VAM Funds (Lux) and VAM Managed Funds (Lux) Commentaries
December 2024
VAM Funds (Lux) Commentaries
VAM US Micro Cap Growth Fund*
The Fund’s holdings assigned to the industrials and information technology sectors detracted from relative returns. Holdings in the energy and health care sectors were the largest source of positive relative returns. At month end, the Fund was underweight the information technology and health care sectors, and overweight the consumer discretionary and industrials sectors.
The holding that detracted the most from the Fund’s relative returns during the month was SoundHound AI, Inc (Ticker: SOUN-US). SoundHound AI, Inc. engages in the development, owning, and commercialisation of voice, sound, and natural language artificial intelligence technologies and related activities. SOUN was a top detractor for the month as the benchmark held a larger weighting in the stock compared to the portfolio. SOUN appreciated after it issued a press release noting Church’s Texas Chicken was piloting its voice-based AI ordering at its drive-thru.
The holding that contributed the most to the Fund’s relative returns during the month was Xometry, Inc. (Ticker: XMTR-US). Xometry, Inc. operates a manufacturing marketplace. XMTR was a top contributor for the month driven by an improvement in the November US Manufacturing PMI report released in early December. Additionally, XMTR received favorable updates from the sell side including a rating upgrade, favorable new coverage and positive estimate revisions. These updates came after XMTR reported September quarter 2024 results above consensus estimates in November and gave a preliminary 2025 outlook that calls for accelerating revenue growth. Their report demonstrated continued share gains and strong international growth. XMTR is positioned to benefit from the current environment that consists of tariff/supply chain uncertainty, improvement in relevant macro indicators such as manufacturing PMIs, and continued onshoring.
VAM US Small Cap Growth Fund
The Fund’s holdings assigned to the consumer discretionary and information technology sectors detracted from relative returns. Holdings in the materials and financials sectors were the largest source of positive relative returns. At month end, the Fund was underweight the financials and health care sectors and overweight the information technology and industrials sectors.
The holding that detracted the most from the Fund’s relative returns during the month was Core Scientific Inc (Ticker: CORZ-US). Core Scientific, Inc. operates datacenter facilities for Bitcoin mining and provides hosting and infrastructure solutions to AI Cloud service companies. CORZ was a top detractor for the month as Bitcoin prices pulled back 15% in the last two weeks of the year from the all-time high level of $110,000.
The holding that contributed the most to the Fund’s relative returns during the month was Astera Labs, Inc. (Ticker: ALAB-US). Astera Labs, Inc. designs semiconductors used in high-speed connectivity applications in data centers, such as PCIe retimers and switches. ALAB was a top contributor for the month as the company was seen as a top beneficiary in having the highest dollar content in providing connectivity solutions to Amazon’s internally developed ASIC based AI processor engine, Trainium 2. Additionally, there was much enthusiasm over its new product pipeline and rising demand from AI server customers.
VAM US Mid Cap Growth Fund
The Fund’s holdings assigned to the information technology and consumer discretionary sectors detracted from relative returns. Holdings in the energy and communication services sectors were the largest source of positive relative returns. At month end, the Fund was underweight the real estate and materials sectors and overweight the consumer staples and industrials sectors.
The holding that detracted the most from the Fund’s relative returns during the month was Carvana Co. (Ticker: CVNA-US). Carvana Co. is the largest eCommerce platform for buying and selling used cars. CVNA was a top detractor for the month as the stock pulled back due to concerns about rising interest rates which impact CVNA’s cost of funds and borrowing rates for customers.
The holding that contributed the most to the Fund’s relative returns during the month was Astera Labs, Inc. (Ticker: ALAB-US). Astera Labs, Inc. designs semiconductors used in high-speed connectivity applications in data centers, such as PCIe retimers and switches. ALAB was a top contributor for the month as the company was seen as a top beneficiary in having the highest dollar content in providing connectivity solutions to Amazon’s internally developed ASIC based AI processor engine, Trainium 2. Additionally, there was much enthusiasm over its new product pipeline and rising demand from AI server customers.
