VAM Managed Funds (Lux) Commentaries

October 2020 (click here to download)

VAM DRIEHAUS FUND

As proxies for larger, broad equity exposures, note that the MSCI All Country World Index was down 2.43% and the S&P 500 was down 2.66% for the month. On a relative basis, the VAM Driehaus Fund’s return was aided by its exposures to smaller capitalisation growth-oriented US equities and to Emerging Markets equities.

As of early November, the results of the US election are becoming clearer as former Vice President Joe Biden will be (likely – not official yet) the next US President. The other key outcome to be considered is that of the US Senate. The Republicans have held control of the Senate for years and are likely to retain control of that side of Congress. However, it is not official yet and won’t be until early January when two seats have “run-off” elections and are ultimately decided. Who controls the Senate is crucial as it will determine the pace of new legislation. A Republican Senate would suggest “gridlock” or a “check and balance” against potential higher taxes, new regulations and other policies that may be unfriendly to the equity market. Also, in early November, the efficacy of the upcoming Covid vaccines is becoming clearer as Pfizer reported very robust results suggesting major progress is coming in the months ahead to contain and, ultimately, limit the virus. This should ultimately create some sector rotation between Covid winners and losers, with a further reopening creating a more even equity market, with both secular and cyclical (valueoriented) industries benefitting.

VAM DISCRETIONARY FUNDS

VAM Cautious Fund

Equities had a turbulent ride in October, with a strong first couple of weeks before uncertainty around the US election result and further delays to the passing of the much debated US stimulus bill hijacked investor sentiment, and sent the market into a downturn. Global equities ended the month 3% down in GBP terms, reflecting much of this uncertainty; with markets having run so hard since March, valuations have become highly sensitive to any noise which might have the potential to hinder short-term business prospects. As many European nations return to lockdown and cases in the US continue to rise, government measures seem likely to encumber economic activity over the coming months, and will place further stress on many businesses which are still reeling from the woes of Spring.

In fixed income, returns have been relatively flat throughout the month with yields stabilising at the levels they retraced to in September as the lack of a stimulus package failed to provide any upward support. Against a less optimistic near-term economic backdrop, spreads widened in high yield bonds towards the end of October, undoing some of the returns which had been achieved over the first half of the month. Government bonds and investment grade credit are yielding 0.3% and 1.4% respectively, reflecting muted return prospects in these assets and requiring investors to look further along the credit spectrum in pursuit of returns.

VAM Balanced Fund

Equities had a turbulent ride in October, with a strong first couple of weeks before uncertainty around the US election result and further delays to the passing of the much debated US stimulus bill hijacked investor sentiment, and sent the market into a downturn. Global equities ended the month 3% down in GBP terms, reflecting much of this uncertainty; with markets having run so hard since March, valuations have become highly sensitive to any noise which might have the potential to hinder short-term business prospects. As many European nations return to lockdown and cases in the US continue to rise, government measures seem likely to encumber economic activity over the coming months, and will place further stress on many businesses which are still reeling from the woes of Spring.

In fixed income, returns have been relatively flat throughout the month with yields stabilising at the levels they retraced to in September as the lack of a stimulus package failed to provide any upward support. Against a less optimistic near-term economic backdrop, spreads widened in high yield bonds towards the end of October, undoing some of the returns which had been achieved over the first half of the month. Government bonds and investment grade credit are yielding 0.3% and 1.4% respectively, reflecting muted return prospects in these assets and requiring investors to look further along the credit spectrum in pursuit of returns.

VAM Growth Fund

Equities had a turbulent ride in October, with a strong first couple of weeks before uncertainty around the US election result and further delays to the passing of the much debated US stimulus bill hijacked investor sentiment, and sent the market into a downturn. Global equities ended the month 3% down in GBP terms, reflecting much of this uncertainty; with markets having run so hard since March, valuations have become highly sensitive to any noise which might have the potential to hinder short-term business prospects. As many European nations return to lockdown and cases in the US continue to rise, government measures seem likely to encumber economic activity over the coming months, and will place further stress on many businesses which are still reeling from the woes of Spring.

In fixed income, returns have been relatively flat throughout the month with yields stabilising at the levels they retraced to in September as the lack of a stimulus package failed to provide any upward support. Against a less optimistic near-term economic backdrop, spreads widened in high yield bonds towards the end of October, undoing some of the returns which had been achieved over the first half of the month. Government bonds and investment grade credit are yielding 0.3% and 1.4% respectively, reflecting muted return prospects in these assets and requiring investors to look further along the credit spectrum in pursuit of returns.

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).

This document is intended for use by professional financial advisers only. The distribution of VAM Funds and the offering of the shares may be restricted in certain jurisdictions. Private investors should contact their financial adviser for more details on any of the products featured. It is the responsibility of any person in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdictions. Prospective applicants for shares should inform themselves as to the legal requirements and consequences of applying for, holding and disposing of shares and any applicable exchange control regulations and taxes in the countries of their respective citizenship, residence or domicile. Click for Important Information