VAM Funds (Lux) Commentaries

December 2021 (click here to download)

VAM US Micro Cap Growth Fund*

The VAM Funds (Lux) – US Micro Cap Growth Fund relative performance benefitted from holdings in the health care and consumer discretionary sectors. Holdings in the energy and real estate sectors detracted from relative returns. At month end, the Fund was overweight the consumer discretionary and energy sectors and underweight the health care and real estate sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Calix, Inc. (Ticker: CALX). The company offers broadband communications access systems and software for fibre and copper-based network architectures that enable communications service providers to transform their networks. CALX appreciated late in December as the company was added to the S&P Midcap Index. The Fund made no changes to the position.

The holding that detracted the most from the Fund’s relative returns during the month was Silvergate Capital Corp. Class A (Ticker: SI). The company is the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry. The stock was a top detractor in December due to a $480m secondary offering early in the month. The Manager made no changes to the position as it believes the new capital can be deployed to support continued rapid growth in digital currency deposits.

VAM US Small Cap Growth Fund

The Fund’s holdings assigned to the industrials and financials sectors were the largest source of negative relative returns. Holdings assigned to the health care and information technology sectors added the most to the Fund’s positive relative returns. At month end, the Fund was underweight the health care sector and overweight the information technology, industrials and financials sectors.

The holding that detracted the most from the Fund’s relative returns during the month was Silvergate Capital Corp. Class A (Ticker: SI). The company is the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry. The stock was a top detractor in December due to a $480m secondary offering early in the month. The Manager made no changes to the position as it believes the new capital can be deployed to support continued rapid growth in digital currency deposits.

The holding that contributed the most to the Fund’s relative returns during the month was Calix, Inc. (Ticker: CALX). The company offers broadband communications access systems and software for fibre and copper-based network architectures that enable communications service providers to transform their networks. CALX appreciated late in December as the company was added to the S&P Midcap Index. The Fund made no changes to the position.

VAM US Mid Cap Growth Fund

Holdings in the consumer discretionary and information technology sectors detracted from relative returns. Performance benefitted from holdings in the health care and financials sectors. At month end, the Fund was underweight the health care, financials, and the information technology sectors and overweight the consumer discretionary sector.

The holding that detracted the most from the Fund’s relative returns during the month was Elastic NV (Ticker: ESTC). Elastic engages in the provision of opensource search and analytics engine services. Elastic detracted in December after the company reported earnings that signalled deceleration in revenue growth trends from 40%+ y/y to mid-30% y/y growth for 2022. The Fund eliminated the position after this earnings update.

The holding that contributed the most to the Fund’s relative returns during the month was Calix, Inc. (Ticker: CALX). The company offers broadband communications access systems and software for fibre and copper-based network architectures that enable communications service providers to transform their networks. CALX appreciated late in December as the company was added to the S&P Midcap Index. The Fund made no changes to the position.

VAM US Large Cap Growth Fund

The VAM Funds (Lux) – US Large Cap Growth Fund performance benefitted from holdings in the information technology and real estate sectors. Holdings in the utilities and consumer staples sectors detracted from relative returns. At month end, the Fund was overweight the real estate sector and underweight the information technology, utilities and consumer staples sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Tesla Inc. (TSLA). Tesla, Inc. engages in the design, development, manufacture, and sale of fully electric vehicles, energy generation and storage systems. The company 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 detracted the most from the Fund’s relative returns during the month was Procter & Gamble Company (PG). Procter & Gamble Co. engages in the provision of branded consumer packaged goods. It operates through the following segments: beauty, grooming, health care, fabric and home care, feminine and family care, and baby. The company 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.

VAM Emerging Markets Growth Fund

Exposures to the information technology and industrials sectors, as well as India and the United States, detracted from relative returns. Performance was aided by holdings in the consumer discretionary and consumer staples sectors, as well as in Argentina and Australia. At month end, the Fund was overweight Argentina and the United States.

The holding that detracted the most from the Fund’s relative returns during the month was JD.com, Inc. Class A (9618-HK). JD.com, Inc. Class A is an e-commerce and logistics service provider in China. The weak performance in China’s internet sector and ADR delisting concerns have caused recent weak performance. An overweight in JD has detracted from performance.

The holding that contributed the most to the Fund’s relative returns during the month was Alibaba Group Holding Ltd. (9988-HK). Alibaba is an e-commerce and internet service platform in China. The stock has been underperforming due to lasting regulatory crackdown and recent ADR delisting concerns. An underweight in Alibaba has contributed to performance.

