VAM Funds (Lux) Commentaries

January 2021 (click here to download)

VAM US Micro Cap Growth Fund*

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

The holding that detracted the most from the Fund’s return during the month was Plug Power Inc. (ticker: PLUG). Plug Power is a manufacturer of fuel cell systems that are used for the industrial off-road and stationary power markets. The company was a significant outperformer in January after Plug made several favourable announcements. These announcements included a $1.5 billion strategic investment in the company by SK Group and a Memorandum of Understanding (MOU) to launch a 50-50 joint venture with Groupe Renault. Both of these announcements served as a validation of Plug’s leadership position in the hydrogen fuel cell space and were favourably viewed by investors.

The holding that contributed the most to the Fund’s return during the month was PMV Pharmaceuticals, Inc. (ticker: PMVP). PMV is a clinical stage pharmaceutical company developing targeted therapies in oncology. Multiple factors contributed to PMV’s underperformance including the late-stage clinical failure of an indirect competitor in late December (Aprea) and the weakening technical landscape for the peer group. The fundamental outlook for PMV is unchanged from when the Manager initially invested so it made no change to its position.

VAM US Small Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was Docebo, Inc (ticker: DCBO). Docebo is a cloud-based learning management platform vendor. In January, Docebo detracted due to a secondary offering for selling shareholders that pressured the stock price. The Manager participated in the offering and added to its position as the pre-announced results for fourth quarter 2020 showed Docebo continued to grow at a robust growth rate that was above consensus expectations.

The holding that contributed the most to the Fund’s return during the month was Plug Power Inc. (ticker: PLUG). Plug Power is a manufacturer of fuel cell systems that are used for the industrial off-road and stationary power markets. The company was a significant outperformer in January after Plug made several favourable announcements. These announcements included a $1.5 billion strategic investment in the company by SK Group and a Memorandum of Understanding (MOU) to launch a 50-50 joint venture with Groupe Renault. Both of these announcements served as a validation of Plug’s leadership position in the hydrogen fuel cell space and were favourably viewed by investors.

VAM US Mid Cap Growth Fund

Holdings in the consumer discretionary and consumer staples sectors detracted from relative returns. Performance benefitted from holdings in the information technology and communication services sectors. At month end, the Fund was overweight the communication services and consumer discretionary sectors and underweight in the consumer staples and information technology sectors.

The holding that detracted the most from the Fund’s return during the month was Sarepta Therapeutics, Inc. (ticker: SRPT). Sarepta is a commercial stage pharmaceutical company selling therapies to treat muscular dystrophy. Sarepta missed the primary clinical efficacy endpoint in their randomised, controlled phase 2 trial of their gene therapy product, showing modest but non-significant improvement versus placebo. The Manager was surprised, given the previously released data showed much stronger clinical improvements, but managed its risk through a relatively small weighting. The Manager exited the position given the uncertainty of the regulatory and clinical next steps for the programme, the timelines and the relative opportunity for its capital elsewhere.

The holding that contributed the most to the Fund’s return during the month was Plug Power Inc. (ticker: PLUG). Plug Power is a manufacturer of fuel cell systems that are used for the industrial off-road and stationary power markets. The company was a significant outperformer in January after Plug made several favourable announcements. These announcements included a $1.5 billion strategic investment in the company by SK Group and a Memorandum of Understanding (MOU) to launch a 50-50 joint venture with Groupe Renault. Both of these announcements served as a validation of Plug’s leadership position in the hydrogen fuel cell space and were favourably viewed by investors.

VAM US Large Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Microsoft Corporation (ticker: MSFT). Microsoft engages in the development and support of software, services, devices and solutions. The company reported a positive quarter citing broad strength across enterprise, mid-size and small business segments. Specifically, cloud and team’s strength were highlighted. The company also guided above consensus.

The holding that detracted the most from the Fund’s return during the month was Charter Communications, Inc. Class A (ticker: CHTR). Charter Communications engages in the provision of broadband communications services. Its services include Spectrum TV, Spectrum Internet and Spectrum Voice. The company reported a quarter beating on the top line but was impacted by Covid levels in 2020. Overall, internet subs are seen as healthy and the growth outlook is expected to remain strong.

VAM Emerging Markets Growth Fund

Exposures to consumer discretionary and information technology sectors, as well as United States and India, detracted from relative returns. Performance was aided by holdings in the communication services and financials sectors, as well as in China and Taiwan. At month end, the Fund was overweight the United States and underweight China.

The holding that detracted the most from the Fund’s return during the month was Visa Inc. Class A (ticker: V-US). Visa shares were under pressure due to the emergence of new strains of Covid and renewed lockdowns to combat the virus. This weighed on the outlook for travel and cross-border spending.

