VAM Funds (Lux) Commentaries

June 2019 (click to download)

VAM US Micro Cap Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Boot Barn Holdings, Inc. (ticker: BOOT-US). Boot Barn Holdings (BOOT) is the nation’s leading lifestyle retailer of western and work-related footwear, apparel and accessories. BOOT was a leading contributor in June as the stock rallied in response to reduced fears of tariffs on footwear imports from Mexico and a positive update at an investment conference, in which sales trends in May were described as continuing to be strong. The Manager maintained its position.

 

The holding that detracted the most from the Fund’s return during the month was Acer Therapeutics Inc. (ticker: ACER-US). ACER is a clinical stage biopharma company developing therapies to treat genetically-defined orphan diseases. They filed for US Food and Drug Administration approval with their lead drug. In June, the company learned that they would need additional studies to come to market, requiring additional time and funding. The Manager held minimal position in the portfolio into the event, given the asymmetric risk/reward as well as the long-term data and sold its position upon the announcement.

VAM US Small Cap Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Array BioPharma Inc. (ticker: ARRY-US). ARRY is a commercial stage biopharma company, developing therapies to treat genetically-defined cancers. In May, they announced updated clinical data in a subset of colorectal cancer that substantially improved the likelihood that they would reach market in a greenfield indication. In June, Pfizer announced they were acquiring ARRY for a large premium (nearly 60%) and for $11.4 billion. The Manager sold its position after the announcement.

 

The holding that detracted the most from the Fund’s return during the month was Orchard Therapeutics Plc Sponsored ADR (ticker: ORTX-US). ORTX is a commercial stage biopharma company developing ex vivo lentiviral gene therapy products to treat lethal, rare, monogenic diseases and is unique in the marketplace in having multiple programmes with multiple years of proof-of-concept data. In June, they announced a follow-on financing to be able to continue to finance the company’s development strategy. This financing put short-term pressure on the stock. The Manager increased its position through participation in the offering.

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 industrials and consumer discretionary sectors detracted from relative returns. At month end, the Fund was overweight the information technology sector and overweight the industrials sector.

 

The holding that contributed the most to the Fund’s return during the month was Array BioPharma Inc. (ticker: ARRY-US). ARRY is a commercial stage biopharma company, developing therapies to treat genetically-defined cancers. In May, they announced updated clinical data in a subset of colorectal cancer that substantially improved the likelihood that they would reach market in a greenfield indication. In June, Pfizer announced they were acquiring ARRY for a large premium (nearly 60%) and for $11.4 billion. The Manager sold its position after the announcement.

 

The holding that detracted the most from the Fund’s return during the month was Ascendis Pharma A/S Sponsored ADR (ticker: ASND-US). ASND is a clinical stage biopharma company focused on endocrine disorders. In March, they announced results of a randomised registrational study that showed their weekly approach was superior to a daily approach in a billion Dollar+ market. Additional details of the study have come out since then that have not materially changed the Manager’s view on the opportunity, but have raised some new questions on the data, resulting in what it believes to be short-term pressure on the stock. The Manager maintains its position.

VAM US Large Cap Growth Fund

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

 

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. Apple contributed the most this month, though due to nothing company-specific. The company continues to have sensitivity to macro events, including ongoing China–US trade talks.

 

The holding that detracted the most from the Fund’s return during the month was AbbVie, Inc. (ticker: ABBV-US). AbbVie, Inc. is a research-based biopharmaceutical company, which engages in the development and sale of pharmaceutical products. Abbvie declined as it announced the acquisition of Allergan for both cash and stock.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the consumer discretionary and industrials sectors, as well as in Hong Kong and India. Exposures to real estate and health care sectors, as well as in Hungary and South Korea, detracted from relative returns. As of month end, the Fund was overweight in Hong Kong and underweight in South Korea.

 

The holding that contributed the most to the Fund’s return during the month was Alibaba Group Holding Ltd. Sponsored ADR (ticker: BABA-US). Alibaba is the largest e-commerce marketplace and cloud computing provider in China. The stock rebounded in June, along with other Chinese equities, as the market became more optimistic that the G20 Summit meetings at the end of the month would lead to a resumption in trade negotiations between the US and China. Alibaba also performed well during an intense industry promotional period by generating good traction with lower-tier users. The company also reorganised some of its segments, which suggests an increased focus on omnichannel retail and cloud computing.

