VAM Funds (Lux) Commentaries

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

 

The holding that contributed the most to the Fund’s return during the month was Palomar Holdings, Inc. (ticker: PLMR-US). Palomar is an innovative insurer focusing on the provision of specialty property insurance for residential and commercial clients. The recent earthquake in Ridgecrest, California prompted a surge in new premiums written for Palomar’s largest line of business, residential earthquake. The Manager added to its position after the Ridgecrest event and the acceleration in growth subsequently drove the stock higher.

 

The holding that detracted the most from the Fund’s return during the month was Telaria Inc (ticker: TLRA-US). Telaria offers a buyer and seller platform for digital online advertising. During the month, software and growth stocks as a group came under major selling pressure, and Telaria was subject to similar selling pressure. The Manager trimmed its position in the stock as part of overall portfolio risk reduction.

VAM US Small Cap Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was M.D.C. Holdings, Inc. (ticker: MDC-US). M.D.C. is a residential homebuilder. The Manager initiated a position in early September, expecting that M.D.C.’s move into entry-level housing and the recent decline in interest rates would lead to an acceleration in orders above consensus expectations. In mid-September, M.D.C. announced that orders in July and August grew 63% vs the consensus estimate of 23%, and the stock rose as a result.

 

The holding that detracted the most from the Fund’s return during the month was Alteryx, Inc. Class A. (ticker: AYX-US). Alteryx sells a self-service data analytics platform. Although Alteryx was the main detractor from the strategy for the month, it still remains a top contributor year-to-date and the largest contributor in the software group. During the month, software and growth stocks as a group came under major selling pressure, and Alteryx was subject to similar selling pressure. The Manager trimmed its position in the stock as part of overall portfolio risk reduction.

VAM US Mid Cap Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Vulcan Materials Company (ticker: VMC-US). Vulcan is the nation’s largest supplier of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. Vulcan has high exposure to countercyclical infrastructure dynamics, and July public construction data reported in early September was strong, bringing year to date growth to +8.3%. Vulcan’s mid-September analyst day revealed industry pricing is accelerating to high-single digits, and Vulcan broadly identified four categories of profitability improvement initiatives moving forward. The combination of both implied upside to consensus margin and earnings per share estimates, and drove the stock higher.

 

The holding that detracted the most from the Fund’s return during the month was Zscaler, Inc. (ticker: ZS-US). ZScaler is a cloud-based security platform vendor. The company issued Fiscal 2020 guidance, which marginally missed consensus expectations and implied a steep drop-off in growth rates. The Manager trimmed its position post the earnings report.

VAM US Large Cap Growth Fund

The VAM Funds (Lux) – US Large Cap Growth Fund performance benefitted from holdings in the information technology and financials sectors. Holdings in the industrials and utilities 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 Apple Inc. (ticker: AAPL-US). Apple, Inc. engages in designing, manufacturing and marketing of mobile communication, media devices, personal computers and portable digital music players. The company was up during this month as it announced a new streaming TV service with a $4.99 per month price point.

 

The holding that detracted the most from the Fund’s return during the month was Facebook, Inc. Class A (ticker: FB-US). Facebook is an American online social media and social networking service company. The company was down during this month as the US Senate announced Big Tech antitrust hearings.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the financials and utilities sectors, as well as in South Africa and China. Exposures to information technology and communication services sectors, as well as in Hong Kong and South Korea, detracted from relative returns. As of month end, the Fund was underweight in South Africa and underweight in Hong Kong.

 

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 semi-conductors, display panels, consumer electronics and appliances. The stock outperformed in September, largely due to increased optimism that a rebound in memory prices is likely to materialise in the next year. Samsung’s smartphone business also performed slightly better-than-expected.

 

The holding that detracted the most from the Fund’s return during the month was Alibaba Group Holding Ltd. Sponsored ADR. (ticker: BABA-US). Alibaba is the largest ecommerce marketplace and cloud computing provider in China. The stock underperformed towards the end of the month due to two factors. First, they held their annual analyst day and did not update their revenue guidance. Some investors had been expecting this. Second, the stock sold off sharply along with other China American depository receipts (ADRs) after Bloomberg reported the Trump Administration is considering limiting US portfolio flows into Chinese ADRs.

VAM World Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Intermediate Capital Group plc (ticker: ICP-GB). Intermediate Capital Group is a leading private equity group operating in the UK and across several western European countries. Given the current strained position of the broader European banking sector, as the leading provider of mezzanine financing in several countries, they are the leading beneficiary of tighter financial conditions and cautious lending standards by most traditional financial institutions. There was no company specific news to drive outperformance during the month, just continued steady performance driven by their ongoing strong fundamental trends.

 

The holding that detracted the most from the Fund’s return during the month was Alteryx, Inc. Class A. (ticker: AYX-US). Alteryx sells a self-service data analytics platform. Although Alteryx was the main detractor from the strategy for the month, it still remains a top contributor year-to-date and the largest contributor in the software group. During the month, software and growth stocks as a group came under major selling pressure, and Alteryx was subject to similar selling pressure. The Manager trimmed its position in the stock as part of overall portfolio risk reduction.

VAM International Real Estate Equity Fund

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

 

The holding that contributed the most to the Fund’s return during the month was Unibail-Rodamco-Westfield SE Stapled Secs Cons of 1 Sh Unibail Rodamco + 1 Sh WFD Unib Rod. (ticker: URW-NL). Unibail-Rodamco-Westfield is a global leading developer and operator of flagship shopping centre. Unibail has underperformed year to date, with slightly improved share performance in September with its high dividend yield. Given slowdown in global growth expectations, central banks, globally, have turned more dovish, leading to lower bond yields globally and further negative in Germany.

 

The holding that detracted the most from the Fund’s return during the month was TLG Immobilien AG (ticker: TLG-DE). TLG is a German commercial property with most exposure to the German office sector that has shown improving fundamentals in recent years. TLG has demonstrated solid track record of sourcing selective acquisitions since going public in 2014. TLG share price was weak during September following the unexpected announcement of a merger between TLG and Aroundtown, where TLG plans to be the acquirer despite being a much smaller company comparatively.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund Performance was aided by holdings in the materials and health care sectors, as well as in Japan and Canada. Exposures to the consumer discretionary and industrials, as well as in Italy and Turkey, detracted from relative returns. As of month end, the Fund was underweight Japan and overweight Italy.

 

The holding that contributed the most to the Fund’s return during the month was Square Enix Holdings Co., Ltd. (ticker: 9684-JP). Square Enix is a Japanese-based developer of entertainment software for online and home video game consoles, and owns the rights to globally popular games such as Dragon Quest and Final Fantasy Series. In early September, their much anticipated newest release in the Dragon Quest series launched with incredible success, substantially exceeding expectations and this led to strong outperformance for the stock during the month.

 

The holding that detracted the most from the Fund’s return during the month was Pegasus Hava Tasimaciligi A.S. (ticker: PGSUS-TR). Pegasus is the largest low-cost airline carrier in Turkey (think of them as the Southwest of Turkey). The main driver of their renewed growth momentum the past 12 months has been a substantial increase in their international capacity with the introduction of new routes allowing them to take market share and grow their international traffic approx. 20% over the past several months. This, along with strong cost management leading to improving yields, has allowed them to post much stronger profitability than expected in each of the last two quarters. There was no company specific negative news or change to their fundamentals or outlook, rather the stock had been a strong outperformer for several months, and the Manager believes it will succumb to normal profit taking after a strong price move.

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 September 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

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