VAM Funds (Lux) Commentaries

April 2021 (click here to download)

VAM US Micro Cap Growth Fund*

Performance benefitted from holdings in the industrials and health care sectors. Holdings in the utilities and consumer staples sectors detracted from relative returns. At month end, the Fund was overweight the industrials and consumer staples sectors and underweight in the health care and utilities sectors.

The holding that contributed the most to the Fund’s relative returns during the month was FuelCell Energy, Inc. (ticker: FCEL). FuelCell Energy manufactures stationary fuel cells for commercial, industrial, government and utility customers. The Manager did not hold a position in FuelCell Energy as it found other investment opportunities in the fuel cell space to be more attractive. The company declined in April as the alternative energy industry fell out of favour with investors.

The holding that detracted the most from the Fund’s relative returns during the month was Overstock.com, Inc. (ticker: OSTK). Overstock.com is an online retailer and technology company. It rose in April after reporting first quarter 2021 earnings above expectations and was a top detractor in April due to a relative underweight position. The Manager expects growth to meaningfully decelerate in coming quarters and continues to avoid the stock.

VAM US Small Cap Growth Fund

Holdings assigned to the industrials and consumer staples sectors added the most to the Fund’s positive relative returns. The Fund’s holdings assigned to the materials and energy sectors were the largest source of negative relative returns. At month end, the Fund’s largest overweight sectors were industrials, materials and energy sectors, and underweight the consumer staples sector.

The holding that contributed the most to the Fund’s relative return during the month was Teradata Corporation (ticker: TDC). Teradata is a provider of database and analytics-related software, products and services. In April, the company pre-announced revenue and profitability above consensus for the first quarter 2021, resulting in stock price appreciation. The Manager did not make any changes to its position.

The holding that detracted the most from the Fund’s relative returns during the month was Viant Technology, Inc. Class A (ticker: DSP). Viant is an advertising software company that enables digital advertisement buying. In April, Viant detracted as trading multiples/valuation for the advertising technology industry came under pressure from rising interest rates. The Manager eliminated the position as technicals sharply deteriorated and the stock faces IPO lockup expiry in a few months that could add further stock supply.

VAM US Mid Cap Growth Fund

Performance benefitted from holdings in the consumer discretionary and industrials sectors. Holdings in the materials and real estate services sectors detracted from relative returns. At month end, the Fund was overweight the consumer discretionary, industrials and materials sectors and underweight in the real estate sector.

The holding that contributed the most to the Fund’s relative returns during the month was Crocs, Inc. (ticker: CROX-US). Crocs is a world leader in innovative casual footwear. Crocs was a top contributor in April after the stock rose in response to reporting first quarter 2021 revenue and earnings significantly above expectations. With exceptional business momentum, the Manager continues to maintain a position and believes estimates remain conservative.

The holding that detracted the most from the Fund’s relative returns during the month was Invitae Corp. (ticker: NVTA-US). Invitae is a commercial-stage diagnostics company selling clinical sequencing-based diagnostics across multiple clinical applications. Invitae’s stock performance was strong into year-end 2020, but with factor rotation into cyclicals in March 2021, pulled back from all-time highs and detracted from performance.

VAM US Large Cap Growth Fund

Holdings in the communication services and health care sectors detracted from relative returns. Performance benefitted from holdings in the real estate and industrials sectors. At month end, the Fund was overweight the real estate sector and underweight the industrials, health care and communication services sectors.

The holding that detracted the most from the Fund’s relative returns during the month was Alphabet Inc. Class C (ticker: GOOG). Alphabet, Inc. is a holding company which engages in the business of acquisition and operation of different companies. It operates through the Google and Other Bets segments. Google detracted to relative performance as it was not owned by the portfolio as it did not meet the model’s criteria which includes a combination of valuation, revision, momentum and duration factors.

The holding that contributed the most to the Fund’s relative returns during the month was United Parcel Service, Inc. Class B (ticker: UPS). United Parcel Service, Inc. operates as a logistics and package delivery company that provides supply chain management services. UPS shares traded higher as the company reported both an EPS and revenue beat. Segments were strong and management affirmed their capital allocation plans for 2021.

VAM Emerging Markets Growth Fund

Performance was aided by holdings in the consumer discretionary and industrials sectors, as well as in China and the United States. Exposures to the materials and utilities sectors, as well as Taiwan and India, detracted from relative returns. At month end, the Fund was underweight China and Taiwan.

The holding that contributed the most to the Fund’s relative returns during the month was EPAM Systems, Inc. (EPAM). EPAM outperformed during April as the market anticipated continued demand recovery for the company’s digital transformation services. The management team has indicated the outlook has remained strong and is increasing hiring to meet demand.

