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SVM Continental Europe Fund

SVM Continental Europe Fund

Continental Europe from the path less taken

The fund, managed by Hugh Cuthbert, aims to achieve long term growth by investing in European companies. Hugh seeks to profit from identifying businesses under-researched by other analysts. This fund can invest in businesses of any size.

SVM Continental Europe Fund

Continental Europe from the path less taken

The fund, managed by Hugh Cuthbert, aims to achieve long term growth by investing in European companies. Hugh seeks to profit from identifying businesses under-researched by other analysts. This fund can invest in businesses of any size.

Overview

Fund Objective

The aim of the Fund is to achieve medium to long-term capital growth from a tightly controlled list of European stocks and other permitted securities. The Fund aims to outperform the FTSE World Europe ex UK Index.

Approach

Continental Europe has 27 different stock markets. Our fund, which can invest right across the market capitalisation spectrum, is perfectly positioned to take advantage of the host of investment opportunities that this presents. At the top end of these markets, valuations can often, though not always, already reflect companies’ prospects. Further down the market cap spectrum, there are a multitude of companies with little or no analyst research coverage and it’s here we consistently find strong potential for valuation anomalies.

We aim to find companies for your portfolio that are “hidden gems” – undiscovered companies with a strong earnings profile. These companies will often be in transition, for example managerial changes, restructuring, or an evolving cost base or product. We take a private equity-style approach to analysing their intrinsic value and their prospects for long-term earnings growth.

Investing in these undiscovered opportunities, you will own a portfolio that is different to most other European equity funds, and will perform differently too. The fund is designed to access specific growth opportunities in Europe while diversifying your European equity exposure away from mainstream investments and indices.

You can invest with confidence in our independent thinking and in a fund that has the ability to reach the lower echelons of European stock markets to capitalise on undiscovered opportunities for your portfolio.

Fund Details

Launch Date20 March 2000
BenchmarkFTSE World Europe ex UK Index
IA SectorEurope ex UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£20.9m

Data as at 31/08/2020.

Fund Managers

Hugh Cuthbert
European Investment Manager
14
Years at SVM
25
Industry Experience

Hugh is lead manager of SVM Continental Europe Fund and co manager of SVM All Europe SRI Fund.

Prior to joining SVM, he spent five years with Kempen Capital Management where he was responsible for the management of pan European equities.

Academic Qualifications:
BA Public Administration

Professional Qualifications:

ASIP

Alasdair Birch
European Investment Analyst
8
Years at SVM
12
Industry Experience

Alasdair joined SVM from BNP Paribas Investment Partners UK where he was a portfolio manager within the European Mid and Small Cap team. Alasdair assists in analysis of European companies providing analytical resource to both the European and Global Equity teams.

Academic Qualifications:
BSc (Hons) Physics & Astronomy

Professional Qualifications:

CFA

Portfolio

Risk Baskets

To help understand the overall balance of the portfolio, stocks are allocated to one of eight risk groups: defensive, cyclical, stable financial, unstable financial, consumer cyclical, oil & gas, mining and finally technology. Most of these groups are self explanatory but financials deserve some clarity. All financials are inherently unstable, but in the main, Lloyd’s underwriters and General Insurers take less balance sheet risk, so are relatively more stable than Banks or Life Assurers.

Seeing the portfolio broken down into these categories allows an understanding of how aggressive or defensive the overall portfolio is, and where risk is being taken.

Allgeier8.6
Schibsted3.2
Aluflexpack3.0
Jost Werke2.5
Adevinta2.2
SESA5.9
Crayon5.3
United Internet5.0
Lime Technologies2.9
Barco1.4
Energiekontor4.5
Roche Holdings2.6
PNE2.3
Veolia2.2
Sedana Medical1.8
Hypoport3.5
Patrizia 3.5
Ringkøbing Landbobank3.2
LEG Immobilien2.1
Partners Group Holding1.7
Capgemini3.4
H+H International2.5
Dustin2.3
va-Q-tec2.1
AXA2.2
Mediobanca 1.4
Total1.4

There are no holdings in this category

There are no holdings in this category

There are no holdings in this category

Portfolio Structure

As an unconstrained fund we invest in our highest conviction ideas irrespective of market capitalisation, country or sector. As a consequence The SVM Continental Europe Fund portfolio will vary considerably from the benchmark index and from other funds that are in the same IA sector.

