VAM Funds (Lux) Commentaries

VAM US Micro Cap Growth Fund*

VAM Funds (Lux) – US Micro Cap Growth Fund relative performance benefitted from holdings in the consumer discretionary and information technology sectors. Holdings in the health care and communication services sectors detracted from relative returns. At month end, the Fund was overweight the consumer discretionary sector and underweight in the information technology, health care and communication services sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Riot Blockchain Inc (ticker: RIOT). Riot is a bitcoin mining company. In May, the stock declined on an absolute basis, as prices of Bitcoin and other related cryptocurrency assets declined versus the US Dollar. The Fund did not own a position in Riot as the company’s valuation was several multiples of the value of Bitcoin that the company had on its balance sheet or is expected to mine in 2021.

The holding that detracted the most from the Fund’s relative returns during the month was PubMatic, Inc. Class A (ticker: PUBM). PubMatic is a cloud infrastructure platform vendor facilitating digital advertising transactions. In May, the stock detracted from performance as it saw weakness ahead of its IPO lock-up expiration in early June that’s expected to bring additional supply of VC and pre-IPO investor shares to the market. The Manager trimmed its position to reduce risk.

VAM US Small Cap Growth Fund

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

The holding that contributed the most to the Fund’s relative return during the month was Springworks Therapeutics, Inc. (ticker: SWTX). Springworks Therapeutics is a development stage therapeutics company focused on oncology. The company continues to make progress across a range of programmes that it has in development, as noted during its earnings release in May. The Manager continues to be enthusiastic about multiple programmes for which data will be released in 2021 and has maintained its exposure in the Fund.

The holding that detracted the most from the Fund’s relative returns during the month was PubMatic, Inc. Class A (ticker: PUBM-US). PubMatic is a cloud infrastructure platform vendor facilitating digital advertising transactions. In May, the stock detracted from performance as it saw weakness ahead of its IPO lock-up expiration in early June that’s expected to bring additional supply of VC and pre-IPO investor shares to the market. The Manager trimmed its position to reduce risk.

VAM US Mid Cap Growth Fund

VAM Funds (Lux) – US Mid Cap Growth Fund performance benefitted from holdings in the health care and materials sectors. Holdings in the communication services and consumer discretionary detracted from relative returns. At month end, the Fund was overweight the materials and consumer discretionary sectors and underweight in the communication services and health care sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Springworks Therapeutics, Inc. (ticker: SWTX). Springworks Therapeutics is a development stage therapeutics company focused on oncology. The company continues to make progress across a range of programmes that they have in development, as noted during their earnings release in May. The Manager continues to be enthusiastic about multiple programmes for which data will be released in 2021 and has maintained its exposure in the Fund.

The holding that detracted the most from the Fund’s relative returns during the month was PubMatic, Inc. Class A (ticker: PUBM). PubMatic is a cloud infrastructure platform vendor facilitating digital advertising transactions. In May, the stock detracted from performance as it saw weakness ahead of its IPO lock-up expiration in early June that’s expected to bring additional supply of VC and pre-IPO investor shares to the market. The Manager trimmed its position to reduce risk.

VAM US Large Cap Growth Fund

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

The holding that contributed the most to the Fund’s relative returns during the month was Tesla Inc (ticker: 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 Berkshire Hathaway Inc. Class B (ticker: BRK.B). Berkshire Hathaway, Inc. engages in the provision of property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing and retailing services. 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

VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the financials and industrials sectors, as well as in Brazil and Hungary. Exposures to the utilities and communication services sectors, as well as Cyprus and South Africa, detracted from relative returns. At month end, the Fund was overweight Brazil and Cyprus.