The holding that detracted the most from the Fund’s relative returns during the month was Taiwan Semiconductor Manufacturing Co., Ltd. (2330-TW). Taiwan Semiconductor Manufacturing detracted from performance during April. While the stock was flattish during the month, the ADR premium over the local shares compressed, which weighed on the Fund’s performance. The company’s fundamental outlook remains robust with strong demand across multiple industries and products.

VAM World Growth Fund

Exposures in the industrials and materials sectors, as well as in Sweden and Hong Kong, detracted from relative returns. Performance was aided by exposures in the consumer discretionary and financials sectors, as well as in China and the United Kingdom. At month end, the Fund was overweight China and underweight Sweden.

The holding that detracted the most from the Fund’s relative returns during the month was Cleveland-Cliffs Inc (ticker: CLF). Cleveland Cliffs is a leading manufacturer of pellets, flat rolled carbon steel, stainless steel, and carbon and stainless-steel tubing products. They are benefitting from a very strong pricing environment that the entire sector is benefitting from, after years of underinvestment in the sector. In addition to a strong pricing environment, all indications are pointing to a very strong demand environment over the next two to three years driven by government fiscal investment policies in rebuilding and upgrading US infrastructure. There was no negative news, in fact, the company recently reported stronger-than-expected results and outlook, and the stock responded very favourably to the news. It is one of the Manager’s top positions and it is very upbeat on the outlook for the next six-12 months.

The holding that contributed the most to the Fund’s relative returns during the month was Teradata Corporation (ticker: TDC). Teradata is a provider of database and analytics-related software, products and services. In April, the company pre-announced revenue and profitability above consensus for the first quarter 2021, resulting in stock price appreciation. The Manager did not make any changes to its position.

VAM International Real Estate Equity Fund

Exposures in Japan and China detracted from relative returns. Performance was aided by exposures in the United Kingdom and Singapore. At month end, the Fund was underweight the United Kingdom and Japan.

The holding that detracted the most from the Fund’s relative returns during the month was Daito Trust Construction Co., Ltd. (ticker: 1878-JP). Daito Trust Construction Co., Ltd. engages in the design and construction of apartments, condominiums, rental office buildings, factories and warehouses. Daito Trust Construction traded lower as the company reported results below street expectations driven by declining sales and uncertain sales efficiency metrics.

The holding that contributed the most to the Fund’s relative returns during the month was Sirius Real Estate Limited (ticker: SRE-GB). Sirius Real Estate Ltd. is a holding company which engages in the investment in and development of commercial property through its subsidiaries. Sirius Real Estate traded higher as the company released a trading update, confirming the robust performance of the business driven by higher occupancy and cash collection of rent.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the consumer discretionary and consumer staples sectors, as well as in Canada and Japan. Exposures to the industrials and materials sectors, as well as in Taiwan and Australia, detracted from relative returns. At month end, the Fund was overweight Canada and underweight Taiwan.

The holding that contributed the most to the Fund’s relative returns during the month was AutoCanada Inc. (ticker: ACQ-CA). AutoCanada is a leading retailer and distributor of automobiles across the Canadian marketplace with company owned and franchised auto dealerships. Like many other dealers across several countries globally, they have been benefitting from two growth drivers during the pandemic. The first was a shortage of quality used vehicles due to production and supply chain disruptions due to the pandemic (that continues to this day) which led to strong pricing power for the larger dealers that were able to secure adequate inventory. The second is they offer a Canadian market industry leading internet-based virtual buy and sell experience, which catered quite well to consumers changing tastes for more online stay at home shopping versus physically having to go to a showroom or dealership. In early March, they reported much stronger-than-expected fourth quarter results and gave a stronger outlook for 2021 than consensus was expecting. Like many industries and trends, the Manager is seeing coming out of the pandemic growth trends appear to be lasting “stronger for longer” than many expected.

The holding that detracted the most from the Fund’s relative returns during the month was ASKUL Corporation (ticker: 2678-JP). Askul Corp. is a leading reseller of office equipment products to small and medium sized businesses in Japan. Their key differentiator is scale and size, with a nationwide footprint enabling them to provide products and services on a real time next day delivery basis. They have been undergoing a major transition away from an old industrial minded company to more of a B2B and ecommerce products and service provider which has greatly enhanced profitability in recent quarters. There was no negative news to cause underperformance for the month. In fact, in mid-March they reported stronger-than-expected results and guided for stronger profitability trends for the second half of the year. The Manager continues to like its leading position and its ongoing transition to a leaner more digital and profitable service provider.

*Fund is currently closed to new subscriptions.

Sources: Driehaus Capital Management LLC, FactSet Research Systems, Inc., Reuters, Yahoo Finance and Bloomberg.

Featured securities were the top contributor to or detractor from return and were held by the Fund at some point during the month of April 2021. The performance numbers for the Funds are provided by VAM Funds (Lux). The performance discussed above represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted.

The information presented is intended for the sole and exclusive use of VAM Funds and contains confidential information that should only be relied on by the intended recipient.

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