VAM World Growth Fund

Exposures in the materials and industrials sectors, as well as in Israel and the United States, detracted from relative returns. Performance was aided by exposures in the consumer staples and consumer discretionary, as well as in Argentina and France. At month end, the Fund was underweight the United States and overweight Argentina.

The holding that detracted the most from the Fund’s relative returns during the month was Livent Corporation (Ticker: LTHM). Livent Corp is a leading miner and producer of lithium compounds used in batteries for electric vehicles as well as various agriculture and aerospace applications. It is benefitting from the ongoing acceleration in EV (electric vehicle) adoption globally with expected 25-30% revenue growth over the next several years. There has been no company-specific negative news to cause the recent drawdown in the stock and the Manager views it as normal profit-taking after a strong move the past few months.

The holding that contributed the most to the Fund’s relative returns during the month was Marvell Technology, Inc. (Ticker: MRVL). Marvell Technology is a leading designer and producer of specialty semiconductors for several end markets including security, networking, communications and data storage. It is a major beneficiary of the ongoing 5G shift taking place globally. In addition, it is vertically integrated (it designs and manufactures its own chips), so, it is also benefitting from the current semiconductor shortage that is gripping the globe. The Manager has owned the name for several quarters, but it recently reported Q3 results in early December which substantially exceeded consensus estimates and the Manager expects that to continue for the next several quarters.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the consumer discretionary and health care sectors, as well as in Brazil and Japan. Exposures to the materials and information technology sectors, as well as in Spain and Italy, detracted from relative returns. At month end, the Fund was overweight Brazil and Italy.

The holding that contributed the most to the Fund’s relative returns during the month was Hornbach Holding AG & Co. (HBH-DE). Hornbach Holdings is the leading retailer of do-it-yourself (DIY) building materials and garden supplies in Germany and other smaller European markets. It has been a clear beneficiary, the last two years, from a home improvement trend that has accelerated globally due to the pandemic. It’s a trend the Manager believes is very sustainable even after the world returns to normal, as the work from home phenomena appears to be here to stay (at least increased flexibility on home vs office time), and consumers are spending to improve their home life as much as possible. The Manager has owned the name for nearly two years and it continues to execute quite well with both strong top and bottom line growth and an ongoing store expansion programme through various European markets.

The holding that detracted the most from the Fund’s relative returns during the month was Synthomer PLC (SYNT-GB). Synthomer is a leading supplier of polymers used in coatings, textiles, paper and synthetic materials. The negative drawdown in the stock was caused by an analyst who downgraded the company’s outlook for the next couple years on rising supply concerns leading to pricing and margin pressure. Earnings estimates were lowered approximately 20% for the next two years, so, the Manager expects the name to be under pressure for the near to medium term.

VAM Global Infrastructure Fund

Selecting companies that have the ability to evolve and operates as a leader in their respective industry is a vital part of the Manager’s investment process. Strategic developments are an important driver of diversification and earnings growth. During the month, relevant examples were announced by two of the Fund’s investments. Canadian-listed renewable energy owner Boralex announced that it has commissioned its first floating solar farm in France, located in a former gravel pit undergoing a global redevelopment operation. The facility consists of more than 43,000 photovoltaic panels and will produce enough to meet the energy needs of around 6,400 households. The project was selected under a French Energy Regulatory Commission tender and so will benefit from a feed-in premium energy contract for 20 years. Further to this, US data centre owner Equinix announced that it had entered the African market for the first time. The $320m transaction will provide it with assets in Nigeria, Ghana and Côte d’Ivoire. The FCM Team expect this to add a further growth avenue to its already vast portfolio.

Fund holding Octopus Renewable Infrastructure Trust (“ORIT”) raised £74m in an oversubscribed equity placing, which the Fund took part in. The company continues to scale, and the raise has already allowed it to invest into onshore wind farm projects in the UK and Finland. The FCM Team view the remaining pipeline as high quality, and the Manager’s expertise continues to allow it to source off-book deals at more attractive valuations.

The outlook for listed infrastructure remains positive for 2022. Growing demand for clean energy, the increasing requirement for high quality digital infrastructure and the renewed focus on core infrastructure spending by global governments provide a solid tailwind for the sector. The Fund will continue to focus on investing in best-in-class owners of sustainable infrastructure assets, providing for a genuine source of diversification away from traditional equity and fixed income markets.

*Fund is currently closed to new subscriptions.

Sources: Driehaus Capital Management LLC, Foresight Capital Management, 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 December 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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