VAM Funds (Lux) Commentaries

April 2020 (click here to download)

VAM US Micro Cap Growth Fund

Holdings in the financials and information technology sectors detracted from relative returns. Performance benefitted from holdings in the consumer discretionary and utilities sectors. At month end, the Fund was overweight the consumer discretionary, information technology and financials sectors, and underweight in the utilities sectors.

The holding that detracted the most from the Fund’s return during the month was eHealth, Inc. (ticker: EHTH-US). eHealth is a healthcare information technology company managing a Medicare Advantage Plan insurance brokering website. In April, a short report pressured the stock, despite strong first quarter performance that resulted in positive earnings revisions.

The holding that contributed the most to the Fund’s return during the month was Axsome Therapeutics, Inc. (ticker: AXSM-US). Axsome is a specialty pharmaceutical company developing novel combinations of existing therapies to treat neurologic conditions. In April, Axsome reported positive Phase 3 data in agitation associated with Alzheimer’s, a disease for which there are not currently approved treatments.

VAM US Small Cap Growth Fund

The VAM (Lux) – US Small Cap Growth Fund performance benefitted from holdings in the health care and information technology sectors. Holdings in the financials and industrials sectors detracted from relative returns. At month end, the Fund was overweight the information technology and financials sectors, and underweight the health care and industrials sectors.

The holding that contributed the most to the Fund’s return during the month was Global Blood Therapeutics Inc (ticker: GBT-US). Global Blood Therapeutics is a commercial biopharmaceutical company selling a therapy to treat sickle cell disease. Management were highly visible to investors in April, highlighting their operational and financial flexibility, even in the context of COVID-19. The Manager continues to be enthusiastic about the potential for GBT to drive utilisation beyond current expectations, leading to positive earnings revisions.

The holding that detracted the most from the Fund’s return during the month was eHealth, Inc. (ticker: EHTH-US). eHealth is a healthcare information technology company managing a Medicare Advantage Plan insurance brokering website. In April, a short report pressured the stock, despite strong first quarter performance that resulted in positive earnings revisions.

VAM US Mid Cap Growth Fund

Holdings in the information technology and financials sectors detracted from relative returns. Performance benefitted from holdings in the communication services and realestate sectors. At month end, the Fund was overweight the communication services sector and underweight the real estate, financials and information technology sectors.

The holding that detracted the most from the Fund’s return during the month was eHealth, Inc. (ticker: EHTH-US). eHealth is a healthcare information technology company managing a Medicare Advantage Plan insurance brokering website. In April, a short report pressured the stock, despite strong first quarter performance that resulted in positive earnings revisions.

The holding that contributed the most to the Fund’s return during the month was Global Blood Therapeutics Inc (ticker: GBT-US). Global Blood Therapeutics is a commercial biopharmaceutical company selling a therapy to treat sickle cell disease. Management were highly visible to investors in April, highlighting their operational and financial flexibility, even in the context of COVID-19. The Manager continues to be enthusiastic about the potential for GBT to drive utilisation beyond current expectations, leading to positive earnings revisions.

VAM US Large Cap Growth Fund

Holdings in the information technology and energy sectors detracted from relative returns. Performance benefitted from holdings in the consumer staples and industrials sectors. At month end, the Fund was overweight the information technology sector and underweight the consumer staples, industrials and energy sectors.

The holding that detracted the most from the Fund’s return during the month was HP Inc. (ticker: HPQ-US). HP Inc. engages in the provision of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. HP declined as investors adjusted their estimates downward in light of the current environment.

The holding that contributed the most to the Fund’s return during the month was Amazon.com, Inc. (ticker: AMZN-US). Amazon.com, Inc. engages in the provision of online retail shopping services. While due to nothing company-specific, on a relative basis, Amazon outperformed as investors believe that the company stands to benefit as people flock to e-commerce and online grocery on the heels of the COVID-19 outbreak.

VAM Emerging Markets Growth Fund

Exposures to consumer staples and consumer discretionary sectors, as well as in India and the United States, detracted from relative returns. Performance was aided by holdings in the health care and communication services sectors, as well as in China and Hong Kong. At month end, the Fund was underweight China and India.

The holding that detracted the most from the Fund’s return during the month was GSX Techedu, Inc. Sponsored ADR Class A (ticker: GSX-US). GSX is a Chinese online education company. The company has been experiencing strong growth as the COVID-19 lockdown has increased willingness to use online education services. However, Luckin Coffee, a totally unrelated company, uncovered fraudulent activity which led to increased investor scrutiny of other high-growth Chinese ADRs, with short track records being listed. A short seller also issued a report on GSX, but the allegations have, so far, proven inconclusive. The Fund exited its position in GSX in favour of more established education providers.

The holding that contributed the most to the Fund’s return during the month was Tencent Holdings Ltd. (ticker: 700-HK). Tencent, a digital platform and gaming company, outperformed in April. Tencent’s businesses like online gaming, social media and cloud computing are benefitting from more remote work and digital communications. The company has a strong gaming pipeline and is gaining share in the cloud services market. They are also launching more financial products to leverage their large digital payments user base.

