VAM Funds (Lux) Commentaries

April 2019 (click to download)

VAM US Micro Cap Growth Fund

The VAM Funds (Lux) – US Micro Cap Growth Fund performance benefited from holdings in the information technology and communication services sectors. Holdings in the health care and financials sectors detracted from relative returns. At month end, the Fund was overweight the information technology sector and underweight the health care sector.

 

The holding that contributed the most to the Fund’s return during the month was DMC Global (ticker: BOOM-US). The company manufactures perforating explosives used for oil and gas drilling. The outperformance was a result of the company pre-announcing better-than-expected revenue and earnings per share for its quarterly earnings for the quarter ending in March 2019.

 

The holding that detracted the most from the Fund’s return during the month was CareDx, Inc. (ticker: CDNA-US), which is a leading molecular diagnostics company focused on creating diagnostic solutions for organ transplant patients. The number of shares shorted fell after the latest set of short interest data was released at the end of March. The data showed a drop in short interest in CDNA shares. The Manager continues to hold this name in the portfolio.

VAM US Small Cap Growth Fund

The VAM Funds (Lux) – US Small Cap Growth Fund performance was aided by holdings in the consumer discretionary and real estate sectors. Holdings in health care and financials detracted from relative returns. At month end, the Fund was overweight the consumer discretionary sector and underweight the financials sector.

 

The holding that contributed the most to the Fund’s return during the month was Endava Plc (ticker: DAVA-US). Endava is an IT services company helping enterprises with digital transformation mandates. The company has been seeing robust growth for the past three quarters since its IPO in July 2018, but lack of liquidity put a lid on the stock. In April, the company completed a five million share secondary that dramatically increased the liquidity and created a valuation unlock.

 

The holding that detracted the most from the Fund’s return during the month was CareDx, Inc. (ticker: CDNA-US), which is a leading molecular diagnostics company focused on creating diagnostic solutions for organ transplant patients. The number of shares shorted fell after the latest set of short interest data was released at the end of March. The data showed a drop in short interest in CDNA shares. The Manager continues to hold this name in the portfolio.

VAM US Mid Cap Growth Fund

The VAM Funds (Lux) – US Mid Cap Growth Fund performance benefited from holdings in the communication services and health care sectors. Holdings in the information technology and financials sectors detracted from relative returns. At month end, the Fund was overweight the consumer discretionary sector and overweight in information technology sector.

 

The holding that contributed the most to the Fund’s return during the month was Pinterest, Inc. (ticker: PINS-US). Pinterest is a recent IPO. Its differentiated digital platform enables users to visually search and explore, through images, personal areas of interest such as clothing, cooking, project design/creation, sport and other categories such as travel. Relative to other advertising platforms, PINS is growing faster and already demonstrating profitability early in its monetisation efforts. The IPO priced at a valuation in line with slower-growing peers, but the stock quickly rose 80% to more than double where its competitors trade. At that point, the Manager reduced the position, but continues to own it based on its expectations for upside to consensus estimates.

 

The holding that detracted the most from the Fund’s return during the month was Array BioPharma Inc (ticker: ARRY-US). The biopharmaceutical company researches, develops and commercialises targeted small molecule drugs for the treatment of cancer and other high-burden diseases. The number of shares shorted fell after the latest set of short interest data was released at the end of March. The data showed a drop in short interest in ARRY shares. The Manager continues to hold this name in the portfolio.

VAM US Large Cap Growth Fund

The VAM Funds (Lux) – US Large Cap Growth Fund performance benefited from holdings in the industrials and financials sectors. Holdings in materials and consumer discretionary sectors detracted from relative returns. At month end, the Fund was overweight the industrials sector and overweight the materials.

 

The holding that contributed the most to the Fund’s return during the month was Microsoft Corp (ticker: MSFT-US). The company engages in the development and support of software, services, devices and solutions. The stock traded positively following its fiscal third quarter release that included better-than-expected top and bottom line results.

 

The holding that detracted the most from the Fund’s return during the month was UnitedHealth Group Incorporated (ticker: UNH). The company specialises in healthcare coverage, software and data consultancy services. In a year’s time, revenue increased $55.2 billion to $60.3 billion. Its share price fell to no material events, although the health insurance sector has seen big declines in share prices due to concerns over possible insurance rebate system changes. The Fund continues to hold this name in the portfolio.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the energy and materials sectors, as well as in Mexico and Taiwan. Exposures to consumer discretionary and healthcare, as well as in South Africa and Indonesia, detracted from relative returns. As of month end, the Fund was overweight Mexico and underweight South Africa.

