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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 will invest at least 80% in equities and equity related instruments dealt in or traded on European Eligible Securities Markets. 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£26.6m

Data as at 30/04/2021.

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.

Aluflexpack3.0
Jost Werke2.9
Schibsted2.7
Verallia 2.6
Pirelli2.2
Thales Group3.0
Energiekontor2.5
PNE2.4
Veolia2.2
Aker Carbon Capture1.9
Mediobanca 4.3
AXA3.3
Banca Mediolanum3.0
BNP Paribas2.5
Allianz2.4
United Internet3.2
Hexatronic Group2.9
Crayon2.9
SESA2.8
Nagarro2.4
Capgemini3.4
Dustin3.4
H+H International2.9
Wienerberger2.6
Ringkøbing Landbobank3.2
Patrizia 2.5
Partners Group Holding1.9
S IMMO1.8
LEG Immobilien1.5
Total1.2

There are no holdings in this category

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 (%)

Mediobanca 4.3
Capgemini3.4
Dustin3.4
AXA3.3
Ringkøbing Landbobank3.2
United Internet3.2
Thales Group3.0
Banca Mediolanum3.0
Aluflexpack3.0
H+H International2.9
Rest of Portfolio67.0

Source: SVM, as at 30/04/2021

Sector Exposure (%)

Financials20.7
Industrials15.7
Information Technology13.9
Materials11.1
Communication Services11.1
Consumer Discretionary7.1
Real Estate5.8
Health Care3.6
Utilities2.2
Consumer Staples1.7
Energy1.2

Source: SVM, as at 30/04/2021

Size Analysis (%)

Mega Cap (>€50bn)11.4
Large Cap (<€50bn)13.7
Mid Cap (<€10bn)48.0
Small Cap (<€1bn)21.0

Source: SVM, as at 30/04/2021

Geographic Analysis (%)

Other1.3
France23.3
Germany21.0
Italy12.3
Norway9.1
Sweden8.1
Switzerland6.7
Denmark6.2
Austria4.4
Netherlands1.7

Source: SVM, as at 30/04/2021

Currency Exposure (%)

Euro64.0
Norwegian Krone9.1
Swiss Franc6.7
Danish Krone6.2
Swedish Krona8.1

Source: SVM, as at 30/04/2021

Show piebar chart

This Month's Featured Stock

Ipsos

French market research company Ipsos is an interesting play on the ever-increasing need for companies and public bodies to gather data and knowledge of their consumers behaviours and preferences as well as the success or otherwise of their products and services. The fact that the way in which such data collection is constantly changing means that the addressable market for Ipsos is benefitting from increased growth as they shift from the traditional model of surveys and panels toward new services such as big data, online analytics, social media monitoring, passive behaviour monitoring and neuroscience.

This more sophisticated profile has also likely made the company weather the past turbulent months in better shape than had they still been confined to the world of surveys and panels. Although the company took a large revenue hit of some 25% in the second quarter of 2020 by the fourth quarter they had already returned to organic growth. At the same time the company managed to dramatically pay down debt. For 2021 management are now suggesting that revenue could already return to the levels seen in 2019 which implies strong growth for the year to come. Such a forecast does of course heavily depend on the Covid-19 outlook although, even here, the company has benefited from large contracts as health authorities seek to determine how successful they have been in managing the crisis.

With a lowly valuation, particularly in comparison to recent deals seen in the sector, and the ability to bolster growth with bolt on acquisitions Ipsos is very well placed in the current market environment.

Performance

Performance (%)

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FundIndex
1 month5.44.4
2021 YTD6.87.2
1 year69.934.2
3 years54.428.5
5 years113.077.5
Since launch*504.1227.5
Source: Lipper, as at 30/04/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202171.234.4+36.8
2020-8.8-7.5-1.3
2019-2.83.1-5.9
20189.33.7+5.6
201720.928.4-7.5
Source: Lipper, as at 31/03/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
776.60p
-0.01%
Class B
890.00p
-0.02%

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

Source: State Street, as at 14/05/2021.

Commentary

European equity markets shrugged off the fact that the Eurozone entered a double dip recession in the first quarter of 2021 with the April rise in the MSCI Europe ex UK Index reaching a healthy +4.4%. The focus remained on the prospect of a strong growth resurgence as the region’s economies emerge from their pandemic induced lockdowns. With vaccination programmes picking up speed, all be it at varying degrees of velocity, the prospect of a return to pre-pandemic levels of activity drew ever closer, and to reflect this many equity markets pushed back through the highs last seen in March 2020.

