The Citywire + rated trio overseeing the $2.1 billion RAM Emerging Markets Equities have moved to an overweight position in Brazil for the first time since the fund was launched.
Speaking to Citywire Global, Emmanuel Hauptmann (right of picture) said the move was gradually overtaken over the past quarter with Brazil now accounting for 6.3% of the fund. This compares to an allocation of 5.9% in the MSCI (EM) Emerging Markets index.
Hauptmann, who co-runs the fund with Thomas de Saint-Seine and Maxime Botti, said the move was in response to the challenges faced by China but also bottom-up opportunities emerging among Brazilian exporters.
‘This happened over September, October and November, with us adopting a neutral weight in October and tipping into an overweight the month after. This was largely in response to the summer correction,’ he said.
‘We did see some weakness in the Brazilian real, which was a downside in some sectors, but it presented an attractive valuation opportunity for a number of companies which have come onto our radar.’
Hauptmann said this has largely seen exporters and export-facing names added to the fund, although he refrained from naming specific stocks. ‘We are seeing much upside in terms of their margins thanks to the weakened currency,’ he said.
In addition, Hauptmann said the strong US dollar has aided internal consumption, as importers have been more affected. This, the Geneva-based manager said, had also presented opportunities in the consumer discretionary sector, which makes up 11.6% of the overall fund on a sector basis.
One immediate knock-on effect of the summer’s turmoil was the trio having to reduce exposure to a previous champion, Taiwan. The managers cut exposure back from around 23% to nearly 19% to mitigate the negative affect of the country’s strong ties to China.
However, Hauptmann is bullish on the prospects for the market in 2016, especially as a source of dividends. ‘We are still effectively overweight Taiwan by about five percentage points and as we see interesting names there, including income opportunities,’ he said.
‘In our more recent rebalancing we started to move back into Taiwan slightly more and the intention is for us to go back into there more, as we are tempted by the tech names. They are more attractive than the opportunities in South Korea and China, for example.’
According to the most recent factsheet, Taiwan us currently the largest country exposure at 17.6%, which is ahead of China/Hong Kong (12.8%) and Australia (10.3%). The largest single stock exposure is to Israeli healthcare group Teva Pharma.
The RAM (Lux) SF-Emerging Markets Equities B USD fund lost 0.9% in US dollar terms over the three years to the end of November 2015. This is ahead of its index, the MSCI EM (Emerging Markets) TR USD, which fell 12.1% over the same period.