 

The holding that contributed the most to the Fund’s return during the month was Tencent Holdings Ltd. (ticker: 700-HK). Tencent is an internet-based technology and cultural enterprise headquartered in Shenzhen, China. The company performed strongly as a freeze in government approvals of online games began to thaw, helping to support a crucial part of Tencent’s business. At the same time, global internet and e-commerce companies performed relatively well broadly and Tencent rerated partially in sympathy with the peer group.

 

The holding that detracted the most from the Fund’s return during the month was Huya, Inc. (ticker: HUYA-US). Huya operates a live streaming platform for interactive broadcasts including gaming, e-sports, reality shows, music, etc. in China. There were no specific news events that led to underperformance during the month. In the prior two months, the stock experienced very strong outperformance and analysts started to question the company’s valuation and rapid multiple expansion which led to some short-term profit taking and pressure on the stock. The Manager continues to like the company’s leading position, outlook and growth profile.

VAM World Growth Fund

The VAM Funds (Lux) – World Growth Fund performance was aided by exposures in the material and utilities sectors, as well as in Canada and Hong Kong. Exposures in information technology and communication services, as well as in the United States and China, detracted from relative returns. As of month end, the Fund was overweight Canada and underweight the United States.

 

The holding that contributed the most to the Fund’s return during the month was Okta, Inc. (ticker: OKTA-US). Okta is the leading provider of internet and cybersecurity software for mobile and desktop user authentication and security clearance. In mid-March, they reported very strong fourth quarter results, but there were concerns about delays in some key product launches. In early April, they announced the official launch of their new product suite, which greatly expanded their addressable market. This led to several bullish ratings’ upgrades and positive commentary from sellside analysts, which subsequently led to strong outperformance during the month.

 

The holding that detracted the most from the Fund’s return during the month was PagSeguro Digital Ltd. (ticker: PAGS_US). PagSeguro is a Brazilian online or mobile payment-based e-commerce service for commercial operations. The company’s share price is down 21% since last year, however, the EPS has improved and revenue increased 56% since last year. There were no material events or the fundamental metrics that led to the fall in share price. The Manager continues to hold this name in the portfolio.

VAM International Real Estate Equity Fund

The VAM Funds (Lux) – International Real Estate Equity Fund performance was aided by exposures in Brazil and Isle of Man, while exposures in Japan and Germany detracted from relative returns. As of month end, the Fund was overweight Brazil and underweight Japan.

 

The holding that contributed the most to the Fund’s return during the month was Green REIT Plc. (ticker: GRN-GB). Green REIT is a leading Irish office landlord, where fundamental trends have remained strong as the Ireland economy has been continuously outperforming European GDP growth. On 15 April, the Board announced intention for a sales process following strategic review. The company shares have consistently been trading at 15-20% discount to underlying NAV for the last three years, and the company decided to pursue a sale of the company or its portfolio of assets.

 

The biggest detractor was Sumitomo Realty & Development, a leading Japan property company with strong positions in core office and condominium markets in Japan. In March, there were brisk earning reports, however, the market slowed down due to lack of buying incentives. Domestic demand-oriented issues also led to underperformance for the company. The Manager continues to hold this name in the portfolio.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the consumer staples and materials sectors, as well as in Taiwan and Hong Kong. Exposures to the information technology and industrials sectors, as well as in Germany and Japan, detracted from relative returns. As of month end, the Fund was overweight Taiwan and underweight Germany.

 

The holding that contributed the most to the Fund’s return during the month was Li Ning Company Limited (2331-HK). Li Ning is one of the top two sports and fitness apparel and footwear providers in China. The Manager has owned the stock for several quarters following a successful turnaround, rebranding, and a major product overhaul, which occurred during 2016 and 2017. Recent outperformance has been driven by stronger-than-expected year end results reported in late March, and a better-than-expected outlook highlighted by management for both the company and the Chinese consumer in general.

 

The holding that detracted the most from the Fund’s return during the month was TAG Immobilien AG (TEG-DE). It is a real estate company that acquires, develops and manages residential real estate properties in Germany. Although it was the biggest detractor, TAG Immobilien shares have, so far, outperformed the MDAX stock Index. The Manager continues to hold this name in the portfolio.

Sources: Driehaus Capital Management LLC, FactSet Research Systems, Inc., Reuters and Bloomberg.

 

Featured securities were the top contributor to or detractor from return and were held by the Fund at some point during the month of April 2019. The performance numbers for the Fund are provided by VAM Funds (Lux). The performance discussed above represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted.

 

The information presented is intended for the sole and exclusive use of VAM Funds and contains confidential information that should only be relied on by the intended recipient.

 

Disclaimer

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