The Q1 reporting season also got underway with, in many instances, companies giving full year guidance which backed this return to growth momentum. Further endorsement, or perhaps a safety net, came from ECB president, Christine Lagarde, who stressed the continued liquidity support her institution was willing and ready to provide giving no hint of any reason why this policy stance should alter in the foreseeable future. This, combined with continued fiscal measures from governments globally, goes a long way to explain the market enthusiasm. Under such a scenario inflationary pressure has the potential to derail the recovery and the EU reported year on year harmonized CPI at 2.10% towards the month end which is the first time this data point has topped 2.00% in two years. Time will tell if this is simply a blip as restocking takes place following the dramatic drop in demand experienced last year or if there is a more sustained trend in place.

The return to global growth will be accompanied by a resurgence in emissions as factories increase their production and consumption returns to pre-pandemic levels and travel is once more on the agenda. With impeccable timing Joe Biden committed in April to cut GHG emissions by 50% prompting a strong rally for renewable energy stocks. Although welcome, his announcement is perhaps not as ambitious as many had hoped for and we will have to wait for the COP 26 meeting in Glasgow later in the year to see if further progress can be made. In the meantime, we continue to favour stocks exposed to this theme including Aker Carbon Capture, Energiekontor and PNE Wind.

The fund outperformed the index with an increase of +5.4%. A number of stocks increased by more than 20% with the stand-out performer Hexatronic of Sweden whose shares rose by 41%. This fibre optic equipment supplier to the telecoms industry is a clear beneficiary of the underlying demand for bandwidth as societies continue to digitalise, a trend brought forward by the increase in working from home. Veolia Environment also contributed strongly to the performance as the company successfully gained agreement for its takeover of rival Suez SA. The move presents clear synergy opportunities making the long protracted fight well worthwhile. Many hoops still exist but the probability of success is now strongly skewed in Veolia’s favour hence the strong share price reaction. Few stocks ended the month in the red with digital games publisher Nacon the worst performer falling -6.31% on no particular news flow. There were no outright buys over the course of the month and two sales, our small holding in Swiss pharmaceutical Novartis where we now see upside for the shares as limited, and software house Lime Technologies where we have taken profits following a good run for the shares.

Commentary by
Hugh Cuthbert
European Investment Manager
As at 30/04/2021.

European equity markets shrugged off the fact that the Eurozone entered a double dip recession in the first quarter of 2021 with the April rise in the MSCI Europe ex UK Index reaching a healthy +4.4%. The focus remained on the prospect of a strong growth resurgence as the region’s economies emerge from their pandemic induced lockdowns. With vaccination programmes picking up speed, all be it at varying degrees of velocity, the prospect of a return to pre-pandemic levels of activity drew ever closer, and to reflect this many equity markets pushed back through the highs last seen in March 2020.

The Q1 reporting season also got underway with, in many instances, companies giving full year guidance which backed this return to growth momentum. Further endorsement, or perhaps a safety net, came from ECB president, Christine Lagarde, who stressed the continued liquidity support her institution was willing and ready to provide giving no hint of any reason why this policy stance should alter in the foreseeable future. This, combined with continued fiscal measures from governments globally, goes a long way to explain the market enthusiasm. Under such a scenario inflationary pressure has the potential to derail the recovery and the EU reported year on year harmonized CPI at 2.10% towards the month end which is the first time this data point has topped 2.00% in two years. Time will tell if this is simply a blip as restocking takes place following the dramatic drop in demand experienced last year or if there is a more sustained trend in place.

The return to global growth will be accompanied by a resurgence in emissions as factories increase their production and consumption returns to pre-pandemic levels and travel is once more on the agenda. With impeccable timing Joe Biden committed in April to cut GHG emissions by 50% prompting a strong rally for renewable energy stocks. Although welcome, his announcement is perhaps not as ambitious as many had hoped for and we will have to wait for the COP 26 meeting in Glasgow later in the year to see if further progress can be made. In the meantime, we continue to favour stocks exposed to this theme including Aker Carbon Capture, Energiekontor and PNE Wind.

The fund outperformed the index with an increase of +5.4%. A number of stocks increased by more than 20% with the stand-out performer Hexatronic of Sweden whose shares rose by 41%. This fibre optic equipment supplier to the telecoms industry is a clear beneficiary of the underlying demand for bandwidth as societies continue to digitalise, a trend brought forward by the increase in working from home. Veolia Environment also contributed strongly to the performance as the company successfully gained agreement for its takeover of rival Suez SA. The move presents clear synergy opportunities making the long protracted fight well worthwhile. Many hoops still exist but the probability of success is now strongly skewed in Veolia’s favour hence the strong share price reaction. Few stocks ended the month in the red with digital games publisher Nacon the worst performer falling -6.31% on no particular news flow. There were no outright buys over the course of the month and two sales, our small holding in Swiss pharmaceutical Novartis where we now see upside for the shares as limited, and software house Lime Technologies where we have taken profits following a good run for the shares.

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.

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0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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