VAM World Growth Fund
The VAM Funds (Lux) – World Growth Fund outperformed its benchmark, the MSCI All Country World Index, this month. Performance was aided by holdings assigned to the health care and information technology sectors, as well as in the United States and Israel. Exposures to the communication services and financials sectors, as well as in the Netherlands and Germany detracted from relative returns. At month end, the Fund was overweight the United Kingdom and Germany and underweight the United States and Canada.
The holding that contributed the most to the Fund’s relative returns during the month was Astera Labs, Inc. (Ticker: ALAB-US). Astera Labs, Inc. designs semiconductors used in high-speed connectivity applications in data centers, such as PCIe retimers and switches. ALAB was a top contributor for the month as the company was seen as a top beneficiary in having the highest dollar content in providing connectivity solutions to Amazon’s internally developed ASIC based AI processor engine, Trainium 2. Additionally, there was much enthusiasm over its new product pipeline and rising demand from AI server customers.
The holding that detracted the most from the Fund’s relative returns during the month was KKR & CO, Inc. (Ticker: KKR-US). KKR & CO., Inc. operates as an investment firm that provides alternative asset management as well as capital markets and insurance solutions. KKR was a top detractor for the month as the shares consolidated after strong gains year to date, likely due to profit taking and an update mid-month on gross realizations that was just in-line with expectations.
VAM Global Infrastructure Fund
At its December 2024 meeting, the Federal Reserve cut interest rates by 25bps bringing the total rate cuts to 100bps since September. Despite the cut, Treasury yields moved out after the Federal Reserve increased its inflation forecast for 2025 and dialled back projections for future cuts as officials incorporated sticky inflation and Trump policy expectations into projections. Economic indicators continue to reflect resilience in the U.S. economy and CPI rose to 2.7% in November, up from 2.6% in October 2024.
In the UK, the Bank of England held rates steady in December at 4.75%, noting risks of persistent services inflation driven by higher wages and higher business costs following the Autumn budget announcements.
The ‘last mile’ inflation experience in the US and the UK diverges from Europe, where the European Central Bank continued reducing the policy rate by a further 25bps to 3.0% in December. Persistently weak industrial growth and subdued economic activity reinforce the need for accommodative monetary policy to support the region’s recovery.
Chorus Ltd (“CNU”), a New Zealand-based owner and operator of fibre infrastructure, hosted an Investor Day during the period, which highlighted plans to generate NZ$30-50m from copper cabling recycling and a review of non-core assets, potentially unlocking NZ$95m in value. Looking ahead, Chorus aims to transition to a fully fibre network by 2030, as well an increase in the adoption of its fibre connections by households and businesses, driven by the continued rise in streaming and data consumption. The company reiterated FY25 guidance and its commitment to delivering a sustainable, inflation-linked dividend. The investor day ultimately showcased the stable nature of CNU’s asset base and how management is positioning the company to benefit from the long-term, growing demand for reliable, scalable digital infrastructure.
Northland Power (“NPI”), a Canadian-listed renewable independent power producer, announced the appointment of Christine Healy as President and CEO, effective January 20, 2025, following the previously announced departure of CEO Mike Crawley. Healy brings extensive experience in energy transition, having most recently served as President of Asia, the Middle East, and Australia at AtkinsRéalis, along with other senior roles at various energy-focused companies. This leadership change is viewed positively for Northland Power, occurring at a time when many key projects have already been advanced under Crawley’s leadership. Healy’s expertise aligns well with the company’s growth and energy transition goals, positioning her to lead the next phase of development and strategic expansion.