Top 10 Holdings (%)

Allgeier8.6
SESA5.9
Crayon5.3
United Internet5.0
Energiekontor4.5
Hypoport3.5
Patrizia 3.5
Capgemini3.4
Schibsted3.2
Ringkøbing Landbobank3.2
Rest of Portfolio54.0

Source: SVM, as at 31/08/2020

Sector Exposure (%)

Oil & Gas1.4
Industrials11.5
Consumer Goods6.8
Health Care5.8
Consumer Services7.7
Telecommunications1.2
Utilities8.9
Financials18.6
Technology31.0

Source: SVM, as at 31/08/2020

Size Analysis (%)

Mega Cap (>€50bn)5.5
Large Cap (<€50bn)13.6
Mid Cap (<€10bn)34.4
Small Cap (<€1bn)39.4

Source: SVM, as at 31/08/2020

Geographic Analysis (%)

Other0.9
Germany34.0
France13.5
Norway10.7
Italy9.4
Switzerland8.8
Sweden7.0
Denmark5.7
Netherlands1.7
Belgium1.4

Source: SVM, as at 31/08/2020

Currency Exposure (%)

Euro60.9
Norwegian Krone10.7
Swiss Franc8.8
Danish Krone5.7
Swedish Krona7.0

Source: SVM, as at 31/08/2020

Show piebar chart

This Month's Featured Stock

Schibsted

Since the spin-off of part of its international operations into Adevinta, which we also still hold, Schibsted has remained an important long-term holding. It has been an exciting period for the company, as Adevinta announced it was acquiring the classifieds operations of eBay late in July. The market was surprised as Adevinta managed an attractive price in a competitive auction process, helped by both significant synergies and the willingness for Ebay to accept shares as currency. Schibsted benefitted through its retained holding in Adevinta, but also picked up Ebay’s Danish operation as part of the transaction, and earlier in the month had announced the acquisition of an important rival in Finland. Taken together, we believe these events will be very valuable for Schibsted, creating more market leadership positions and economies of scale in product development.

Although the first half of the year proved difficult from the perspective of GDP declines in many of its markets and thereby earnings, it has also accelerated the digitalisation of its professional customer base, pushing up penetration and creating a healthy outlook for medium term growth. Declines in the print operations are still challenging, but are becoming immaterial and remain well managed through cost control. Finally, the company released an in-depth report into the “second hand effect”, measuring the societal benefits from their marketplace ecosystems. This estimated that consumers using Schibsted and Adevinta’s platforms saved the equivalent of 50% of Norway’s total greenhouse emissions in 2019, and the equivalent of 1,247 Eiffel Towers of steel.

Performance

Performance (%)

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FundIndex
1 month11.22.2
2020 YTD15.9-1.2
1 year21.10.7
3 years24.27.1
5 years72.055.6
Since launch*376.3179.4
Source: Lipper, as at 31/08/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
20203.40.6+2.8
20192.57.9-5.4
20184.02.5+1.5
201727.929.1-1.2
20166.36.1+0.2
Source: Lipper, as at 30/06/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
648.90p
1.14%
Class B
740.10p
1.13%

SVM funds are priced every working day at 12 noon UK time and prices are updated here shortly afterwards.

Source: State Street, as at 28/09/2020.

Commentary

Macro-economic data provided continued support for European equity markets in August as Purchasing Manager’s Indices across the region indicated a return to economic growth following the initial impact of the global pandemic. Germany in particular appeared to be firmly on the growth path with July industrial orders surging 27.9% over the June level. Such signals of recovery are of course all but mandatory if global markets are to sustain the returns we have witnessed since their sell-off in March 2020. Some level of growth was almost inevitable, but it will be the sustainability and the gradient of the recovery which we will have to focus upon in the coming months for more clarity on the resilience and strength of these initial shoots.

Comments from the Bank of England were hardly encouraging on this point as its Monetary Policy Committee, while keeping rates on hold in its August update, projected a relatively upbeat short-term recovery for the UK but for this to slow dramatically once the third quarter rebound is over and for pre-crisis levels of GDP not to be reached before the end of 2021. Gold’s move above $2,000 per ounce which suggested a similar cautiousness for many investors although heightened political tensions between China and the US may be a better explanation for the commodity’s record move. This was spurred by President Trump’s banning of US dealings with the owners of Chinese apps TikTok and WeChat. US tech companies with meaningful Chinese presence must have watched nervously as the situation developed. For Europe, the coronavirus development remained gloomy with Spain notably reporting a dramatic increase in the daily number of cases. Also of note was the strength of the Euro over the US dollar although not a phenomenon confined to the Eurozone as the greenback suffered against most major currencies over the course of the month.

