VAM Funds (Lux) Commentaries

VAM US Micro Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development-stage biotech company focused on cardiology. During the month, Myokardia released Phase 3 data for their lead drug candidate. The data was positive, causing the stock to appreciate.

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 biotech company focused on mood and neurological disorders. Axsome released positive Phase 3 data in April, which caused the stock to appreciate by >30%. On the heels of April’s gains, Axsome consolidated and gave back some of its gains in May, detracting from the Fund.

VAM US Small Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development-stage biotech company focused on cardiology. During the month, Myokardia released Phase 3 data for their lead drug candidate. The data was positive, causing the stock to appreciate.

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 biotech company focused on treating sickle cell disease. During the month, Global Blood released financial results for the quarter ending in March. The company outperformed consensus expectations for revenue ($14M versus consensus at $4M), but shares underperformed and detracted from the Fund, as some of the upside was anticipated by the market with the stock having doubled from its March low.

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 industrials sectors detracted from relative returns. At month end, the Fund was overweight the communication services sector and underweight the information technology, health care and industrials sectors.

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development-stage biotech company focused on cardiology. During the month, Myokardia released Phase 3 data for their lead drug candidate. The data was positive, causing the stock to appreciate.

The holding that detracted the most from the Fund’s return during the month was Roku, Inc. Class A (ticker: ROKU-US). Roku is an Over The Top (OTT) streaming platform company. Roku reported strong first quarter 2020 earnings in the month of May but withdrew full year guidance given the macro uncertainty that is impacting ad budgets. The Manager held onto its position as it believes the company’s future growth prospects are only temporarily held back by the current macroeconomic environment, and that company-specific datapoints around adoption and engagement remain robust.

VAM US Large Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was American Financial Group, Inc. (ticker: AFG-US). American Financial Group, Inc. is an insurance holding company. It engages in property and casualty insurance, focusing on commercial products for businesses, and in the sale of fixed and fixed-indexed annuities in the retail, financial institutions and education markets. American Financial Group declined as the company reported and lowered guidance due to projected
negative impact surrounding the Coronavirus pandemic.

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 sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services. Apple appreciated along with the market, as many companies (including Apple) announced they would start opening stores in cities that are introducing less restrictive safety measures surrounding the Coronavirus pandemic.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the consumer discretionary and communication services sectors, as well as in Argentina and China. Exposures to health care and industrials sectors, as well as in India and Hong Kong, detracted from relative returns. At month end, the Fund was overweight Argentina and underweight India.

The holding that contributed the most to the Fund’s return during the month was MercadoLibre, Inc. (ticker: MELI-US). MercadoLibre is a marketplace which offers an automated online commerce service. The company is one of the main beneficiaries in Latin America of the ongoing shift from offline to online/digital consumption. MercadoLibre is able to attract more sellers and increase the assortment which, in turn, drives traffic and purchase frequency. MercadoLibre enjoyed solid gross merchandise volume growth in the quarter, up 45%. This most recent crisis also favours companies with a strong balance sheet and with better bargaining power with suppliers such as MercadoLibre. The company also has one of the most compelling financial technology offerings with high potential to cross sell products through the ecosystem.

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 underperformed during May due to concerns over new US regulations to prevent them from supplying chips to Huawei without a licence. Huawei is a meaningful customer for Taiwan Semiconductor and these measures may affect their growth outlook until they can convert capacity to other customers. Additionally, Taiwan Semiconductor announced plans for a new plant in the US. The future economics of this plant relative to their existing capacity is uncertain at this point.

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 the United States and Singapore. Exposures in the industrials sector, as well as in Sweden and China, detracted from relative returns. As of month end, the Fund was underweight the United States and Sweden.

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development-stage biotech company focused on cardiology. During the month, Myokardia released Phase 3 data for their lead drug candidate. The data was positive, causing the stock to appreciate.

The holding that detracted the most from the Fund’s return during the month was COSMOS Pharmaceutical Corporation (ticker: 3349-JP). Cosmos is a leading drug and convenience store operator in Japan. In addition to pharmacy services, they offer groceries, electronics, alcohol and other convenience items. They are one of the few beneficiaries in the current environment of shelter in place and essential only travel outside of your house. The company is also benefitting from a general trend of avoiding large format stores and focusing more on smaller, local neighborhood stores for essential items. In addition to defensive characteristics, they also have a strong new store growth expansion plan in place across many regions of Japan, away from their core base in the Kyushu region. The Manager expects these positive trends to continue long after the reopening of the broader economy occurs, as there appears to be a structural shift underway, again away from larger format stores to smaller locally-based “in your neighborhood” type stores.

VAM International Real Estate Equity Fund

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

The holding that contributed the most to the Fund’s return during the month was Vonovia SE (ticker: VNA-DE). Vonovia is a holding company which engages in the management of residential units. Vonovia reported positive numbers and expects a positive start to the year to continue despite the effects of Coronavirus.

The holding that detracted the most from the Fund’s return during the month was China Overseas Grand Oceans Group Limited (ticker: 81-HK). China Overseas Grand Oceans Group Limited is an investment holding company which engages in property investment and development, and property leasing through its subsidiaries. The company declined as volumes could continue to be weaker than 2019 on all fronts.

VAM International Opportunities Fund

Exposures to the industrials and health care sectors, as well as in United Kingdom and Sweden, detracted from relative returns. Performance was aided by holdings in the information technology and consumer discretionary sectors, as well as in Germany and Netherlands. As of month end, the Fund was overweight Germany and the United Kingdom.

The holding that detracted the most from the Fund’s return during the month was Leonardo SpA (ticker: LDO-IT). Leonardo is the leading technology company in Italy, focused on the aerospace and defence industries specifically for helicopters and other military aircraft, defence systems, naval technologies and satellites. There has been no companyspecific news to cause an outsized negative drawdown in the stock. In fact, the company recently reported strongerthan-expected results and gave an upbeat outlook for 2020. The Manager believes the stock is being caught up in macro concerns relating to the Coronavirus, which may lead to reduced aircraft demand in the near-to-intermediate term. In addition, there has been a strong rotation in the short term in European markets to value instead of growth and the stock is underperforming its value peers on a relative basis.

The holding that contributed the most to the Fund’s return during the month was Shop Apotheke Europe NV (ticker: SAE-DE). Shop Apotheke is benefitting from similar trends in Europe as Cosmos in Japan, except they are entirely online based. The company is operating in eight European countries distributing prescription and non-prescription medications, beauty and personal care products, and natural and health foods. Again, we see a structural inflection taking place, accelerating more online shopping (other companies the Manager owns such as ASOS, an online fashion retailer, are benefitting from similar trends) and Shop Apotheke is well-positioned to strongly benefit from these trends on a medium-to-longer term basis. They have been experiencing 20-25% top line growth for the past two years. This looks set to accelerate further closer to 30% for the next two years and the Manager also believes these stronger trends will accelerate their profitability sooner than expected.

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 May 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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