VAM Funds (Lux) Commentaries

December 2019 (click to download)

VAM US Micro Cap Growth Fund

Holdings in the industrials and health care sectors detracted from relative returns. Performance benefitted from holdings in the real estate and communication services sectors. At month end, the Fund was overweight the industrials sector and underweight in the real estate, communication services and health care sectors.

The holding that detracted the most from the Fund’s return during the month was Impinj, Inc. (ticker: PI-US). Impinj, Inc. is a semiconductor company manufacturing Radio-Frequency Identification (RFID) chips and gateways. The driver of the underperformance occurred after the company issued $75 million of convertible notes, which resulted in sharp selling as investors in the convertible offering hedged their exposure by shorting common stock. The Manager modestly trimmed its position to account for technical breakdown/negative price action.

The holding that contributed the most to the Fund’s return during the month was Axsome Therapeutics, Inc. (ticker: AXSM-US). Axsome is a development stage therapeutics company with a focus on neurology. During the month, Axsome released data from a phase 3 study in major depressive disorder that was positive. The company also released positive data from a phase 3 study in migraine.

VAM US Small Cap Growth Fund

The VAM Funds (Lux) – US Small Growth Fund performance benefitted from holdings in the healthcare and information technology sectors. Holdings in the materials and real estate sectors detracted from relative returns. At month end, the Fund was overweight information technology sector and underweight in the health care, materials and real estate sectors.

The holding that contributed the most to the Fund’s return during the month was Springworks Therapeutics, Inc. (ticker: SWTX-US). Springworks is a development stage therapeutics company focused on oncology. During the month, a large pharma partner of Springworks released data that continued to suggest that there could be synergy between the lead asset at Springworks and a drug in the large pharma partner’s pipeline.

The holding that detracted the most from the Fund’s return during the month was Roku, Inc. Class A (ticker: ROKU-US). Roku, Inc. is an Over The Top (OTT) streaming platform company. In the month of December, a bulge bracket sell side firm downgraded the stock to a sell rating on valuation grounds which caused the weakness. The Manager decided to hold on to its position as it believes the company’s future growth will surprise to the upside, thereby justifying current elevated valuations.

VAM US Mid Cap Growth Fund

The VAM Funds (Lux) – US Mid Cap Growth Fund performance benefitted from holdings in the information technology and health care sectors. Holdings in the communication services and real estate sectors detracted from relative returns. At month end, the Fund was overweight the information technology and communication services sectors, and underweight the health care and real estate 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 is a commercial stage therapeutics company. During the month, Global Blood received FDA approval for their lead asset, marking their first approval as a company. The approval came several months earlier than expected.

The holding that detracted the most from the Fund’s return during the month was Roku, Inc. Class A (ticker: ROKU-US). Roku, Inc. is an Over The Top (OTT) streaming platform company. In the month of December, a bulge bracket sell side firm downgraded the stock to a sell rating on valuation grounds which caused the weakness. The Manager decided to hold on to its position as it believes the company’s future growth will surprise to the upside, thereby justifying current elevated valuations.

VAM US Large Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was GrafTech International Ltd. (ticker: EAF-US). GrafTech International Ltd. manufactures graphite electrode products essential to the production of electric arc furnace steel and other ferrous and non-ferrous metals. GrafTech was downgraded by an analyst citing a majority shareholder overhang and soft market dynamics.

The holding that contributed the most to the Fund’s return during the month was Apple Inc. (ticker: AAPL-US). Apple, Inc. engages in the design, manufacture and marketing of mobile communication, media devices, personal computers and portable digital music players. Besides some analyst upgrades, there were no new company specific events. However, it continues to have sensitivity to macro events, including ongoing US-China trade talks.

VAM Emerging Markets Growth Fund

Exposures to consumer discretionary and information technology sectors, as well as in China and Hong Kong, detracted from relative returns. Performance was aided by holdings in the health care and financials sectors, as well as in Hungary and United Arab Emirates. At month end, the Fund was overweight in Hungary and underweight China.

The holding that detracted the most from the Fund’s return during the month was WHA Corporation Public Company Limited NVDR (ticker: WHA.R-TH). WHA Corp. is an integrated logistics and industrial real estate developer in Thailand. The stock underperformed during December due to management commentary that suggests the company will miss its land sales target in the fourth quarter.

