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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£18.0m

Data as at 31/07/2020.

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.

Allgeier7.2
Schibsted3.2
Aluflexpack2.9
Jost Werke2.5
Adevinta2.2
Energiekontor4.5
Roche Holdings3.1
PNE2.5
Veolia2.4
Sedana Medical2.3
SESA5.9
United Internet5.5
Crayon4.4
Lime Technologies3.2
Barco1.6
Patrizia 3.9
Ringkøbing Landbobank3.7
Hypoport3.3
LEG Immobilien2.4
Partners Group Holding2.0
Capgemini3.8
H+H International2.7
Dustin2.6
va-Q-tec1.6
AXA4.1
Mediobanca 1.5
Total1.6

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 (%)

Allgeier7.2
SESA5.9
United Internet5.5
Energiekontor4.5
Crayon4.4
AXA4.1
Patrizia 3.9
Capgemini3.8
Ringkøbing Landbobank3.7
Hypoport3.3
Rest of Portfolio53.9

Source: SVM, as at 31/07/2020

Sector Exposure (%)

Oil & Gas1.6
Industrials11.6
Consumer Goods8.2
Health Care7.0
Consumer Services8.0
Telecommunications1.5
Utilities9.4
Financials21.8
Technology29.9

Source: SVM, as at 31/07/2020

Size Analysis (%)

Mega Cap (>€50bn)6.3
Large Cap (<€50bn)14.7
Mid Cap (<€10bn)39.5
Small Cap (<€1bn)38.4

Source: SVM, as at 31/07/2020

Geographic Analysis (%)

Other2.6
Germany33.2
France16.9
Italy10.3
Norway9.8
Switzerland9.6
Sweden8.0
Denmark6.4
Netherlands2.0

Source: SVM, as at 31/07/2020

Currency Exposure (%)

Euro65.1
Norwegian Krone9.8
Swiss Franc9.6
Danish Krone6.4
Swedish Krona8.0

Source: SVM, as at 31/07/2020

Show piebar chart

This Month's Featured Stock

Barco

The full effects of the COVID-19 pandemic have become apparent through European Q2 results, revealing the unprecedented divergence across industries and sectors. Companies with multiple business segments, such as Belgian portfolio company Barco, are thereby proving particularly challenging to analyse.

As a provider of approximately one in two of the world’s cinema projector screens, as well as LED screens for entertainment and hospitality venues, Barco’s main division has been hard hit as customers shut down and preserved cash. Reopenings are now taking place, but film release schedules and capacity limitations are proving to be difficult ongoing challenges.

Barco also serves the corporate market for wireless presentation sharing and provides panels for large scale control room environments. Here there was also a strong revenue decline in the second quarter, but with more visibility on a positive second half outlook.

Finally, Barco’s healthcare business, producing specialised high definition screens and workflow solutions to areas like radiology, actually grew in the first half.

The company’s share price has we feel been somewhat unduly punished, as providing working capital support to customers and continuing R&D investments left the market disappointed with the short term results. However, we believe Barco is taking the opportunity to tangibly strengthen its market position, which could provide very strong benefits if and/when end markets pick up. In addition, our analysis indicates Barco has an underrated sustainability profile, with impressive management of eco-designed products, the supply chain and employee welfare. The risk/reward is looking increasingly favourable.

Performance

Performance (%)

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FundIndex
1 month5.6-1.4
2020 YTD4.2-3.3
1 year6.5-2.8
3 years13.47.7
5 years50.943.7
Since launch*328.5173.3
Source: Lipper, as at 31/07/2020, 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
615.00p
1.23%
Class B
700.90p
1.24%

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

Source: State Street, as at 13/08/2020.

Commentary

There can be no doubt that central bank stimulus will play an important role in the recovery of the global economy from the carnage inflicted by the on-going pandemic and the actions taken by governments to combat its spread. With such a disparate set of member nations the Eurozone was always going to struggle more than most to reach the compromise required to make this happen. But compromise they did in July 2020 with the announcement of a €750 billion rescue package which, for the first time in the bloc’s history, relied upon common debt issuance to fund the loans and grants up to 30% of which would focus on tackling climate change. For many this is a pivotal moment for Europe. The sums involved, although impressive, are all but what is becoming a standard response to the crisis. What is more significant is the shift toward a more cohesive fiscal regime, the absence of which has often been viewed as the area’s Achille’s heal. The move should not be viewed as the first step towards a common fiscal policy but a signal that the EU is willing to act together where the circumstances dictate. This goes some way to silence critics of the regime who view the weakness of peripheral European economies as the obstacle in the way of the long- term future of the Eurozone. Following the previous quarter’s strong increase equity markets were reasonably sanguine in their response with the FTSE World Europe ex UK Index declining by  -1.4%.