 

The holding that detracted the most from the Fund’s return during the month was Reliance Industries Limited (ticker: 500325-IN). Reliance Industries is a major producer of refined fuels and petrochemical products as well as an important player in the Indian telecom and retail sectors through its subsidiaries, Reliance Jio and Reliance Retail. The stock underperformed in June due to concern about weak petrochemical and refined product spreads. Without support from favourable developments in Jio or Retail during the month, the softness in refining and petrochemicals showed.

VAM World Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Alteryx, Inc. Class A (ticker: AYX-US). Alteryx is the leading software provider of data science, artificial intelligence and analytics platforms. They are in a sweet spot in a strongly growing end market and are considered the go to software provider for companies in data mining and data analytics. In early May, they reported first quarter results that substantially exceeded consensus estimates. In early June, the company presented at several Growth investor conferences, where they gave an even more positive outlook for the rest of 2019 and 2020. With relatively attractive valuations relative to the software sector and a stronger growth profile, the stock outperformed strongly in both May and June.

 

The holding that detracted the most from the Fund’s return during the month was Adastria Co., Ltd. (ticker: 2685-JP). Adastria operates a chain of clothing retail stores in Japan and throughout neighbouring countries in Asia including China, Hong Kong and South Korea. After years of mismanagement and restructuring, the company began a growth turnaround phase a year ago. No turnaround is without hiccups however, and their earnings results reported in May and June disappointed expectations questioning the sustainability of their turnaround story. Forward guidance implies a few quarters of lacklustre results ahead, so the Manager decided to exit the position at the end of the quarter.

VAM International Real Estate Equity Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Goodman Group (ticker: GMG-AU). Goodman Group is a leading global developer and owner of industrial warehouse space, among the most desirable real estate segments globally, benefitting from e-commerce. Shares outperformed as investors re-rated Australian REITs during June, as investors search for dividend yields. During the month, Blackstone purchased competitor GLP’s US logistics assets, giving investors greater confidence in valuation of logistics asset valuations. The group remains well positioned to deliver double digit earnings growth in the years ahead with strong development pipeline and significant investor interest in the asset class.

 

The holding that detracted the most from the Fund’s return during the month was Deutsche Wohnen SE (ticker: DWNI-DE). Deutsche Wohnen, the largest landlord in Berlin, shares underperformed in June on increased political risk for Berlin residential property. During the month, the Berlin Senate approved a bill to freeze Berlin rents for five years, starting January 2020. While there remain questions on the legality of the measure, the increased political risk led to sector weakness and de-rating as investors grapple to understand implications on future rent and earnings expectations, and property valuations.

VAM International Opportunities Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Li Ning Company Limited (ticker: 8056-JP). Li Ning is one of the top two sports and fitness apparel and footwear providers in China (think of them as the Nike or Adidas of China). The Manager has owned the stock for several quarters following a successful turnaround, rebranding and major product overhaul which occurred during 2016 and 2017. The stock has been performing strongly for several months, after continued reporting of better-than-expected results. This was the case yet again in mid-June, when the company pre-announced strong results for the first half and increased guidance for the remainder of the year due to 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 CyberArk Software Ltd. (ticker: CYBR-US). Cyberark is a leading provider of digital security software designed to protect internal corporate employees’ accounts from “cyber-attacks”. Nothing company-specific led to any material weakness or underperformance as the stock had performed quite strongly during the first few months of the year on a string of stronger-than-expected earnings results and outlooks and the Manager attributes the slight underperformance recently to garden variety profit taking, as valuation has become a bit stretched after such strong outperformance earlier in the year.

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 June 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

This document is intended for use by professional financial advisers only. The distribution of VAM Funds and the offering of the shares may be restricted in certain jurisdictions. Private investors should contact their financial adviser for more details on any of the products featured. It is the responsibility of any person in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdictions. Prospective applicants for shares should inform themselves as to the legal requirements and consequences of applying for, holding and disposing of shares and any applicable exchange control regulations and taxes in the countries of their respective citizenship, residence or domicile. Click for Important Information