Buoyed by the positive economic news-flow the FTSE World Europe ex UK returned +2.2% over the course of the month. The fund outperformed the index rising by +11.2%. Our best performing stock was Va-q-Tec of Germany which rose by over 50%. This innovative producer of insulated transportation containers helps companies move temperature-controlled goods around the world in an economic and environmentally sensitive manner. The stock has been particularly strong over recent months as it has emerged that the company is likely to be pivotal in the distribution of Covid-19 vaccinations should they become widely available. Also making a strong contribution was our largest holding Allgeier whose second quarter results demonstrated a resilience to today’s crisis. Likewise, software supplier Crayon of Norway whose results even showed a benefit from the trend of home working. The worst performing stock was Sedana Medical of Sweden. Despite reporting record breaking results the shares declined 9.5% largely as a result of comments from the CEO that the positive impact of Covid-19 on the company’s business may now have peaked. This comes as no surprise to us as we hold the shares for the potential approval of their inhaled anaesthesia product which should prove very valuable if successful. No new positions were bought in August and no complete divestments were made.

Commentary by
Hugh Cuthbert
European Investment Manager
Alasdair Birch
European Investment Analyst
As at 31/08/2020.

Macro-economic data provided continued support for European equity markets in August as Purchasing Manager’s Indices across the region indicated a return to economic growth following the initial impact of the global pandemic. Germany in particular appeared to be firmly on the growth path with July industrial orders surging 27.9% over the June level. Such signals of recovery are of course all but mandatory if global markets are to sustain the returns we have witnessed since their sell-off in March 2020. Some level of growth was almost inevitable, but it will be the sustainability and the gradient of the recovery which we will have to focus upon in the coming months for more clarity on the resilience and strength of these initial shoots.

Comments from the Bank of England were hardly encouraging on this point as its Monetary Policy Committee, while keeping rates on hold in its August update, projected a relatively upbeat short-term recovery for the UK but for this to slow dramatically once the third quarter rebound is over and for pre-crisis levels of GDP not to be reached before the end of 2021. Gold’s move above $2,000 per ounce which suggested a similar cautiousness for many investors although heightened political tensions between China and the US may be a better explanation for the commodity’s record move. This was spurred by President Trump’s banning of US dealings with the owners of Chinese apps TikTok and WeChat. US tech companies with meaningful Chinese presence must have watched nervously as the situation developed. For Europe, the coronavirus development remained gloomy with Spain notably reporting a dramatic increase in the daily number of cases. Also of note was the strength of the Euro over the US dollar although not a phenomenon confined to the Eurozone as the greenback suffered against most major currencies over the course of the month.

Buoyed by the positive economic news-flow the FTSE World Europe ex UK returned +2.2% over the course of the month. The fund outperformed the index rising by +11.2%. Our best performing stock was Va-q-Tec of Germany which rose by over 50%. This innovative producer of insulated transportation containers helps companies move temperature-controlled goods around the world in an economic and environmentally sensitive manner. The stock has been particularly strong over recent months as it has emerged that the company is likely to be pivotal in the distribution of Covid-19 vaccinations should they become widely available. Also making a strong contribution was our largest holding Allgeier whose second quarter results demonstrated a resilience to today’s crisis. Likewise, software supplier Crayon of Norway whose results even showed a benefit from the trend of home working. The worst performing stock was Sedana Medical of Sweden. Despite reporting record breaking results the shares declined 9.5% largely as a result of comments from the CEO that the positive impact of Covid-19 on the company’s business may now have peaked. This comes as no surprise to us as we hold the shares for the potential approval of their inhaled anaesthesia product which should prove very valuable if successful. No new positions were bought in August and no complete divestments were made.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

Availability

The fund is a sub-fund within the SVM ICVC Fund, a UK domiciled Open Ended Investment Company, with UCITS status. The Funds are regulated by the UK Financial Conduct Authority.

Dealing into the fund is available daily. Deals are accepted on a forward pricing basis, with 24 hours notice. SVM employs International Financial Data Services (IFDS Group) as third party administrator and transfer agent to our funds.

How to Invest
You can invest directly with us or through a wide variety of third party wraps, supermarkets and life companies.

For each fund in the SVM ICVC range we offer a B share class which is our lowest priced clean share class.

Share class availability via third parties varies depending on their model.

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Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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