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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 objective of the Fund is to achieve capital growth over the long term (5 years or more) and it aims to outperform the MSCI Europe ex UK Index. The Fund will identify investment opportunities in undervalued companies in European equity markets which will not necessarily be prominent in mainstream indices. The Fund may invest in other permitted securities.

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
BenchmarkMSCI Europe ex UK Index
IA SectorEurope ex UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£25m

Data as at 28/02/2021.

Fund Manager

Hugh Cuthbert
European Investment Manager
15
Years at SVM
26
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

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.

Nagarro4.6
Crayon4.1
United Internet3.6
Lime Technologies3.3
SESA2.9
Aluflexpack3.3
Jost Werke2.7
Pirelli2.4
Schibsted2.2
JDE Peet's1.9
Sedana Medical2.9
PNE2.6
Thales Group2.5
Energiekontor2.5
Roche Holdings2.0
Mediobanca 4.2
AXA2.7
Banca Mediolanum2.5
BNP Paribas2.0
Allianz1.7
Ringkøbing Landbobank3.3
Patrizia 2.6
Partners Group Holding1.7
LEG Immobilien1.6
S IMMO1.6
Capgemini3.2
Dustin2.9
H+H International2.4
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 (%)

Nagarro4.6
Mediobanca 4.2
Crayon4.1
United Internet3.6
Ringkøbing Landbobank3.3
Lime Technologies3.3
Aluflexpack3.3
Capgemini3.2
SESA2.9
Sedana Medical2.9
Rest of Portfolio64.5

Source: SVM, as at 28/02/2021

Sector Exposure (%)

Technology27.3
Financials25.3
Industrials9.6
Consumer Goods8.9
Utilities7.0
Health Care6.1
Consumer Services4.2
Oil & Gas1.4
Telecommunications1.0

Source: SVM, as at 28/02/2021

Size Analysis (%)

Mega Cap (>€50bn)8.2
Large Cap (<€50bn)15.0
Mid Cap (<€10bn)39.7
Small Cap (<€1bn)27.7

Source: SVM, as at 28/02/2021

Geographic Analysis (%)

Other1.6
Germany24.5
France16.6
Italy12.1
Sweden11.2
Switzerland8.1
Norway7.6
Denmark5.7
Netherlands1.9
Belgium1.3

Source: SVM, as at 28/02/2021

Currency Exposure (%)

Euro58.0
Norwegian Krone7.6
Swiss Franc8.1
Danish Krone5.7
Swedish Krona11.2

Source: SVM, as at 28/02/2021

Show piebar chart

This Month's Featured Stock

Banca Mediolanum

Banca Mediolanum is an Italian bank which seeks to capitalise on the strong demand for savings products in Italy. Having never had a branch network, the company has a strong internet offering through which its team of 5,100 tied advisers can operate. There is a strong focus on equity and equity linked products which has resulted in inflows even when equity markets have experienced negative returns. Growth has also been boosted by grabbing market share from Italy’s larger, and in many cases troubled, commercial banks. With none of the legacy issues these competitors have to deal with, Mediolanum has been nimbler and more inventive in its approach.

There are of course other wealth managers and asset gatherers in Italy who have also focussed on the same business area and also competed well with the larger banks but here Mediolanum distinguishes itself by virtue of the fact it has a banking license and by striving to make itself the sole bank for its wealth management clients. This results in a stickier client base and gives the opportunity to cross-sell in a multitude of areas.

Despite these attractive characteristics Mediolanum trades on very low multiples and the yield, contingent on the ECB’s ruling on European banks dividend paying opportunities, is likely to be more than 5%. The reason for this attractive opportunity is, we believe, those very competitors which Mediolanum is catching market share from who have unjustly tarred the perception of the whole Italian banking sector regardless of the reality for the more successful operators.

Performance

Performance (%)

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FundIndex
1 month4.10.3
2021 YTD0.1-1.9
1 year49.013.9
3 years44.618.5
5 years108.169.1
Since launch*466.4199.7
Source: Lipper, as at 28/02/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202037.78.2+29.5
201919.221.0-1.8
2018-12.0-9.1-2.9
201717.916.8+1.1
201613.819.7-5.9
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
747.40p
-0.04%
Class B
855.30p
-0.04%

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

Source: State Street, as at 08/03/2021.

