VAM Managed Funds (Lux) Commentaries

August 2022 (click here to download)

VAM Fund

Once again Central Banks shaped the market action in August. Their focus on bringing inflation under control, despite the inherent risks to the growth outlook, dented investor confidence. Fears of economic slowdown highlighted by the Purchasing Managers’ Index (PMI), which dropped to a 22-month low in July, spooked markets although some economic data was better-than-expected. The Manager also saw some inflation pressures easing as commodity prices fell somewhat.

Uncertainty and fears of recession weighed on the market, especially in Europe where there is no sign of a ceasefire in the war in Ukraine which is intensifying fears of a winter energy crisis. Some grain exports have resumed which has combatted food pricing pressures somewhat, but this has done little to offset gas prices which are at all-time highs.

After the market strength in July, Developed Markets were broadly lower with both the MSCI World and S&P 500 falling 4.1% during the month. Growth stocks suffered far more than the value sector as the momentum trade was the victim of lower conviction. On the other hand, Emerging Markets and Japan fared better, leaving the Topix flat for the year.

Recession risks remain elevated, as shown by the weakness of the Euro, which dropped to parity with the US Dollar.

While inflation seems to have peaked in the US, Eurozone countries are still unlikely to see peak inflation until some point next year. We are already in a technical recession in the US, as there have been two consecutive quarters of negative economic growth, however, some data remains positive. Employment seems to be surprisingly buoyant as new job creation and wages were up while jobless claims were down.

While, on the face of it, this is positive, it may cause the Fed to raise interest rates again in September as wages are contributing to push core inflation to above the Fed target. This hawkish approach was confirmed by Fed Chairman Jerome Powell in his speech at Jackson Hole at the end of August. Markets are expecting a 0.75% increase during September and this has dampened investor outlook somewhat. If this hawkish approach does work and pushes US inflation rates below 4% by the end of the year, it is possible that the US economy may escape a ‘hard landing’ which would likely boost investor sentiment.

The Fund is well positioned for such an eventuality and has built in downside protection from the infrastructure exposure. There is likely to be interim volatility across all global markets, but the positioning within the Fund means it reacts strongly to the upside when markets rally.

VAM DISCRETIONARY FUNDS

VAM Cautious Fund

Over the month of August, inflationary pressures continued with prices edging higher and equity markets remained choppy. UK inflation hit double digits surging to 10.1%, the highest level since 1982. Earnings season continued with further reporting from the Fund’s holdings including Akamai, London Stock Exchange Group and Taylor Wimpey. Towards the end of the month, key policymakers and academics gathered at Jackson Hole for the 45th Annual conference. Chairman of the Fed, Jerome Powell deliberated as to how they will move to combat inflation stating that any further decisions to hike rates will depend on incoming data. The race to become the next UK prime minister continued with Rishi Sunak and Liz Truss continuing to go through their gruelling leadership campaign. Over the month, global equities were up 0.8%, UK equities were down 1.3% and Emerging Market equities were up 5%. In fixed income, UK Gilts were down 8.1%, corporate bonds were down 3.3% and high yield were down 1.3%.

VAM Balanced Fund

Over the month of August, inflationary pressures continued with prices edging higher and equity markets remained choppy. UK inflation hit double digits surging to 10.1%, the highest level since 1982. Earnings season continued with further reporting from the Fund’s holdings including Akamai, London Stock Exchange Group and Taylor Wimpey. Towards the end of the month, key policymakers and academics gathered at Jackson Hole for the 45th Annual conference. Chairman of the Fed, Jerome Powell deliberated as to how they will move to combat inflation stating that any further decisions to hike rates will depend on incoming data. The race to become the next UK prime minister continued with Rishi Sunak and Liz Truss continuing to go through their gruelling leadership campaign. Over the month, global equities were up 0.8%, UK equities were down 1.3% and Emerging Market equities were up 5%. In fixed income, UK Gilts were down 8.1%, corporate bonds were down 3.3% and high yield were down 1.3%.

VAM Growth Fund

Over the month of August, inflationary pressures continued with prices edging higher and equity markets remained choppy. UK inflation hit double digits surging to 10.1%, the highest level since 1982. Earnings season continued with further reporting from the Fund’s holdings including Akamai, London Stock Exchange Group and Taylor Wimpey. Towards the end of the month, key policymakers and academics gathered at Jackson Hole for the 45th Annual conference. Chairman of the Fed, Jerome Powell deliberated as to how they will move to combat inflation stating that any further decisions to hike rates will depend on incoming data. The race to become the next UK prime minister continued with Rishi Sunak and Liz Truss continuing to go through their gruelling leadership campaign. Over the month, global equities were up 0.8%, UK equities were down 1.3% and Emerging Market equities were up 5%. In fixed income, UK Gilts were down 8.1%, corporate bonds were down 3.3% and high yield were down 1.3%.

Sources: Rivers Capital Management and Sanlam Private Wealth.
Sanlam Private Wealth (SPW) is a trading name of Sanlam Private Investments (UK) Ltd and Sanlam Wealth Planning UK Ltd (SWP). SPW and SWP are authorised by the Financial Conduct Authority.

South African Investors: This is a Section 65 approved fund under the Collective Investment Schemes Control Act 45, 2002 (CISCA). Boutique Collective Investments (RF) (Pty) Ltd is the South African Representative Office for this Fund. Boutique Collective Investments (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002).

Disclaimer

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

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