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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£19.2m

Data as at 31/05/2020.

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
11
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.

Orange3.6
Energiekontor3.3
Roche Holdings3.1
Thales Group2.9
Veolia2.3
United Internet4.9
SESA4.3
Crayon3.7
Lime Technologies2.2
Barco2.0
Allgeier5.4
Aluflexpack2.8
Schibsted2.3
Jost Werke2.0
JDE Peet's1.8
Ringkøbing Landbobank3.4
Patrizia 3.4
Hypoport3.1
LEG Immobilien2.1
Partners Group Holding1.7
Capgemini3.0
H+H International2.7
Dustin2.4
va-Q-tec1.5
AXA3.7
Mediobanca 2.8
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 IMA sector.

Top 10 Holdings (%)

Allgeier5.4
United Internet4.9
SESA4.3
AXA3.7
Crayon3.7
Orange3.6
Ringkøbing Landbobank3.4
Patrizia 3.4
Energiekontor3.3
Hypoport3.1
Rest of Portfolio61.2

Source: SVM, as at 31/05/2020

Sector Exposure (%)

Oil & Gas1.6
Industrials13.3
Consumer Goods6.9
Health Care6.2
Consumer Services6.2
Telecommunications3.6
Utilities7.9
Financials21.3
Technology25.4

Source: SVM, as at 31/05/2020

Size Analysis (%)

Mega Cap (>€50bn)6.3
Large Cap (<€50bn)18.8
Mid Cap (<€10bn)31.6
Small Cap (<€1bn)35.5

Source: SVM, as at 31/05/2020

Geographic Analysis (%)

Other3.1
Germany29.9
France18.5
Italy10.2
Switzerland9.3
Norway7.4
Denmark6.2
Sweden6.0
Netherlands1.8

Source: SVM, as at 31/05/2020

Currency Exposure (%)

Euro63.5
Norwegian Krone7.4
Swiss Franc9.3
Danish Krone6.2
Swedish Krona6.0

Source: SVM, as at 31/05/2020

Show piebar chart

This Month's Featured Stock

JDE Peet’s

The European IPO market had to endure an extended hibernation thanks to COVID-19, with underwriters waiting for signs of financial market stability in order to restart capital market activities. This has resulted in only the most resilient businesses being put forward for listings, and with signs of improvement in the pandemic situation in early April, a few have now made it to market.

JDE Peet’s is one example, and is now a new constituent in both the European market and the fund. The company was formed with the backing of a German family, well known for their involvement with Reckitt Benckiser. After acquiring Peet’s Coffee in 2012, further acquisitions were made to create a global leader in coffee and tea. As a pure play on one of the most attractive consumer staples categories, we felt JDE had the right brand portfolio, track record and initial pricing to create attractive future returns.

What we believe is most underappreciated is that, while premiumisation has been well-advanced by Starbucks in the out of home category, there is still a long runway for companies like JDE to adopt the strategy for at-home consumption. This has already been evident in the growth of revenues per cup from around 4 to 6 Euro cents, but that remains far off the several Euros level for high-end out of home coffee. We believe this can also be driven through a rigorous approach to ESG, with coffee one of the most advanced categories in tying together sustainability and pricing.

Performance

Performance (%)

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FundIndex
1 month10.38.0
2020 YTD-4.6-6.0
1 year6.03.2
3 years4.33.3
5 years39.533.7
Since launch*292.3170.2
Source: Lipper, as at 31/05/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
2020-8.8-9.1+0.3
2019-2.8-1.0-1.8
20189.35.8+3.5
201720.924.5-3.6
20162.9-1.4+4.3
Source: Lipper, as at 31/05/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
539.90p
0.32%
Class B
614.80p
0.33%

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

Source: State Street, as at 03/07/2020.

Commentary

European equities began May 2020 in negative territory as an underwhelming ECB policy report, delivered at the end of the prior month, continued to disappoint markets. President Donald Trump also did little to help as he appeared to rekindle the bad feelings between the US and China. Following the previous month’s rally any hint of bad news was always likely to be taken badly and particularly when that rally has been inspired by the actions of central banks rather than a solid underpinning from fundamentals. But the negativity wasn’t to last long and the month ended on a strong note eventually dwarfing the gains seen in the prior month with the FTSE World Europe ex UK rising by +8.3%, admittedly boosted somewhat by the Euro’s strong move against Sterling.