VAM World Growth Fund

Exposures in the information technology and consumer discretionary sectors, as well as in the United States and Australia, detracted from relative returns. Performance was aided by exposures in the health care and real estate sectors, as well as in China and Hong Kong. As of month end, the Fund was overweight China and underweight the United States.

The holding that detracted the most from the Fund’s return during the month was TransUnion (ticker: TRU-US). Transunion is a leading consumer credit reporting agency operating nationally in the US. With a leading position, they have a steady 10-15% annual growth business (during normal economic times). There was no company specific news that caused major underperformance during the month, but the market was rightfully anticipating that business conditions for them had deteriorated rapidly amidst the economic shutdown across the US. Consumers essentially stopped applying for loans for cars, houses, new lines of credit, etc. In late April, the company reported results and, like several other companies, announced they will not give guidance for the remainder of the year, given the lack of visibility on end market demand. The Manager decided to exit the position, simply given the lack of clarity surrounding the outlook for the US consumer for the intermediate term.

The holding that contributed the most to the Fund’s return during the month was Ping An Healthcare and Technology Company Limited (ticker: 1833-HK). Ping An Healthcare is the leading health care software solutions provider in China. They provide an online and mobile platform for consultations, referrals, appointments, and records and data management. As the health services industry continues to expand in China, they are the leading beneficiary of centralised data management and solutions for health service networks, doctors and hospitals. They have generated sales growth in excess of 40% annually for the past three years. A major catalyst which drove accelerated adoption across China’s health care industry occurred six months ago when the Federal Government endorsed the solutions and technology they provide, and mandated adoption rates to accelerate across the industry. There was no specific news that drove the strong performance for the month, more of a realisation by the market that, in the midst of the global pandemic, technology they provide likely accelerates leading to an even stronger growth profile for the company in coming quarters.

VAM International Real Estate Equity Fund

Exposures in Hong Kong and Japan detracted from relative returns. Performance was aided by exposures in Thailand and Germany. As of month end, the Fund was overweight Thailand and underweight Hong Kong.

The holding that detracted the most from the Fund’s return during the month was PSP Swiss Property AG (ticker: PSPN-CH). PSP Swiss Property AG is a holding company that engages in the provision of real estate. PSP Swiss Property declined as growth was revised downward, uncertainty on demand for office space, and potential shock to current occupancy from job losses due to the COVID-19 impacts.

The holding that contributed the most to the Fund’s return during the month was Scentre Group (ticker: SCG-AU). Scentre Group engages in the ownership and operation of pre-eminent shopping centres in Australia and New Zealand. Scentre Group appreciated as the group was granted authorisation to discuss and implement rent relief measures for small to medium shopping centre tenants facing hardship because of the COVID-19 pandemic.

VAM International Opportunities Fund

Exposures to the materials and information technology sectors, as well as in Australia and Sweden, detracted from relative returns. Performance was aided by holdings in the health care and real estate sectors, as well as in Japan and China. As of month end, the Fund was underweight Australia and Japan.

The holding that detracted the most from the Fund’s return during the month was Clicks Group Limited (ticker: CLS-ZA). Clicks Group operates the largest network of retail store chains in South Africa, selling a wide range of consumer discretionary and staple goods from health and beauty to lifestyle, music and small electronics. The company had been one of the bright spots in an otherwise very difficult South African retail environment, but finally succumbed to the negative pressures affecting the local consumer. In mid-April, the company reported weaker than expected quarterly results for the first time since the 2008 financial crisis. Given valuations are still near all-time highs, the Manager decided to exit the position following results. Although the Manager still likes their long-term position and growth outlook, it believes the intermediate term weaker trends will persist for several quarters, and, with record valuations, it believes the risk/reward is not favourable for the foreseeable future.

The holding that contributed the most to the Fund’s return during the month was Ping An Healthcare and Technology Company Limited (ticker: 1833-HK). Ping An Healthcare is the leading health care software solutions provider in China. They provide an online and mobile platform for consultations, referrals, appointments, and records and data management. As the health services industry continues to expand in China, they are the leading beneficiary of centralised data management and solutions for health service networks, doctors and hospitals. They have generated sales growth in excess of 40% annually for the past three years. A major catalyst which drove accelerated adoption across China’s health care industry occurred six months ago when the Federal Government endorsed the solutions and technology they provide, and mandated adoption rates to accelerate across the industry. There was no specific news that drove the strong performance for the month, more of a realisation by the market that, in the midst of the global pandemic, technology they provide likely accelerates leading to an even stronger growth profile for the company in coming quarters.

Sources: Driehaus Capital Management LLC, FactSet Research Systems, Inc., Reuters, Yahoo Finance 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 2020. The performance numbers for the Funds 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.

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