The holding that contributed the most to the Fund’s relative returns during the month was Vamos Locacao de Caminhoes, Maquinas e Equipamentos SA (ticker: VAMO3-BR). Vamos is a truck rental company based in Brazil, with a fleet of 15,000 trucks and units of equipment, making it larger than the next three competitors combined, as the company estimates that it has 80% market share. The market is highly underpenetrated at 1.1% vs. 17% in the US. Vamos recently reported a strong quarter, with revenue and earnings exceeding consensus forecasts by 10-20%, with demand for agricultural machinery showing particular strength. Further, the company outlined medium-term growth targets materially above analyst estimates as industry demand accelerates from a low base.

The holding that detracted the most from the Fund’s relative returns during the month was TXC Corporation (ticker: 3042-TW). TXC produces crystal oscillators which act as timing components in electronic circuits (similar to a metronome or heartbeat). The company is seeing strong pricing trends owing to rising demand for smaller products and relatively benign competition. However, the stock fell in the first half of May, along with the broader Taiwan market. The company also announced a convertible bond offering that would lead to 3-4% shareholder dilution. The Fund exited its position in favour of higher conviction opportunities.

VAM World Growth Fund

Exposures in the consumer discretionary and communication services sectors, as well as in the United States and Taiwan, detracted from relative returns. Performance was aided by exposures in the materials and information technology sectors, as well as in Brazil and the Netherlands. At month end, the Fund was overweight the United States and Brazil.

The holding that detracted the most from the Fund’s relative returns during the month was PubMatic, Inc. Class A (ticker: PUBM). PubMatic is a cloud infrastructure platform vendor facilitating digital advertising transactions. In May, the stock detracted from performance as it saw weakness ahead of its IPO lock-up expiration in early June that’s expected to bring additional supply of VC and pre-IPO investor shares to the market. The Manager trimmed its position to reduce risk.

The holding that contributed the most to the Fund’s relative returns during the month was Embraer S.A. Sponsored ADR (ticker: ERJ-US). Embraer is a leading Brazilian based manufacturer of small commercial, private and some smaller defence aircraft. The case here is very simple. Coming out of the pandemic, there is increasing demand for smaller aircraft on the commercial side of the business and booming demand for private jets for the ultra-wealthy. In addition, it has a nice service and maintenance business to complement the manufacturing side of its business. It was able to restructure its debt considerably several months ago, freeing it up for accelerated expansion to meet these two new twin demand drivers, which the Manager believes will be sustainable for at least another two years.

VAM International Opportunities Fund

Exposures to the consumer discretionary and real estate sectors, as well as in Canada and Germany, detracted from relative returns. Performance was aided by holdings in the health care and materials sectors, as well as in the United Kingdom and Brazil. At month end, the Fund was overweight Canada and the United Kingdom.

The holding that detracted the most from the Fund’s relative returns during the month was HENNGE K.K. (ticker: 4475-JP). Hennge is a Japanese-based software service provider company providing cloud computing and internet security to corporate customers across Japan. Like most software companies globally, it has been experiencing very strong growth trends for the past several quarters and, of course, these trends only accelerated over the last six to 12 months during the pandemic. There has been no specific negative news, in fact, the company substantially exceeded expectations in its most recent set of earnings results, but, like many technology and software companies globally, it has been underperforming as a result of multiple contraction and difficult growth comps coming in the second half of the year. Although the Manager still likes its medium-term outlook, it recently decided to exit the position.

The holding that contributed the most to the Fund’s relative returns during the month was Meliuz SA (ticker: CASH3-BR). Meliuz is a leading Brazilian ecommerce online general retail merchant catering to food and grocery delivery, health and beauty, fashion, as well as home furnishings, computers and sporting equipment. Similar to other ecommerce companies globally, it has greatly benefitted from the ongoing accelerating shift to online shopping during the pandemic. Ecommerce penetration and trends, specifically in Brazil, appear to be accelerating even more rapidly than other Emerging Markets, and they are in a sweet spot catering to several various consumer tastes and preferences. The Manager sees a long runway of 30% revenue growth for several years to come for the company.

*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 May 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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VAM Funds is the brand for VAM Funds (Lux) and VAM Managed Funds (Lux).

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