VAM Managed Funds (Lux) Commentaries

January 2020 (click to download)

VAM DRIEHAUS FUND

As proxies for larger, broad equity exposures, note that the MSCI All Country World Index was down -1.10% and the S&P 500 was down -0.04%. On a relative basis, the VAM Driehaus Fund’s return was hurt by its exposures to emerging markets equities and to smaller cap equities outside the United States.

The market outlook for January and the new year started off bright. The Federal Reserve was dovish as it successfully reduced rates several times in 2019 and the inflation picture remained benign. Earnings and economic conditions were stable to improving. The largest parts of the US economy, the consumer and services segments, remained positive. The manufacturing segment, which had been a drag throughout 2019, continued to improve. The sentiment on trade policy also turned up in January as the US and China have a truce, for now, as the Phase 1 agreement was signed during the month. As was the USMCA agreement, the updated NAFTA deal with Mexico and Canada. This positive backdrop allowed US equities to perform strongly for the first half of January as equities hit new highs. Then the Coronavirus hurt equity multiples as the epidemic grew, and uncertainty and fear caused stocks to give back their early January gains.

VAM DISCRETIONARY FUNDS

VAM Cautious Fund

Equity markets were infected with fears that the Coronavirus outbreak in Wuhan, China, would be a headwind for growth globally given the knock-on impact it would likely have across supply chains globally. Emerging market equities fell the heaviest, down around 4% in Sterling terms. UK equities were down by around 3% whilst global (ex UK) equities were down by less than 1% after being aided on a relative basis by some better-than-expected results in US large cap stocks. The Manager continues to monitor developments in China and remains prepared to take advantage of any short-term volatility or disruptions to increase its investments in strong businesses that can deliver.

For the UK market, January witnessed the Bank of England keeping its base rate steady at 0.75% after recent macroeconomic data for the region was not as weak as many had expected. At 11 pm on the 31st of January, the UK officially left the EU which represents the passing of a key milestone for Boris’ Conservatives. Sterling, which proved to be the most reactive barometer for Brexit developments, rose 0.70% against the Euro in January, whilst it fell 0.40% and 0.70% against the US Dollar and Japanese Yen respectively. There remains a lot of ground to cover before a deal agreeable to both sides is signed. Boris’ self-imposed 11-month timescale to complete such a deal before the end of the year appears optimistic, and the Manager remains interested to learn of any developments on the likely future trading relationship between the UK and Europe as and when they are announced.

VAM Balanced Fund

Equity markets were infected with fears that the Coronavirus outbreak in Wuhan, China, would be a headwind for growth globally given the knock-on impact it would likely have across supply chains globally. Emerging market equities fell the heaviest, down around 4% in Sterling terms. UK equities were down by around 3% whilst global (ex UK) equities were down by less than 1% after being aided on a relative basis by some better-than-expected results in US large cap stocks. The Manager continues to monitor developments in China and remains prepared to take advantage of any short-term volatility or disruptions to increase its investments in strong businesses that can deliver.

For the UK market, January witnessed the Bank of England keeping its base rate steady at 0.75% after recent macroeconomic data for the region was not as weak as many had expected. At 11 pm on the 31st of January, the UK officially left the EU which represents the passing of a key milestone for Boris’ Conservatives. Sterling, which proved to be the most reactive barometer for Brexit developments, rose 0.70% against the Euro in January, whilst it fell 0.40% and 0.70% against the US Dollar and Japanese Yen respectively. There remains a lot of ground to cover before a deal agreeable to both sides is signed. Boris’ self-imposed 11-month timescale to complete such a deal before the end of the year appears optimistic, and the Manager remains interested to learn of any developments on the likely future trading relationship between the UK and Europe as and when they are announced.

VAM Growth Fund

Equity markets were infected with fears that the Coronavirus outbreak in Wuhan, China, would be a headwind for growth globally given the knock-on impact it would likely have across supply chains globally. Emerging market equities fell the heaviest, down around 4% in Sterling terms. UK equities were down by around 3% whilst global (ex UK) equities were down by less than 1% after being aided on a relative basis by some better-than-expected results in US large cap stocks. The Manager continues to monitor developments in China and remains prepared to take advantage of any short-term volatility or disruptions to increase its investments in strong businesses that can deliver.

For the UK market, January witnessed the Bank of England keeping its base rate steady at 0.75% after recent macroeconomic data for the region was not as weak as many had expected. At 11 pm on the 31st of January, the UK officially left the EU which represents the passing of a key milestone for Boris’ Conservatives. Sterling, which proved to be the most reactive barometer for Brexit developments, rose 0.70% against the Euro in January, whilst it fell 0.40% and 0.70% against the US Dollar and Japanese Yen respectively. There remains a lot of ground to cover before a deal agreeable to both sides is signed. Boris’ self-imposed 11-month timescale to complete such a deal before the end of the year appears optimistic, and the Manager remains interested to learn of any developments on the likely future trading relationship between the UK and Europe as and when they are announced.

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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