In the month of May the Fund (I-class) was up 0.6% versus the MSCI World Small-cap index (benchmark) that was down 1.7% and the MSCI World Small-Cap Value that lost 0.2%. Stock markets remained volatile in May as rising inflation and energy prices are causing concern for the outlook on economic growth, which resulted in pressure on certain consumer related stocks. The strong relative performance in May further strengthened our long-term track record of outperformance.

The three top contributing stocks during the month of May were Kronos (+23%), SIGA Technologies (+84%), and Software AG (+13%). The share price of Kronos, a leading global producer of a white pigment called titanium dioxide, increased by +23% during the month of May after the company reported better than expected Q1 results. Kronos sells its pigments into a wide variety of end markets and continues to see healthy demand across the board, resulting in favorable pricing and higher earnings power. SIGA Technologies is a US pharmaceutical company marketing the only antiviral treatment for smallpox, monkeypox and other orthopox viruses that is approved in both North America and Europe. SIGA's share price was up 84% in volatile trading in the final weeks of May when several monkeypox outbreaks were identified, particularly in Europe, where the virus is not endemic. The US and Canada were the only countries in the world that stockpile SIGA's drug, TPOXX. In recent weeks, several European countries have been scrambling to obtain TPOXX as well and we expect SIGA to sign contracts to supply the drug to governments all over the globe. Trading in SIGA stock is expected to remain volatile as the situation around the current outbreaks becomes more clear. We do not expect a covid19-like pandemic. However, the current outbreaks teach an important lesson on pandemic preparedness and we are of the view that SIGA will have a meaningfully larger business going forward. Shares of Software AG were up 13% in May. The results published at the end of April confirmed the progress being made against the fiscal year 2022 targets. The Digital Business showed 15% bookings growth and, due to phasing, A&N showed a remarkable 42% bookings growth. The company reiterated its 2022 and 2023 organic targets, while the consolidation of StreamSets will accelerate the growth of the group. We believe that the shares provide good value, with the global uncertainty of inflation and supply chains will have less of an impact on Software AG than many other companies.

The largest three negative contributors in May were Abercrombie & Fitch (-41%), Fujitec (-8%) and American Eagle Outfitters (-21%). Abercrombie & Fitch's (A&F) stock price declined by 41% during May driven by a reduction of its full year outlook and weaknesses reported by other retailers. As we wrote in the previous monthly report we took some profit as the stock had outperformed its peers by a wide margin. This limited the negative impact on the performance of our portfolio in May to some extent, but due to the steep decline the impact was still significant. Fundamentally we believe the company performed well, but the environment was very difficult with increasing freight costs, FX headwinds, unfavorable weather, Shanghai lockdowns and a difficult compare. A&F's market capitalisation is now back to about $1bn, which is only 6x the average FCF generated over the past eight years. The balance sheet is very strong, but we have to admit that the outlook for the consumer is very uncertain. Fujitec declined by 8% during May. The shares performed reasonably well year-to-date, resulting in a +20-30% performance gap in local currencies with international peers like Kone, Schindler and Otis. Fujitec’s shares continue to trade at a substantial discount versus international peers. American Eagle Outfitters' (AEO) stock price declined by 21% in May. The company is facing similar issues as Abercrombie & Fitch. However, where we believe A&F did very well in terms of controlling the controllable, the execution of AEO was not flawless. AEO misjudged consumer demand, planned too aggressively and is now left with too much inventory. It will take time to recover from this. We still believe this is a valuable franchise and in our view Aerie (28% of revenues) is already worth more than the whole company.