VAM Managed Funds (Lux) Commentaries

January 2021 (click here to download)

VAM DRIEHAUS FUND

As proxies for larger, broad equity exposures, note that the MSCI All Country World Index was down -0.43% and the S&P 500 was down 1.01%. On a relative basis, the VAM Driehaus Fund’s return was aided particularly by its exposures to US smaller capitalisation growth equities and its exposure to emerging markets equities.

January was a positive month for smaller capitalisation equites, but a wild one with elevated volatility. The strength in US small caps continued from the fourth quarter, fuelled by the continued positive and unprecedented monetary and fiscal stimulus to provide relief and support as the pandemic continues to impact certain parts of the economy, especially smaller (private) businesses and households. While there are plenty of supportive factors and industry trends, there are certainly risks ahead as well. The primary potential risks include new Covid variants and unwelcome side effects of the vaccines; new polices from the US Congress or the Biden administration that are unfriendly to the economy or the market such as new taxes or burdensome regulation; a greater-than-expected increase in inflation expectations and interest rates; and market sentiment that could become too euphoric.

VAM DISCRETIONARY FUNDS

VAM Cautious Fund

Equity markets began 2021 with a continuation of the bullish run they had ended the prior year with. Global markets rose 3% in the first week of the year as vaccination programmes got underway and Joe Biden announced an ambitious stimulus bill as President-elect. Markets traded fairly flat throughout most of January, at times swayed in both directions by political noise from Washington, varied levels of success in ongoing vaccine programmes and the start of earnings season as companies began reporting to markets. Towards the end of the month, a posse of retail investors targeting hedge fund short positions caused volatility to surge and prices to suffer as liquidity was withdrawn by spooked hedge funds closing out short positions. In the background, earnings announcements largely surprised on the upside, especially for tech companies which continue to prosper. Markets ended January slightly down as the last week undid the gains achieved towards the start of the year.

In Fixed Income, government bond yields rose slightly throughout the month causing the UK Gilts Index to fall almost 2%. After months of contraction, spreads remained relatively flat with corporate bonds also marginally down over the month. High yield fared the best across the credit spectrum with smaller fluctuations in valuations than investment grade or government bonds, ending January broadly flat.

VAM Balanced Fund

Equity markets began 2021 with a continuation of the bullish run they had ended the prior year with. Global markets rose 3% in the first week of the year as vaccination programmes got underway and Joe Biden announced an ambitious stimulus bill as President-elect. Markets traded fairly flat throughout most of January, at times swayed in both directions by political noise from Washington, varied levels of success in ongoing vaccine programmes and the start of earnings season as companies began reporting to markets. Towards the end of the month, a posse of retail investors targeting hedge fund short positions caused volatility to surge and prices to suffer as liquidity was withdrawn by spooked hedge funds closing out short positions. In the background, earnings announcements largely surprised on the upside, especially for tech companies which continue to prosper. Markets ended January slightly down as the last week undid the gains achieved towards the start of the year.

In Fixed Income, government bond yields rose slightly throughout the month causing the UK Gilts Index to fall almost 2%. After months of contraction, spreads remained relatively flat with corporate bonds also marginally down over the month. High yield fared the best across the credit spectrum with smaller fluctuations in valuations than investment grade or government bonds, ending January broadly flat.

VAM Growth Fund

Equity markets began 2021 with a continuation of the bullish run they had ended the prior year with. Global markets rose 3% in the first week of the year as vaccination programmes got underway and Joe Biden announced an ambitious stimulus bill as President-elect. Markets traded fairly flat throughout most of January, at times swayed in both directions by political noise from Washington, varied levels of success in ongoing vaccine programmes and the start of earnings season as companies began reporting to markets. Towards the end of the month, a posse of retail investors targeting hedge fund short positions caused volatility to surge and prices to suffer as liquidity was withdrawn by spooked hedge funds closing out short positions. In the background, earnings announcements largely surprised on the upside, especially for tech companies which continue to prosper. Markets ended January slightly down as the last week undid the gains achieved towards the start of the year.

In Fixed Income, government bond yields rose slightly throughout the month causing the UK Gilts Index to fall almost 2%. After months of contraction, spreads remained relatively flat with corporate bonds also marginally down over the month. High yield fared the best across the credit spectrum with smaller fluctuations in valuations than investment grade or government bonds, ending January broadly flat.

Sources: Driehaus Capital Management LLC and Sanlam Private Wealth.
Sanlam Private Wealth is a trading name of Sanlam Private Investments (UK) Ltd.

Disclaimer

VAM Driehaus, VAM Cautious, Balanced and Growth Funds are compartments of VAM Managed Funds (Lux).

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