VAM Managed Funds (Lux) Commentaries

December 2020 (click here to download)

VAM DRIEHAUS FUND

As proxies for larger, broad equity exposures, note that the MSCI All Country World Index was up 4.64% and the S&P 500 was up 3.84%. On a relative basis, the VAM Driehaus Fund’s return was aided by its exposures to smaller capitalisation growth-oriented global equities and its exposure to emerging markets equities.

December was a strong month for equites, particularly US small caps. The strength fed off continued positive sentiment on the imminent release of Covid-19 vaccines. The outlook continues to be positive for the market as vaccine efficacy of around 95% for the two leading candidates is a near best case scenario. This is expected to result in a much quicker return to normalcy and a rapid economic reopening. This sanguine scenario is balanced by a few potential sources of risk and volatility, including a transfer of power in Washington DC and risks that the pace of the distribution of the vaccines may continue to be slower than original expectations.

VAM DISCRETIONARY FUNDS

VAM Cautious Fund

The final month of 2020 continued the trend which has persisted almost unchecked since April of strong equity prices buoyed by government and Central Bank support. Global equities rose 4% throughout the month in USD terms, though slightly less in GBP terms due to a Brexit resolution resulting in Sterling strengthening towards the end of the month. In the UK, the eventual signing of a trade deal with the EU is a positive sign for UK equities after months of concern ahead of the UK leaving the trading bloc. Valuations remain elevated in an environment where the short-term outlook is bleak with many nations struggling to control Covid-19 infection rates without completely closing down their economies. However, taking a longer-term perspective, the start of vaccine roll-outs provides significant cause for optimism amongst investors and, despite these valuation trends, opportunities to identify overlooked names are rife.

The relentless tightening of credit spreads was a theme throughout December as investors are continually forced to fish further down the credit spectrum in pursuit of yield. As such, high yield bonds displayed strong returns of nearly 2% throughout the month which has benefitted portfolios. UK government bond yields contracted slightly in December and the front end of the UK yield curve is now negative until seven years out with the whole curve below 1%.

VAM Balanced Fund

The final month of 2020 continued the trend which has persisted almost unchecked since April of strong equity prices buoyed by government and Central Bank support. Global equities rose 4% throughout the month in USD terms, though slightly less in GBP terms due to a Brexit resolution resulting in Sterling strengthening towards the end of the month. In the UK, the eventual signing of a trade deal with the EU is a positive sign for UK equities after months of concern ahead of the UK leaving the trading bloc. Valuations remain elevated in an environment where the short-term outlook is bleak with many nations struggling to control Covid-19 infection rates without completely closing down their economies. However, taking a longer-term perspective, the start of vaccine roll-outs provides significant cause for optimism amongst investors and, despite these valuation trends, opportunities to identify overlooked names are rife.

The relentless tightening of credit spreads was a theme throughout December as investors are continually forced to fish further down the credit spectrum in pursuit of yield. As such, high yield bonds displayed strong returns of nearly 2% throughout the month which has benefitted portfolios. UK government bond yields contracted slightly in December and the front end of the UK yield curve is now negative until seven years out with the whole curve below 1%.

VAM Growth Fund

The final month of 2020 continued the trend which has persisted almost unchecked since April of strong equity prices buoyed by government and Central Bank support. Global equities rose 4% throughout the month in USD terms, though slightly less in GBP terms due to a Brexit resolution resulting in Sterling strengthening towards the end of the month. In the UK, the eventual signing of a trade deal with the EU is a positive sign for UK equities after months of concern ahead of the UK leaving the trading bloc. Valuations remain elevated in an environment where the short-term outlook is bleak with many nations struggling to control Covid-19 infection rates without completely closing down their economies. However, taking a longer-term perspective, the start of vaccine roll-outs provides significant cause for optimism amongst investors and, despite these valuation trends, opportunities to identify overlooked names are rife.

The relentless tightening of credit spreads was a theme throughout December as investors are continually forced to fish further down the credit spectrum in pursuit of yield. As such, high yield bonds displayed strong returns of nearly 2% throughout the month which has benefitted portfolios. UK government bond yields contracted slightly in December and the front end of the UK yield curve is now negative until seven years out with the whole curve below 1%.

Sources: Driehaus Capital Management LLC and Sanlam Private Wealth.
Sanlam Private Wealth is a trading name of Sanlam Private Investments (UK) Ltd.

Disclaimer

VAM Driehaus, VAM Cautious, Balanced and Growth Funds are compartments of VAM Managed Funds (Lux).

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