Commentary

The volatile retail trading phenomenon that stirred a bout of extreme volatility in the previous month appeared to have abated as we entered February 2021 on a calmer note. The much-vaunted reflation trade did, however, hit something of an obstacle as US inflation numbers highlighted a virtual stagnation of prices for the preceding month and employment numbers remained moribund. But this wasn’t enough to curb both equity market enthusiasm and bond market pessimism as news on the pandemic turned for the better with both lock down measures and vaccine programmes apparently starting to bite. Indeed, toward month end European CPI proved considerably more buoyant than the US, and as expectations turned to the impact all this would have on global growth, equity markets enjoyed a good month with the MSCI Europe ex UK index increasing by 0.3%.

The political situation in Europe also took an important turn for the better with Mario Draghi taking the helm in Italy. Italian markets applauded this appointment which, for once, appeared to be a move with almost universal approval, quite a feat for a country renowned for its political discord. Entering the pandemic in a weak economic situation had made Italy a clear danger in terms of European unity as populace parties have in the past snatched such opportunities to further their anti-Europe agendas. With a reputation for sound economic management and a strongly pro-European bias Mr Draghi does appear as something of a panacea for the country’s ills. Experience tells us not to take too much for granted here though our hope is this does herald a period of stability for this large and strategically important European economy.

The fund outperformed the index with a return of 4.1%. Some of our Italian holdings were logically among the better performing stocks over the course of the month led by Mediobanca. Banks in Italy are always considered a proxy for the comings and goings of the government of the day although we would consider such a role for Mediobanca to be inappropriate as the business has performed extremely well in recent years despite the problems witnessed in its home country. The best contributing stock was last month’s worst performer German IT services provider. As we explained last month the share price fall was likely technical as the company’s shareholder register changed following the spin-out from parent company Allgeier. There was no news-flow behind this month’s rebound which strongly backs this thesis. The lack of news-flow also likely explains the underperformers over the course of the period with the worst contributor Patrizia in fact announcing comforting results toward the months end strongly supporting the investment case. There were no outright buys or sells in February.

Commentary by
Hugh Cuthbert
European Investment Manager
As at 28/02/2021.

The volatile retail trading phenomenon that stirred a bout of extreme volatility in the previous month appeared to have abated as we entered February 2021 on a calmer note. The much-vaunted reflation trade did, however, hit something of an obstacle as US inflation numbers highlighted a virtual stagnation of prices for the preceding month and employment numbers remained moribund. But this wasn’t enough to curb both equity market enthusiasm and bond market pessimism as news on the pandemic turned for the better with both lock down measures and vaccine programmes apparently starting to bite. Indeed, toward month end European CPI proved considerably more buoyant than the US, and as expectations turned to the impact all this would have on global growth, equity markets enjoyed a good month with the MSCI Europe ex UK index increasing by 0.3%.

The political situation in Europe also took an important turn for the better with Mario Draghi taking the helm in Italy. Italian markets applauded this appointment which, for once, appeared to be a move with almost universal approval, quite a feat for a country renowned for its political discord. Entering the pandemic in a weak economic situation had made Italy a clear danger in terms of European unity as populace parties have in the past snatched such opportunities to further their anti-Europe agendas. With a reputation for sound economic management and a strongly pro-European bias Mr Draghi does appear as something of a panacea for the country’s ills. Experience tells us not to take too much for granted here though our hope is this does herald a period of stability for this large and strategically important European economy.

The fund outperformed the index with a return of 4.1%. Some of our Italian holdings were logically among the better performing stocks over the course of the month led by Mediobanca. Banks in Italy are always considered a proxy for the comings and goings of the government of the day although we would consider such a role for Mediobanca to be inappropriate as the business has performed extremely well in recent years despite the problems witnessed in its home country. The best contributing stock was last month’s worst performer German IT services provider. As we explained last month the share price fall was likely technical as the company’s shareholder register changed following the spin-out from parent company Allgeier. There was no news-flow behind this month’s rebound which strongly backs this thesis. The lack of news-flow also likely explains the underperformers over the course of the period with the worst contributor Patrizia in fact announcing comforting results toward the months end strongly supporting the investment case. There were no outright buys or sells in February.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

If you would like a copy of any historic factsheets please email info@svmonline.co.uk

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 SS&C Financial Services International Limited and SS&C Financial Services Europe Limited 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.

Dealing - Funds
0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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