document has been drawn up for information purposes only. It is neither an offer nor an invitation to buy or sell the investment products mentioned herein and may not be interpreted as an investment advisory service. It is not intended to be distributed, published or used in a jurisdiction where such distribution, publication or use is prohibited, and is not intended for any person or entity to whom or to which it would be illegal to address such a document. In particular, the products mentioned herein are 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). The opinions expressed herein do not take into account each customer’s individual situation, objectives or needs. Customers should form their own opinion about any security or financial instrument mentioned in this document. Prior to any transaction, customers 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. The information and analyses contained in this document are based on sources deemed to be reliable. However, RAM AI Group cannot guarantee that said information and analyses are up-to-date, accurate or exhaustive, and accepts no liability for any loss or damage that may result from their use. All information and assessments are subject to change without notice. Investors are advised to base their decision whether or not to invest in fund units on the most recent reports and prospectuses. These contain further information on the products concerned. The value of units and income thereon may rise or fall and is in no way guaranteed. The price of the financial products mentioned in this document may fluctuate and drop both suddenly and sharply, and it is even possible that all money invested may be lost. If requested, RAM AI Group will provide customers with more detailed information on the risks attached to specific investments. Exchange rate variations may also cause the value of an investment to rise or fall. Whether real or simulated, past performance is not necessarily a reliable guide to future performance. The prospectus, key investor information document, articles of association and financial reports are available free of charge from the SICAVs’ and management company’s head offices, its representative and distributor in Switzerland, RAM Active Investments S.A., Geneva, and the funds’ representative in the country in which the funds are registered. This marketing document has not been approved by any financial Authority, it is confidential and its total or partial reproduction and distribution are prohibited. 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 Management Company RAM Active Investments (Europe) S.A., 51 av. John F. Kennedy L-1855 Luxembourg, Grand Duchy of Luxembourg. The reference to RAM AI Group includes both entities, RAM Active Investments S.A. and RAM Active Investments (Europe) S.A.