The inability of authorities in the US to control the progress of the virus, as well as the continued deterioration of the country’s relationship with China with tit for tat consulate closures put a lid on any further strong equity returns. This was despite some encouraging clinical data on both the Astra Zeneca and Moderna Covid-19 vaccines as well as Gilead’s Remdesivir compound which indicated a 62% reduction in death rates from the disease in comparison to other treatments. The second quarter earnings season got well underway during the month and, although unremittingly bleak for many, the bar has clearly been substantially lowered ensuring the fallout was more limited than would have been the case had such poor performance come out of the blue. Others, who are coping well with the pandemic, were rewarded with strong share price returns including heavyweights such as SAP and Unilever.

The fund outperformed the index rising by +5.6%. Norwegian media and online marketplace companies Schibsted and Adevinta were strong contributors to performance as they announced their success in purchasing classified assets from Ebay. For Adevinta (of which Schibsted currently owns a controlling stake) in particular this is a transformational move giving the company market leading positions in more geographies and bolstering existing positions. Although not concluding until next year the market acted quickly to price in the many synergies the deal will create. Also performing strongly was our largest holding, IT services company Allgeier of Germany. The company has gone through many years of restructuring, but this is now beginning to pay off with an excellent set of results for the second quarter of 2020 pre-announced in July. The worst contributor to performance was Barco of Belgium. The company has a considerable exposure to the cinema industry through its projectors business and this has clearly been hit hard as countries have gone into lockdown. We are disappointed by the performance but believe it is worth holding onto the shares as the balance sheet is very strong and thanks to management cost cutting the company should emerge even stronger when economies start to function properly again. There were no new buys or outright sales over the period.

Commentary by
Hugh Cuthbert
European Investment Manager
Alasdair Birch
European Investment Analyst
As at 31/07/2020.

There can be no doubt that central bank stimulus will play an important role in the recovery of the global economy from the carnage inflicted by the on-going pandemic and the actions taken by governments to combat its spread. With such a disparate set of member nations the Eurozone was always going to struggle more than most to reach the compromise required to make this happen. But compromise they did in July 2020 with the announcement of a €750 billion rescue package which, for the first time in the bloc’s history, relied upon common debt issuance to fund the loans and grants up to 30% of which would focus on tackling climate change. For many this is a pivotal moment for Europe. The sums involved, although impressive, are all but what is becoming a standard response to the crisis. What is more significant is the shift toward a more cohesive fiscal regime, the absence of which has often been viewed as the area’s Achille’s heal. The move should not be viewed as the first step towards a common fiscal policy but a signal that the EU is willing to act together where the circumstances dictate. This goes some way to silence critics of the regime who view the weakness of peripheral European economies as the obstacle in the way of the long- term future of the Eurozone. Following the previous quarter’s strong increase equity markets were reasonably sanguine in their response with the FTSE World Europe ex UK Index declining by  -1.4%.

The inability of authorities in the US to control the progress of the virus, as well as the continued deterioration of the country’s relationship with China with tit for tat consulate closures put a lid on any further strong equity returns. This was despite some encouraging clinical data on both the Astra Zeneca and Moderna Covid-19 vaccines as well as Gilead’s Remdesivir compound which indicated a 62% reduction in death rates from the disease in comparison to other treatments. The second quarter earnings season got well underway during the month and, although unremittingly bleak for many, the bar has clearly been substantially lowered ensuring the fallout was more limited than would have been the case had such poor performance come out of the blue. Others, who are coping well with the pandemic, were rewarded with strong share price returns including heavyweights such as SAP and Unilever.

The fund outperformed the index rising by +5.6%. Norwegian media and online marketplace companies Schibsted and Adevinta were strong contributors to performance as they announced their success in purchasing classified assets from Ebay. For Adevinta (of which Schibsted currently owns a controlling stake) in particular this is a transformational move giving the company market leading positions in more geographies and bolstering existing positions. Although not concluding until next year the market acted quickly to price in the many synergies the deal will create. Also performing strongly was our largest holding, IT services company Allgeier of Germany. The company has gone through many years of restructuring, but this is now beginning to pay off with an excellent set of results for the second quarter of 2020 pre-announced in July. The worst contributor to performance was Barco of Belgium. The company has a considerable exposure to the cinema industry through its projectors business and this has clearly been hit hard as countries have gone into lockdown. We are disappointed by the performance but believe it is worth holding onto the shares as the balance sheet is very strong and thanks to management cost cutting the company should emerge even stronger when economies start to function properly again. There were no new buys or outright sales over the period.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

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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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0800 0199 110

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0800 0199 440

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