VAM Funds (Lux) Commentaries

January 2020 (click to download)

VAM US Micro Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Cardlytics, Inc. (ticker: CDLX-US). Cardlytics, Inc. is a leading purchase intelligence and marketing services provider. The stock was a top contributor in January as the company preannounced fourth quarter 2019 revenue and billings ahead of expectations. The Manager has maintained its position.

The holding that detracted the most from 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. In January 2020, Axsome began to consolidate technically after a >100% price move in December, driven by positive major depressive disorder data. Axsome detracted during the month and the Manager maintained its position.

VAM US Small Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Enphase Energy, Inc. (ticker: ENPH-US). Enphase manufactures microinverters for the solar industry. The stock appreciated as Enphase’s new energy management platform, Ensemble, released in December was well received in the marketplace. Ensemble increases Enphase’s wallet share in an installation 5x, compared to just selling a microinverter. The Manager maintained its position exiting the month.

The holding that detracted the most from the Fund’s return during the month was Global Blood Therapeutics Inc (ticker: GBT-US). Global Blood is a commercial stage therapeutics company. Late in 2019, Global Blood appreciated meaningfully due to early approval for their therapy to treat sickle cell disease. In January, Global Blood partially retraced those gains due to variable projections of initial launch cadence, an NGO review of cost-effectiveness, lack of merger & acquisition and overall weaker stock performance of the biopharma industry. Global Blood detracted during the month and the Manager maintained its position.

VAM US Mid Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was RingCentral, Inc. Class A (ticker: RNG-US). Ringcentral is a cloud communication and collaboration software vendor. The stock appreciated as Ringcentral was close to launching a new product that would be sold by Avaya to its customer base. Avaya has 20x the user base than that of Ringcentral, which makes this re-seller channel meaningful for Ringcentral. The Manager maintained its position exiting the month.

The holding that detracted the most from the Fund’s return during the month was Global Blood Therapeutics Inc (ticker: GBT-US). Global Blood is a commercial stage therapeutics company. Late in 2019, Global Blood appreciated meaningfully due to early approval for their therapy to treat sickle cell disease. In January, Global Blood partially retraced those gains due to variable projections of initial launch cadence, an NGO review of cost-effectiveness, lack of merger & acquisition and overall weaker stock performance of the biopharma industry. Global Blood detracted during the month and the Manager maintained its position.

VAM US Large Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was BorgWarner Inc. (ticker: BWA-US). BorgWarner, Inc. engages in the provision of technology solutions for combustion, hybrid and electric vehicles. BorgWarner pre-announced earnings guiding lower than consensus citing declining global commercial vehicle/off-highway industry volumes.

The holding that contributed the most to the Fund’s return during the month was Microsoft Corporation (ticker: MSFT-US). Microsoft Corp. engages in the development and support of software, services, devices and solutions. Microsoft traded higher during the month as the company reported better than consensus earnings on the back of Cloud strength, solid momentum in Enterprise in the field, and health cash flow generation.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the communication services and energy sectors, as well as in China and Argentina. Exposures to information technology and consumer staples sectors, as well as in Taiwan and Turkey, detracted from relative returns. At month end, the Fund was underweight China and Taiwan.

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 and Technology Company outperformed in January as fear over the Coronavirus outbreak escalated in China. The company offers a unique telemedicine service that allows patients to consult with doctors online. The virus outbreak is likely to drive more patients to the platform, which in turn helps to keep non-infected patients away from hospitals. Looking past the virus, this innovative business model can help to expand medical access and reduce health care system costs in China.

The holding that detracted the most from the Fund’s return during the month was Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (ticker: TSM-US). Taiwan Semiconductor detracted from performance in January despite reporting strong fourth quarter results. While Taiwan Semiconductor remains well-positioned and will benefit from several demand drivers over the next few years, the company is likely to be affected in the short term by demand disruptions related to the Coronavirus outbreak in China.

VAM World Growth Fund

The VAM Funds (Lux) – World Growth Fund performance was aided by exposures in the industrials and information technology sectors, as well as in Germany and Jersey. Exposures in financials and energy sectors, as well as in the United States and Hong Kong, detracted from relative returns. As of month end, the Fund was overweight in Germany and underweight the United States.

The holding that contributed the most to the Fund’s return during the month was Enphase Energy, Inc. (ticker: ENPH-US). Enphase manufactures microinverters for the solar industry. The stock appreciated as their recently launched Ensemble Solution, which is considered the next generation industry standard in solar energy storage solutions, has been gaining a lot of traction and positive commentary from the analysts who cover the company, and given that the share price was fairly depressed following last quarter, the stock has outperformed strongly on the positive news.

The holding that detracted the most from the Fund’s return during the month was M&A Capital Partners Co. Ltd. (ticker: 6080-JP). M&A Capital Partners is the second largest mergers and succession planning advisory firm in Japan. The two leading players in the industry have been reporting very strong growth for several years given the structural shortage of viable successors to literally thousands of small and medium sized businesses across Japan. Unfortunately, nothing in business is always linear and both companies reported weaker-than-expected results for the fourth quarter of 2019, citing a slowdown in the number of deals closed and a lower Dollar value per deal. Given the stock had been a strong outperformer for several months, it was severely punished with a negative reaction following results. The Manager still believes in the long-term structural growth opportunity looking out on a two to three year basis.

VAM International Real Estate Equity Fund

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

The holding that detracted the most from the Fund’s return during the month was Shenzhen Investment Limited (ticker: 604-HK). Shenzhen Investment Ltd. engages in the development of real estate properties. The company traded down as market sentiment was impacted negatively due to the spread of Coronavirus, causing property sales to see a delay in demand.

The holding that contributed the most to the Fund’s return during the month was PSP Swiss Property AG (ticker: PSPN-CH). PSP Swiss Property AG is a holding company which engages in the provision of real estate. While nothing company specific, PSP Swiss traded higher as sell side research initiated on the company with a “Buy” rating, citing the company high quality and the company’s focus on superior quality commercial real estate.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the information technology and consumer staples sectors, as well as in South Korea and Isle of Man. Exposures to the consumer discretionary and materials sectors, as well as in India and Luxembourg, detracted from relative returns. As of month end, the Fund was underweight South Korea and India.

The holding that contributed the most to the Fund’s return during the month was CAE Inc. (ticker: CAE-CA). CAE is the leading provider of flight simulation and training solutions to aerospace and defence industries. There is an ongoing structural shortage of trained flight specialists and training equipment, and they are the leading beneficiary of this structural growth trend. There was no specific news that drove strong outperformance in January, just a continuation of the strong trends they have reported in recent quarters.

The holding that detracted the most from the Fund’s return during the month was Constellium SE Class A (ticker: CSTM-US). Constellium is a leading specialty aluminum producer supplying the auto, aerospace, defence and industrial sectors. The overall aluminum market has been suffering from subdued demand and pricing due to the ongoing low growth trends globally across industrial and machinery sectors. They have benefitted from being a specialty producer rather than a commoditised product producer but even they are not immune to the slow global growth trends of the past few quarters and the stock has been weak in recent months on the back of weaker-than-expected demand and pricing trends. The Manager continues to believe in their specialty product mix however, and believes as global industrial trends bottom out and begin to improve, they will be a leading beneficiary of the recovery.

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 January 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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