Innergex (“INE”), a Canadian-listed renewable independent power producer, secured a significant win in BC Hydro’s latest wind request for proposal (RFP), totalling 560 MW of capacity (274 MW net for INE) in partnership with First Nations groups. The projects include a 200 MW wind farm with Stellat’en First Nation, another 200 MW project with West Moberly First Nation, and a 160 MW project with Westbank First Nation. All projects will be awarded 30-year off-take agreements indexed to inflation, with operations expected to start in 2030, providing revenue stability as they move into development. Despite recent challenges, including the impact of rising interest rates and a dividend reset to preserve cash, INE’s focus on high-return projects is expected to drive long-term value. INE’s unique partnerships with First Nations groups has played a key role in the company’s success through the bidding process, reinforcing the company’s medium-term earnings growth outlook.
During the period, Infrastrutture Wireless Italiane (“INW”) was added to the fund. INW is an Italian-listed operator of telecommunications infrastructure and holds a dominant position in Italy, focusing on providing tower and wireless communication infrastructure services to major mobile operators. The position was added due to its attractive valuation, which presented a compelling entry point for the fund. INW benefits from strong, defensive cash flows generated by its asset base, providing significant strategic flexibility for management. This robust cash generation supports deleveraging, share buybacks, and shareholder returns through a stable ~5% dividend.
VAM Managed Funds (Lux) Commentaries
VAM Managed Funds (Lux) – VAM Fund
The month ending December was negative across all currency classes, in line with global market activity. For 2024, performance was positive with high single digit performance across all currencies.
The fourth quarter of 2024 saw a dynamic shift in global financial markets, marked by geopolitical events, evolving monetary policies, and varied regional economic performances. Equities showed resilience in developed markets, while emerging markets experienced divergent trends. Bond yields rose in response to inflationary pressures, and commodities showed mixed performance as energy prices stabilised. Investors navigated a landscape shaped by the US political transition, the UK’s economic recalibration, Europe’s cautious optimism, and mixed signals from Asia and Latin America.
Global equity markets posted strong gains in 2024. Undoubtedly, the main driver was US equities. However, Europe and the United Kingdom lagged behind their US counterparts. In particular the tech sector posted gains as energy fell behind. Concerns about a potential economic slowdown in China, combined with rising geopolitical tensions in Ukraine, dampened market confidence. Investor sentiment remains tentative as Donald Trump assumes office especially as over 60 countries went to the polls during the year.
Investor sentiment remains tentative as Donald Trump assumes office especially as over 60 countries went to the polls during the year.
VAM Managed Funds (Lux) – VAM Cautious Fund
The end of each year is usually a period for gift-giving, spending time with family, and higher-than-average equity market returns. The latter wasn’t part of the agenda this year though as global stocks fell in December, bringing a slightly underwhelming end to what had been a strong year for global equities. The spotlight was on the Federal Reserve in December, as it lowered its policy rate 25bps and provided hawkish-looking interest rate projections for the year ahead. Its scaled back interest rate cut expectations was a result of persistently sticky inflation. The Federal Reserve’s preferred measure of inflation, the core PCE (personal consumption expenditure) increased 2.8% year-on-year in November. This led to the second worst trading day of 2024 for US markets, dragging down other markets with it. Otherwise, US economic data for November remained generally upbeat, consumer spending was robust, jobs growth rebounded, and business surveys showed a buoyant services sector.
Turning to the UK, markets were unable to shake the negativity surrounding the Labour government’s autumn budget, moving down 1.2%. The Bank of England also kept its base rate unchanged at 4.75% in a split decision, while forecasting fewer rate cuts for the year ahead. Turning to Europe, political instability was a key feature for the month. French President Emmanuel Macron appointed Francois Bayrou as new prime minister, as former PM Michel Barnier was removed in a no confidence vote as other parties didn’t back his budget. While in Germany, the three-party coalition collapsed.
