VAM Funds (Lux) Commentaries

VAM US Micro Cap Growth Fund*

The Fund’s holdings assigned to the industrials and information technology sectors were the largest source of positive relative returns. Holdings in the communication services and financials sectors detracted from relative returns. At month end, the Fund was overweight the industrials and energy sectors and underweight the information technology and health care sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Blue Bird Corporation (Ticker: BLBD-US). Blue Bird Corporation engages in the design and manufacturing of school buses. BLBD’s stock price increased by 72.99% in May. MarQ2024 earnings were strong with EPS beating consensus by 89%. BLBD is benefitting from a cyclical recovery in the school bus market, an increased mix of EVs, strong government funding, and having worked off all legacy/low margin backlog. The company raised 2024 revenue, EBITDA, and FCF guidance above consensus as a result.

The holding that detracted the most from the Fund’s relative returns during the month was Summit Therapeutics, Inc. (Ticker: SMMT-US). Summit Therapeutics, Inc. is a development-stage biopharmaceutical company. SMMT experienced a significant increase in its stock price this month (120.99%) after its Chinese licensor reported significant benefit over standard-of-care in treating non-small cell lung cancer. The benchmark owned SMMT while the Fund did not and, as a result, SMMT was a top detractor from Fund performance for the month.

VAM US Small Cap Growth Fund

The Fund’s holdings assigned to the consumer discretionary and consumer staples sectors were the largest source of positive relative returns. Holdings in the utilities and industrials sectors detracted from relative returns. At month end, the Fund was overweight the industrials and energy sectors and underweight the real estate and information technology sectors.

The holding that contributed the most to the Fund’s relative returns during the month was TransMedics Group, Inc. (Ticker: TMDX-US). TransMedics Group, Inc. is a commercial stage medical device company selling extracorporeal devices for the preservation and transport of human organs for transplant. TMDX experienced a 44.91% increase in stock price this month. TMDX reported strong Q1 2024 results, exceeding EPS and revenue estimates, which led to a significant increase in share trading and raised FY revenue projections. Several sellside analysts increased their target prices for the company, citing strong US demand, new program launches, and successful logistics/service strategies.

The holding that detracted the most from the Fund’s relative returns during the month was MicroStrategy Incorporated (Ticker: MSTR-US). MicroStrategy Incorporated provides enterprise analytics and mobility software and is the largest corporate holder of Bitcoin. The company was a top detractor this month as the price of Bitcoin moved up by 10% in May and the benchmark held a very high weighting. The portfolio did not own the stock, therefore, causing it to be the largest detractor.

VAM US Mid Cap Growth Fund

The Fund’s holdings assigned to the industrials and health care sectors were the largest source of positive relative returns. Holdings in the utilities and communication services sectors detracted from relative returns. At month end, the Fund was overweight the industrials and consumer staples sectors and underweight the financials and information technology sectors.

The holding that contributed the most to the Fund’s relative returns during the month was TransMedics Group, Inc. (Ticker: TMDX-US). TransMedics Group, Inc. is a commercial stage medical device company selling extracorporeal devices for the preservation and transport of human organs for transplant. TMDX experienced a 44.91% increase in stock price this month. TMDX reported strong Q1 2024 results, exceeding EPS and revenue estimates, which led to a significant increase in share trading and raised FY revenue projections. Several sell-side analysts increased their target prices for the company, citing strong US demand, new program launches, and successful logistics/service strategies.

The holding that detracted the most from the Fund’s relative returns during the month was Nutanix, Inc. (Ticker: NTNX-US) Nutanix, Inc. engages in the provision of a cloud platform leveraging web-scale engineering and consumer-grade design. NTNX was a top detractor this month after it reported fiscal Q3 2024 results that were broadly better than expected, but guided revenue for the next quarter 1% below expectations. NTNX is seeing a higher number of large deals in the pipeline that have longer sales durations which factored into their guidance. The Manager made no changes to the position as an opportunity related to VMWare displacement remained strong, the Cisco partnership remains in the early stages and is expected to drive an upside to results over the next 12 months.

