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EM equity trio forced to trim Taiwanese exposure in $2.2bn fund

EM equity trio forced to trim Taiwanese exposure in $2.2bn fund

RAM Active Investments’ emerging market equity team has cut back on its biggest country overweight, Taiwan, following a difficult period of performance in the wake of Chinese volatility.

The Citywire + rated team of Emmanuel Hauptmann, Thomas de Saint-Seine and Maxime Botti reduced exposure from 22.8% of the $2.2 billion RAM (Lux) SF-Emerging Markets Equities to 18.7% over July.

According to Hauptmann, the change was spurred by China’s aggressive devaluation of the currency in August, which has seen the team move further out of Taiwan despite still championing the country.

‘Our Taiwan selection fell victim to the contagion from the Chinese correction, despite sounder fundamentals,’ Hauptmann said in an investor update.

‘Significant flows have left Taiwan, hurting companies irrespective of their quality and in the absence of stock-specific news. Less liquid small/mid cap names have been hurt the most.’

‘In this context our strategies have been reducing their Taiwan exposure, despite now very appealing fundamentals, which should support these stocks in the future.’

Taiwan has been a long-running favourite of the trio in their developing world equity fund. Speaking to Citywire Global in April of last year, Hauptmann said the fund had more attractive entry points than China or South Korea.

Snapping up H-shares

Conversely, the trio, who oversee several funds at the Swiss group including an additional long/short equity emerging market fund, said they have added to their Chinese Hong-Kong listed H-shares exposure.

‘During the correction, H-shares have moved in parallel with - and overall even more than - A-shares, despite much more attractive valuations, now trading at a discount of 37% on average to the mainland-listed stocks.’

‘That move makes us currently reduce our underweight in China, reducing our country bets vs. the MSCI EM Index,’ Hauptmann said. The overall Chinese exposure in the fund was raised from 17.4% in June to 18.4% at the end of June 2015.

The RAM (Lux) SF-Emerging Markets Equities fund returned 15.14% in US dollar terms over the three years to the end of July 2015. This compares to a rise of 2.91% by the MSCI EM (Emerging Markets) TR USD over the same timeframe.

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