The impetus for these returns was largely based on the easing of the severity of the global pandemic as numerous countries, including some of the worst hit such as Spain and Italy, began to ease their lockdown restrictions. As is always the case, stock markets were one step ahead of such moves and began to discount a strong rebound in earnings as economies were given the first hints that they may begin to return to some semblance of normality. Quite why Donald Trump chose this moment to pick a fight with China is a mystery although the more Machiavellian among us suspected a subsequent resolution of such a conflict could boost his electoral chances in this year’s presidential election. Later in the month China further exacerbated the situation by threatening to impose a national security law on Hong Kong, a move which pulled the UK firmly into the fray. Despite the market’s bullishness the underlying economic data remained unremittingly bleak with, for example, April’s Eurozone new car registrations down 76% and March construction output and industrial production both down double digit.

The fund outperformed the index with a return of +10.3%. Our technology holdings provided a strong contribution to the performance with the likes of Adevinta, Crayon, Hypoport, Schibsted and Lime Technologies all rising well in excess of 20%. Our best performer was va-Q-tec of Germany which rose by almost 40%. This small and innovative logistics company provides temperature-controlled products and services in an environmentally friendly manner thanks to their proprietary insulation technology. The Covid crisis has impacted their business positively as some of their key customers are from the pharmaceutical industry. Only two stocks ended the month in negative territory, Leonardo of Italy and Nacon of France, despite no specific news-flow to warrant the moves. One new stock was introduced over the course of the month, JDE Peets, a Dutch producer of coffees and teas. The company came to the market by way of an IPO at what we considered an attractive price considering both the company’s organic and self-help potential.

Commentary by
Hugh Cuthbert
European Investment Manager
Alasdair Birch
European Investment Analyst
As at 31/05/2020.

European equities began May 2020 in negative territory as an underwhelming ECB policy report, delivered at the end of the prior month, continued to disappoint markets. President Donald Trump also did little to help as he appeared to rekindle the bad feelings between the US and China. Following the previous month’s rally any hint of bad news was always likely to be taken badly and particularly when that rally has been inspired by the actions of central banks rather than a solid underpinning from fundamentals. But the negativity wasn’t to last long and the month ended on a strong note eventually dwarfing the gains seen in the prior month with the FTSE World Europe ex UK rising by +8.3%, admittedly boosted somewhat by the Euro’s strong move against Sterling.

The impetus for these returns was largely based on the easing of the severity of the global pandemic as numerous countries, including some of the worst hit such as Spain and Italy, began to ease their lockdown restrictions. As is always the case, stock markets were one step ahead of such moves and began to discount a strong rebound in earnings as economies were given the first hints that they may begin to return to some semblance of normality. Quite why Donald Trump chose this moment to pick a fight with China is a mystery although the more Machiavellian among us suspected a subsequent resolution of such a conflict could boost his electoral chances in this year’s presidential election. Later in the month China further exacerbated the situation by threatening to impose a national security law on Hong Kong, a move which pulled the UK firmly into the fray. Despite the market’s bullishness the underlying economic data remained unremittingly bleak with, for example, April’s Eurozone new car registrations down 76% and March construction output and industrial production both down double digit.

The fund outperformed the index with a return of +10.3%. Our technology holdings provided a strong contribution to the performance with the likes of Adevinta, Crayon, Hypoport, Schibsted and Lime Technologies all rising well in excess of 20%. Our best performer was va-Q-tec of Germany which rose by almost 40%. This small and innovative logistics company provides temperature-controlled products and services in an environmentally friendly manner thanks to their proprietary insulation technology. The Covid crisis has impacted their business positively as some of their key customers are from the pharmaceutical industry. Only two stocks ended the month in negative territory, Leonardo of Italy and Nacon of France, despite no specific news-flow to warrant the moves. One new stock was introduced over the course of the month, JDE Peets, a Dutch producer of coffees and teas. The company came to the market by way of an IPO at what we considered an attractive price considering both the company’s organic and self-help potential.

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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