VAM US Large Cap Growth Fund

The Fund’s holdings assigned to the information technology and consumer discretionary sectors were the largest source of positive relative returns. Holdings in the real estate and communication services sectors detracted from relative returns. At month end, the Fund was overweight the financials and communication services sectors and underweight the health care and utilities sectors.

The holding that contributed the most to the Fund’s relative returns during the month was KLA Corporation (Ticker: KLAC-US). KLA Corp. provides process control and yield management solutions for the semiconductor and related nano-electronics industries. KLAC’s stock price increased by 6.97% this month. KLAC outlined a robust financial outlook for 2024 with expectations of growth in Wafer Fabrication Equipment and significant growth in its service business.

The security that detracted the most from the Fund’s relative returns during the month was Netflix Inc. (Ticker: NFLX-US). Netflix, Inc. is an entertainment services company. 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

Performance was aided by holdings assigned to the communication services and energy sectors, as well as in South Korea and Canada. Exposures to the real estate and financials sectors, as well as India and Indonesia detracted from relative returns. At month end, the Fund was overweight Mexico and Argentina and underweight Taiwan and China.

The holding that detracted the most from the Fund’s relative returns during the month was Bank Mandiri (Ticker: BMRI-ID). Bank Mandiri is a large, diversified bank in Indonesia. BMRI’s market performance in May saw a decrease of 1.55% in price, with currency fluctuations contributing -0.75 to the overall performance. The stock was weak on softer monthly data showing profits below expectations from softer margins and growth.

The holding that contributed the most to the Fund’s relative returns during the month was Taiwan Semiconductor Manufacturing Co., Ltd. (Ticker: 2330-TW). Taiwan Semiconductor Manufacturing Co., Ltd. is the world’s leading semiconductor foundry. TSMC reported a significant rise in April net revenue and has an optimistic outlook for the semiconductor industry. AI and high-performance computing applications are continuing to drive strong demand for TSMC’s advanced process nodes.

VAM World Growth Fund

Exposures to the financials and information technology sectors, as well as the Philippines and Mexico detracted from relative returns. Performance was aided by holdings assigned to the industrials and communication services sectors, as well as in Japan and the United States. At month end, the Fund was underweight the United States and Japan and overweight the United Kingdom and Italy.

The holding that detracted the most from the Fund’s relative returns during the month was Apple, Inc (Ticker: AAPL-US). Apple, Inc. engages in the design, manufacture, and sale of smartphones, personal computers, tablets, wearables and accessories, and other varieties of related services. AAPL’s Q2 2024 earnings result came in better-than-expected with growth again led by services. Additionally, the market has started to anticipate that AAPL will offer new details at its upcoming developer conference about its roadmap to integrate AI into its product portfolio.

The holding that contributed the most to the Fund’s relative returns during the month was Rolls-Royce (Ticker: RR-GB). Rolls-Royce is a market leader in the wide body aero engine market. RR reiterated its 2024 guidance in May following a strong start to the year. RR has also highlighted its positioning in power systems for datacenters which should benefit from sharp growth in global cloud capex.

VAM International Opportunities Fund

Performance was aided by holdings assigned to the industrials and information technology sectors, as well as in Japan and Spain. Exposures to the communication services and utilities sectors, as well as the United Kingdom and Sweden detracted from relative returns. At month end, the Fund was overweight Italy and Germany and underweight Australia and India.

The holding that detracted the most from the Fund’s relative returns during the month was NICE Ltd. (Ticker: 3046-JP). NICE Ltd. is an Israeli-based provider of information technology systems used to manage and analyse transactional data and multimedia content across various communications platforms. In mid-May, it reported stronger-than-expected results but subsequently announced the abrupt retirement of its CEO who has been very instrumental in executing its growth strategy the past few years and this was not taken kindly by the market. In addition, Microsoft recently announced a set of competing products adding further negative pressure and sentiment for the stock. The Manager continues to hold a small position as it felt the drawdown was an overreaction, but the Manager is in the process of reassessing that view in light of these negative announcements.

