VAM Funds (Lux) Commentaries

December 2020 (click here to download)

VAM US Micro Cap Growth Fund

Performance benefitted from holdings in the health care and consumer discretionary sectors. Holdings in the materials and energy sectors detracted from relative returns. At month end, the Fund was overweight the consumer discretionary, energy, and materials sectors and underweight in the health care sector.

The holding that contributed the most to the Fund’s return during the month was Celsius Holdings, Inc. (ticker: CELH). Celsius is a lifestyle fitness and energy drink manufacturer. The company contributed in December as investors grew increasingly enthusiastic about new distribution and shelf space gains at key retailers, along with the stock’s addition to the S&P SmallCap 600 Index.

The holding that detracted the most from the Fund’s return during the month was Trillium Therapeutics Inc. (ticker: TRIL). Trillium is a clinical stage biopharma company developping therapies to treat advanced cancers. In early December, Trillium announced interim clinical dose escalation data at a medical conference. Though investors reacted negatively to the clinical data, Trillium’s profile as the only CD47-targeted company with monotherapy efficacy, and clearly room to go to higher doses safely, makes their profile unique among peers in the space. The Manager continues to maintain exposure.

VAM US Small Cap Growth Fund

Holdings in the health care and financials sectors detracted from relative returns. Performance benefitted from holdings in the information technology and materials sectors. At month end, the Fund was overweight the financials sector and underweight in the health care, materials and information technology sectors.

The holding that detracted the most from the Fund’s return during the month was Invitae Corp. (ticker: NVTA). Invitae sells genetic diagnostic tests for patients across various disease states (women’s health, oncology and others) Invitae is one of the market leaders in testing volume and menu breadth. Over time, they expect their scale and comprehensiveness to enable them to capture outsized share and drive massive cash flows in an incredibly large and dynamic market. In June, Invitae announced a transformative acquisition of ArcherDX which propelled their portfolio to the market lead. In December, the share lock-up from the transaction announced to finance the acquisition expired. This additional supply of the shares in the market pressured the stock price. The Manager expects that supply of shares to be simply a short-term overhang and non-fundamental in nature, and as such, has maintained its exposure.

The holding that contributed the most to the Fund’s return during the month was SiTime Corporation (ticker: SITM). SiTime is a micro-electromechanical system (MEMS) based silicon timing devices manufacturer. SiTime stock appreciated materially in December as the company pre-announced fourth quarter 2020 earnings well above consensus expectations, led by shipments of a leading 5G smartphone model and strong design win momentum, as well as continued strength in the communication infrastructure end market. The Manager made no changes to its position as it believes the company’s strong fundamental momentum will lead to continued upward revisions to consensus earnings estimates in future periods.

VAM US Mid Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was Invitae Corp. (ticker: NVTA). Invitae sells genetic diagnostic tests for patients across various disease states (women’s health, oncology and others) Invitae is one of the market leaders in testing volume and menu breadth. Over time, they expect their scale and comprehensiveness to enable them to capture outsized share, and drive massive cash flows in an incredibly large and dynamic market. In June, Invitae announced a transformative acquisition of ArcherDX which propelled their portfolio to the market lead. In December, the share lock-up from the transaction announced to finance the acquisition expired. This additional supply of the shares in the market pressured the stock price. The Manager expects that supply of shares to be simply a short-term overhang and non-fundamental in nature, and as such, has maintained its exposure.

The holding that contributed the most to the Fund’s return during the month was RingCentral, Inc. Class A (ticker: RNG). RingCentral is a cloud communication and collaboration software vendor. The company appreciated in response to a new partnership with Vodafone to sell RingCentral’s cloud communications platform into Vodafone’s 5 million legacy unified communications as a service (UCaaS) and 30 million business line customer base in Europe. RingCentral currently has ~1 million paying seat customers. The Manager maintained its position exiting the month as it believes this partnership can substantially drive RingCentral’s new customer adds above consensus expectations in upcoming quarters.

VAM US Large Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was SYNNEX Corporation (ticker: SNX). SYNNEX Corp. engages in the provision of distribution, logistics and integration services for the technology industry. The company declined as it closed the spin-off of services business, Concentrix.

The holding that contributed the most to the Fund’s return during the month was Apple Inc. (ticker: AAPL). Apple, Inc. engages in the design, manufacture, and sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services. While due to nothing company-specific, the stock contributed positively to the portfolio in-line with market dynamics and macro sensitivities.

VAM Emerging Markets Growth Fund

Exposures to information technology and materials sectors, as well as South Korea and the Cayman Islands, detracted from relative returns. Performance was aided by holdings in the financials and industrials sectors, as well as in China and Hong Kong. At month end, the Fund was underweight South Korea and China.

