VAM Managed Funds (Lux) Commentaries

May 2019 (click to download)

VAM DRIEHAUS FUND

As proxies for larger, broad equity exposures, note that the MSCI All Country World Index was down 5.93% and the S&P 500 was down 6.35% for the full month. On a relative basis, the VAM Driehaus Fund’s returns were aided by the outperformance of its global smaller cap growth exposures.

 

Market sentiment changed quite dramatically for equity investors sparked by United States President Trump’s early afternoon tweet on the 5th of May, setting in motion the renewed prospect of an intensifying trade war. This catalysed the worst month for the MSCI All Country World Index and the S&P 500 Index since December 2018’s global equity market rout. Heading into June, there are a number of key events that will be closely watched by investors which have the potential to set the tone for global markets in the coming months. These include the US Federal Reserve undertaking a framework review during a conference in early June, the European Central Bank (ECB) meeting in early June amid a growing sense of urgency marked by low growth rates and inflation, and the G20 Osaka summit which will be held on the 28th and 29th of June and will be closely watched given the worsening status of the trade war. Investors should be mindful of these, and other economic and geopolitical uncertainties and be prepared for further equity market volatility.

VAM DISCRETIONARY FUNDS

VAM Cautious Fund

After four months of relatively calm markets, financial markets reacted to the escalation of ongoing trade disputes. The US increased tariffs on Chinese imports and cut off some Chinese companies from US technology. While the Chinese considered their response, the US also drew Mexico and India into the trade war, opening up new disputes. Equity markets reacted negatively to the uncertainty, with US stocks falling over 6% and emerging market stocks falling over 7% in US Dollars. Domestic political drama in the UK weakened the currency, and Sterling fell around 3% against both the US Dollar and the Euro, a move which cushioned the pull-back in global equities. Credit spreads widened during May, resulting in just over 1% loss from high yield credit, while investment grade debt as the fall in yields more than compensate for the wider credit spreads. As investors sought out safe haven assets, the UK 10-year gilt generated a return of almost 3% in the month as the yield fell 0.3% to a slim 0.89%.

VAM Balanced Fund

After four months of relatively calm markets, financial markets reacted to the escalation of ongoing trade disputes. The US increased tariffs on Chinese imports and cut off some Chinese companies from US technology. While the Chinese considered their response, the US also drew Mexico and India into the trade war, opening up new disputes. Equity markets reacted negatively to the uncertainty, with US stocks falling over 6% and emerging market stocks falling over 7% in US Dollars. Domestic political drama in the UK weakened the currency, and Sterling fell around 3% against both the US Dollar and the Euro, a move which cushioned the pull-back in global equities. Credit spreads widened during May, resulting in just over 1% loss from high yield credit, while investment grade debt as the fall in yields more than compensate for the wider credit spreads. As investors sought out safe haven assets, the UK 10-year gilt generated a return of almost 3% in the month as the yield fell 0.3% to a slim 0.89%.

VAM Growth Fund

After four months of relatively calm markets, financial markets reacted to the escalation of ongoing trade disputes. The US increased tariffs on Chinese imports and cut off some Chinese companies from US technology. While the Chinese considered their response, the US also drew Mexico and India into the trade war, opening up new disputes. Equity markets reacted negatively to the uncertainty, with US stocks falling over 6% and emerging market stocks falling over 7% in US Dollars. Domestic political drama in the UK weakened the currency, and Sterling fell around 3% against both the US Dollar and the Euro, a move which cushioned the pull-back in global equities. Credit spreads widened during May, resulting in just over 1% loss from high yield credit, while investment grade debt as the fall in yields more than compensate for the wider credit spreads. As investors sought out safe haven assets, the UK 10-year gilt generated a return of almost 3% in the month as the yield fell 0.3% to a slim 0.89%.

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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