The holding that contributed the most to the Fund’s relative returns during the month was Indra Sistemas SA (Ticker: SMHN-DE). Indra Sistemas SA is a Spanish-based provider of information technology data analysis services for transportation markets (railways and road traffic control) and aerospace/defense markets. In early May, the company reported much stronger-than-expected Q1 2024 results driven by 22% growth in revenues in the defense and air traffic management divisions. The company’s information technology division, Minsait, also performed well, despite competitors’ slowdowns as it continues to increase market share in this division. Management gave a slightly more cautious outlook for the year, but the Manager, along with the market, dismissed the conservative tone as the Manager believes strong trends experienced during the quarter will continue for the remainder of the year.

VAM Funds (Lux) – VAM Global Infrastructure Fund

The proximity of inflation to Central Bank targets amidst growth pathways diverging across the US and Europe continue to frame the trajectory of market expectations for interest rates. Across both economies, the respective Central Banks remain cautious of services inflation.

The current macro environment has continued to create valuation gaps in the market, resulting in institutional capital actively seeking to acquire attractively priced assets trading at a discount.

The Fund remains well-positioned in companies that continue to benefit from structural growth drivers with strong cashflow visibility.

Brookfield Renewable Partners (BEP) recently announced a 10.5 GW framework agreement with Microsoft to develop renewable energy projects between 2026 and 2030, focusing on solar, onshore wind and battery storage in the US and Europe, with potential expansions in APAC, India and LatAm. This deal exemplifies the robust demand from corporations for clean power, driven by AI and data center growth. Concurrently, BEP, in partnership with Brookfield Global Transition Fund II and Temasek, is negotiating to acquire the French renewable Independent Power Producers (IPP) Neoen, which has an 8GW portfolio and a 20GW pipeline. This acquisition aligns with BEP’s $8 billion capital deployment strategy and supports the Microsoft agreement. The transaction is expected to finalise in the first half of 2025.

Canadian-listed IPPs reported impressive results during the period. Northland Power Inc. (NPI) showcased strong performance in both earnings and power generation, driven by its offshore and onshore portfolio, while also maintaining its 2024 guidance. Similarly, Boralex (BLX) delivered robust earnings and results with the company well-positioned for further expansion in Canada, benefitting from strong tailwinds and a healthy balance sheet. BLX is equipped for organic growth, bolstered by significant government support for renewables and upcoming requests for proposals (RFPs). These results highlight the underlying need for renewable energy generation to meet growing environmental and energy demands.

UK investor and developer of primary care properties Assura (AGR) recently announced a 20/80 joint venture (JV) with Universities Superannuation Scheme Limited (USS) to invest in essential NHS infrastructure across the UK. Assura will retain a 20% stake and serve as the property and asset manager. The JV will begin with a portfolio of seven assets, valued at £107 million and seeded by AGR, with plans to expand to £250 million within three years and potentially reach £400 million. This JV highlights the opportunity for investment in high-quality health care infrastructure across the UK and showcases AGR’s market credibility as a chosen partner in this initiative.

UK-based investor in onshore and offshore wind projects Greencoat UK Wind (UKW), held a Capital Markets Day (CMD) to outline its long-term strategy and opportunities for asset enhancement. Management highlighted its high-level of active management, which includes ~£140m in value-added enhancements and optimisation initiatives to date. These efforts include increasing generation output, negotiating a better price for output, asset-level changes to assumptions, and diligently managing operating expenses. The company remains committed to exploring new avenues for revenue optimisation, including asset life extensions, while also prioritising capital allocation plans towards share buybacks and dividend increases.

A full divestment of HICL Infrastructure PLC occurred during the period. The proceeds of the sale have been reallocated to digital infrastructure stocks which offer better risk-adjusted returns.

There were no significant portfolio changes to report during the month.

*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 May 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).

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