Finally, to fixed income where Gilt yields increased (or gilt prices decreased) over the month, as markets priced in slower BoE rate cuts in 2025. Even as the Fed cut rates, US Treasury yields rose as bond markets look ahead to what could be a shortened cutting cycle and potentially inflationary policies from incoming President Donald Trump. Higher yield bonds outperformed its investment grade counterparts as the Trump administration is expected to promote corporate profitability.
VAM Managed Funds (Lux) – VAM Balanced Fund
The end of each year is usually a period for gift-giving, spending time with family, and higher-than-average equity market returns. The latter wasn’t part of the agenda this year though as global stocks fell in December, bringing a slightly underwhelming end to what had been a strong year for global equities. The spotlight was on the Federal Reserve in December, as it lowered its policy rate 25bps and provided hawkish-looking interest rate projections for the year ahead. Its scaled back interest rate cut expectations was a result of persistently sticky inflation. The Federal Reserve’s preferred measure of inflation, the core PCE (personal consumption expenditure) increased 2.8% year-on-year in November. This led to the second worst trading day of 2024 for US markets, dragging down other markets with it. Otherwise, US economic data for November remained generally upbeat, consumer spending was robust, jobs growth rebounded, and business surveys showed a buoyant services sector.
Turning to the UK, markets were unable to shake the negativity surrounding the Labour government’s autumn budget, moving down 1.2%. The Bank of England also kept its base rate unchanged at 4.75% in a split decision, while forecasting fewer rate cuts for the year ahead. Turning to Europe, political instability was a key feature for the month. French President Emmanuel Macron appointed Francois Bayrou as new prime minister, as former PM Michel Barnier was removed in a no confidence vote as other parties didn’t back his budget. While in Germany, the three-party coalition collapsed.
Finally, to fixed income where Gilt yields increased (or gilt prices decreased) over the month, as markets priced in slower BoE rate cuts in 2025. Even as the Fed cut rates, US Treasury yields rose as bond markets look ahead to what could be a shortened cutting cycle and potentially inflationary policies from incoming President Donald Trump. Higher yield bonds outperformed its investment grade counterparts as the Trump administration is expected to promote corporate profitability.
VAM Managed Funds (Lux) – VAM Growth Fund
The end of each year is usually a period for gift-giving, spending time with family, and higher-than-average equity market returns. The latter wasn’t part of the agenda this year though as global stocks fell in December, bringing a slightly underwhelming end to what had been a strong year for global equities. The spotlight was on the Federal Reserve in December, as it lowered its policy rate 25bps and provided hawkish-looking interest rate projections for the year ahead. Its scaled back interest rate cut expectations was a result of persistently sticky inflation. The Federal Reserve’s preferred measure of inflation, the core PCE (personal consumption expenditure) increased 2.8% year-on-year in November. This led to the second worst trading day of 2024 for US markets, dragging down other markets with it. Otherwise, US economic data for November remained generally upbeat, consumer spending was robust, jobs growth rebounded, and business surveys showed a buoyant services sector.
Turning to the UK, markets were unable to shake the negativity surrounding the Labour government’s autumn budget, moving down 1.2%. The Bank of England also kept its base rate unchanged at 4.75% in a split decision, while forecasting fewer rate cuts for the year ahead. Turning to Europe, political instability was a key feature for the month. French President Emmanuel Macron appointed Francois Bayrou as new prime minister, as former PM Michel Barnier was removed in a no confidence vote as other parties didn’t back his budget. While in Germany, the three-party coalition collapsed.
Finally, to fixed income where Gilt yields increased (or gilt prices decreased) over the month, as markets priced in slower BoE rate cuts in 2025. Even as the Fed cut rates, US Treasury yields rose as bond markets look ahead to what could be a shortened cutting cycle and potentially inflationary policies from incoming President Donald Trump. Higher yield bonds outperformed its investment grade counterparts as the Trump administration is expected to promote corporate profitability.
*Fund is currently closed to new subscriptions.
Sources: atomos, 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 2024. 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.
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
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