The holding that detracted the most from the Fund’s return during the month was Alibaba Group Holding Ltd. Sponsored ADR (ticker: BABA). Alibaba underperformed after a number of unfavourable developments stemming from regulatory actions. First, their highly anticipated IPO of Ant Group was cancelled at the last minute as the regulator intends for Ant to overhaul its business model. Second, the government released a draft paper on anti-monopoly regulations. The exact details and enforcement mechanisms are not yet known, but the proposal seemed to focus on the practice of forced exclusivity with ecommerce merchants (making merchants sell on only one platform). Alibaba was in the cross hairs of both of these developments and the shares subsequently have derated.

The holding that contributed the most to the Fund’s return during the month was Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (ticker: TSM). Taiwan Semiconductor Manufacturing outperformed during December as the company benefitted from strong semiconductor industry demand. In particular, chip demand from Apple was strong as the new iPhone 12 models have been selling well since launch.

VAM World Growth Fund

Exposures in the communication services and health care sectors, as well as in the Cayman Islands and Canada, detracted from relative returns. Performance was aided by exposures in the information technology and consumer staples sectors, as well as in the United States and Germany. At month end, the Fund was overweight the United States and Cayman Islands.

The holding that detracted the most from the Fund’s return during the month was Dada Nexus Ltd. Sponsored ADR (ticker: DADA). Dada is the leading ecommerce platform in China for on demand retail and food and restaurant delivery (think of them as the Doordash or Deliveryhero of China). As with most ecommerce companies globally, they have benefitted strongly from the stay at home/work from home trends that continue to be driven by the ongoing global pandemic. In addition to this driver however, they were just hitting the inflection of accelerating topline growth from services like these rolling out in China. In mid-November, they reported very strong third quarter results substantially exceeding expectations and the stock responded very strongly. This is when the Manager initiated its position. The drawdown in December was the stock giving back some of its previous month’s gains. It was good old-fashioned profit taking, as there was no negative news. The Manager continues to think we are in early innings of their growth story.

The holding that contributed the most to the Fund’s return during the month was RingCentral, Inc. Class A (ticker: RNG). RingCentral is a cloud communication and collaboration software vendor. The company appreciated in response to a new partnership with Vodafone to sell RingCentral’s cloud communications platform into Vodafone’s 5 million legacy unified communications as a service (UCaaS) and 30 million business line customer base in Europe. RingCentral currently has ~1 million paying seat customers. The Manager maintained its position exiting the month as it believes this partnership can substantially drive RingCentral’s new customer adds above consensus expectations in upcoming quarters.

VAM International Real Estate Equity Fund

Exposures in Japan and China detracted from relative returns. Performance was aided by exposures in Australia and Spain. At month end, the Fund was overweight Japan and underweight Australia.

The holding that detracted the most from the Fund’s return during the month was Longfor Group Holdings Ltd. (ticker: 960-HK). Longfor Group Holdings Ltd. is an investment holding company which engages in real estate development. While due to nothing company-specific, the stock was downgraded to neutral as the stock price increased meaningfully against peers and, therefore, its valuation did as well.

The holding that contributed the most to the Fund’s return during the month was Lifestyle Communities Ltd (ticker: LIC-AU). Lifestyle Communities Ltd. engages in the development, ownership and management of land lease communities. The company increased as it provided a positive operations update, which included information on new developments and pipeline of projects.

VAM International Opportunities Fund

Exposures to the materials and consumer discretionary sectors, as well as in Belgium and Canada, detracted from relative returns. Performance was aided by holdings in the information technology and industrials sectors, as well as in Japan and the United Kingdom. At month end, the Fund was overweight Belgium and underweight Japan.

The holding that detracted the most from the Fund’s return during the month was AutoCanada Inc. (ticker: ACQ-CA). AutoCanada is a leading retailer and distributor of automobiles across the Canadian marketplace with both company-owned and franchised auto dealerships. Like many other dealers across several countries globally, they have been benefitting from two growth drivers during the pandemic. The first was a shortage of quality used vehicles due to production and supply chain disruptions from the ongoing pandemic. This led to strong pricing power for the larger dealers that were able to secure adequate inventory. Second, they offer an industry leading (for the Canadian market) internet-based virtual buy and sell experience, which catered quite well to consumers changing tastes for more online-stay-at home shopping versus physically having to go to a showroom or dealership. There was no negative news to cause the pull-back during the month, just normal profit taking after a very strong performance for most of the year (the stock was one of the Manager’s top contributors for the year). The Manager continues to like the company’s outlook and growth runway, but it has trimmed its position back in recent weeks in light of the strong advance over the course of the year.

The holding that contributed the most to the Fund’s return during the month was Xebec Adsorption Inc. (ticker: XBC-CA). Xebec manufactures filtration and purification equipment for compressed air and gases. They are a leading player in the rapidly emerging trend for renewable natural gas and hydrogen in the ongoing push towards clean energy. In early December, they announced a transformational acquisition of Hygear, a leading provider of hydrogen generations solutions for industrial and vehicle fueling applications. The industry is in the very early stages of a major multi-year long-term structural growth cycle. They are positioning themselves as one of the leading beneficiaries with projected 50-100% revenue growth annually over the next three to five years. This acquisition was very well received by the market and led to substantial outperformance during the month.

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 December 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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