The holding that contributed the most to the Fund’s return during the month was Tencent Holdings Ltd. (ticker: 700-HK). Tencent outperformed as investors turned incrementally positive on Tencent’s strong ecosystem and monetisation potential, especially its mini programmes and live streaming features. Tencent’s ecosystem provides large potential for increased monetisation. Industry data also shows that mobile games continue to perform well. The shares were further supported by strong southbound inflows from China’s mainland investors.

VAM World Growth Fund

Exposures in the consumer discretionary and health care sectors, as well as in Brazil and Hong Kong, detracted from relative returns. Performance was aided by exposures in the industrials and communication services sectors, as well as in the United States and Sweden. At month end, the Fund was overweight the United States and Brazil.

The holding that detracted the most from the Fund’s return during the month was Cyrela Brazil Realty SA Empreendimentos e Participacoes (ticker: CYRE3-BR). Cyrela is a leading residential and commercial real estate developer and rental property manager in Brazil. The majority of their operations are in leading urban areas such as Sao Paulo and Rio. They have been benefitting for years from increasing development and urban (and suburban) sprawl across most of their major markets. Like most industries, demand was severely interrupted in early/mid 2020 due to the pandemic, but their order and growth trends have been recovering strongly since last summer. There was no specific news to cause short-term underperformance; the Manager views it as a normal pull-back in the context of a longer-term upcycle.

The holding that contributed the most to the Fund’s return during the month was Plug Power Inc. (ticker: PLUG). Plug Power is a manufacturer of fuel cell systems that are used for the industrial off-road and stationary power markets. The company was a significant outperformer in January after Plug made several favourable announcements. These announcements included a $1.5 billion strategic investment in the company by SK Group and a Memorandum of Understanding (MOU) to launch a 50-50 joint venture with Groupe Renault. Both of these announcements served as a validation of Plug’s leadership position in the hydrogen fuel cell space and were favourably viewed by investors.

VAM International Real Estate Equity Fund

Exposures in Japan and Hong Kong detracted from relative returns. Performance was aided by exposures in the United Kingdom and the Philippines. At month end, the Fund was overweight Japan and underweight the United Kingdom.

The holding that detracted the most from the Fund’s return during the month was Vonovia SE (ticker: VNA-DE). Vonovia is a holding company which engages in the management of residential units. While nothing company-specific, the company traded lower as Covid is negatively impacting the residential property industry.

The holding that contributed the most to the Fund’s return during the month was GOLDCREST Co., Ltd. (ticker: 8871-JP). GOLDCREST engages in the development and sale of condominiums. The company announced sales delivering progress in line with expectations making up low profits impacted by Covid lockdowns.

VAM International Opportunities Fund

Exposures to the information technology and financials sectors, as well as in Canada and Hong Kong, detracted from relative returns. Performance was aided by holdings in the energy and materials sectors, as well as in Germany and Sweden. At month end, the Fund was overweight Germany and Canada.

The holding that detracted the most from the Fund’s return during the month was Methanex Corporation (ticker: MX-CA). Methanex is the #1 global producer of methanol (an additive to gasoline, plastics and synthetic wood products). However, this is not some amazing new breakthrough product. It has been around for decades; they are merely the global leader by a wide margin and benefit from normal global growth trends. The stock has corrected recently due to supply shortages at two of their larger manufacturing plants negatively impacting short-term operating results. In the long term, they will likely see reduced demand as electric vehicle adoption accelerates but, for the medium term, the Manager likes the company’s leading position and anchor to the ongoing global recovery.

The holding that contributed the most to the Fund’s return during the month was VERBIO Vereinigte BioEnergie AG (ticker: VBK-DE). Verbio is a German-based leading player in the biodiesel and bioethanol fuels market. If the 2020s are the decade of decarbonisation and continued acceleration in green and clean energy solutions, their proprietary solution which turns toxic raw ingredients into clean biofuels puts them in a sweet spot to benefit from these trends, particularly in the truck, fleet and transportation markets. In addition to these manufacturing solutions, they are able to sell greenhouse gas emission reduction credits through their sale of biofuels, so they have multiple revenue and margin drivers to benefit from the accelerating clean energy trend. Over the past two years, they have been bolstering their product offering and sales footprint in the midst of a major global expansion throughout Europe, the US, and now accelerating in China and Asia. It is too early in the industry’s development to know just how large the ultimate addressable market will be, but the Manager strongly believes it is in the early innings of a multi-year growth runway.

*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 January 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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