The holding that contributed the most to the Fund’s return during the month was Samsung Electronics Co., Ltd. (ticker: 005930-KR). Samsung Electronics is a diversified technology company that sells semiconductors, display panels, consumer electronics and appliances. The stock outperformed in December due to improved dynamics in the memory market. The NAND industry has started to rebound, and DRAM prices are expected to bottom out earlier than the market had previously expected.

VAM World Growth Fund

The VAM Funds (Lux) – World Growth Fund performance was aided by exposures in the information technology and health care sectors, as well as in China and Brazil. Exposures in materials and communication services sectors, as well as in Taiwan and Canada, detracted from relative returns. As of month end, the Fund was overweight in China and Taiwan.

The holding that contributed the most to the Fund’s return during the month was Notre Dame Intermedica Participacoes SA (ticker: DNDI3-BR). Notre Dame Intermedica is the leading provider of managed health care services (including health, dental and health care plans) in Brazil. They have been benefitting the past two years from a structural shift in the Brazil health care market transitioning to more employer sponsored health care plans for employees resulting in accelerating new customer growth over the past few years. The company has been growing the top line 20-25% and the bottom line 30-35% during this time. There was no company-specific news to drive strong performance during the month.

The holding that detracted the most from the Fund’s return during the month was Roku, Inc. Class A (ticker: ROKU-US). Roku, Inc. is an Over The Top (OTT) streaming platform company. In the month of December, a bulge bracket sell side firm downgraded the stock to a sell rating on valuation grounds which caused the weakness. The Manager decided to hold on to its position as it believes the company’s future growth will surprise to the upside, thereby justifying current elevated valuations.

VAM International Real Estate Equity Fund

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

The holding that contributed the most to the Fund’s return during the month was Cyrela Brazil Realty SA Empreendimentos e Participacoes (ticker: CYRE3-BR). Cyrela is a leading middle-high income residential homebuilder in Brazil. Throughout 2019, the Brazil homebuilding industry outlook continuously improved with rising investor sentiment in Brazil macroeconomic conditions, and lower mortgage rates boosting expectations for growth in homebuilders launches, sales, and earnings outlook. While a number of companies in the sector raised new equity in 2019 to take advantage of the improved outlook, Cyrela’s strong balance sheet allowed the company to pay dividends to shareholders in December.

The holding that detracted the most from the Fund’s return during the month was Goodman Group (ticker: GMG-AU). Goodman Group is a leading developer and owner of industrial property worldwide. Following strong performance over the recent three-year period, in December, Goodman and other leading industrial REITs saw some profit taking, prompted by long-term interest rates moving slightly higher in December with improved global sentiments.

VAM International Opportunities Fund

Exposures to the materials and consumer discretionary sectors, as well as in Canada and Italy, detracted from relative returns. Performance was aided by holdings in the financials and industrials sectors, as well as in the United Kingdom and Australia. As of month end, the Fund was overweight the United Kingdom and Canada.

The holding that detracted the most from the Fund’s return during the month was Net One Systems Co., Ltd. (ticker: 7518-JP). Net One Systems is a leading designer and installer of computer and network communication systems in Japan. They have been benefitting from a long overdue upgrade cycle across corporate Japan to upgrade their information technology infrastructure, security and networks. In mid-December, there was a report released by the Japanese Tax Agency questioning some of their revenue recognition policies which caused a large one-day drawdown in the stock. Since then, the stock has stabilised, but the Manager has reduced its position pending the outcome of the investigation.

The holding that contributed the most to the Fund’s return during the month was Sul America SA Ctf de Deposito de Acoes Cons of 1 Sh + 2 Pfd Shs (ticker: SULA11-BR). Sul America is the largest independent insurance group in Brazil with operations across diverse insurance lines and is the fourth largest overall insurance company in terms of annual premiums. They have been gaining market share across all their lines and benefitting from strong member growth for the past few years. They reported strong quarterly results through 2019, exceeding expectations every quarter. There was no company-specific news to drive strong outperformance during the month, just a continuation of the trend since reporting stronger results in early November.

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 2019. 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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