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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£24.6m

Data as at 31/12/2020.

Fund Manager

Hugh Cuthbert
European Investment Manager
14
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.

Energiekontor7.3
Sedana Medical2.9
PNE2.8
Thales Group2.5
Roche Holdings2.2
Nagarro4.9
Crayon3.8
United Internet3.5
Lime Technologies3.2
SESA2.8
Aluflexpack3.3
Jost Werke2.5
Schibsted2.5
Pirelli2.3
JDE Peet's2.2
Ringkøbing Landbobank3.2
Patrizia 3.2
LEG Immobilien1.9
Partners Group Holding1.7
S IMMO1.6
Mediobanca 3.9
AXA2.6
Banca Mediolanum2.6
BNP Paribas1.8
Allianz1.8
Capgemini3.2
H+H International2.4
Dustin2.3
Total1.3

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 (%)

Energiekontor7.3
Nagarro4.9
Mediobanca 3.9
Crayon3.8
United Internet3.5
Aluflexpack3.3
Lime Technologies3.2
Ringkøbing Landbobank3.2
Patrizia 3.2
Capgemini3.2
Rest of Portfolio60.6

Source: SVM, as at 31/12/2020

Sector Exposure (%)

Financials25.4
Technology23.9
Utilities12.0
Industrials9.4
Consumer Goods9.0
Consumer Services6.5
Health Care6.4
Oil & Gas1.3
Telecommunications1.1

Source: SVM, as at 31/12/2020

Size Analysis (%)

Mega Cap (>€50bn)6.6
Large Cap (<€50bn)16.9
Mid Cap (<€10bn)40.1
Small Cap (<€1bn)31.4

Source: SVM, as at 31/12/2020

Geographic Analysis (%)

Other1.6
Germany30.2
France16.2
Italy11.5
Sweden10.1
Switzerland8.5
Norway7.9
Denmark5.6
Netherlands2.2
Belgium1.2

Source: SVM, as at 31/12/2020

Currency Exposure (%)

Euro62.9
Norwegian Krone7.9
Swiss Franc8.5
Danish Krone5.6
Swedish Krona10.1

Source: SVM, as at 31/12/2020

Show piebar chart

This Month's Featured Stock

Axa

From an ESG perspective French Insurer Axa can be considered best in class regarding the company’s approach to a host of non-financial matters. Not least is the proactive stance management have adopted to tackling the reporting demands of the TCFD or Task Force on Climate Related Financial Disclosure. Established in 2015 by the Financial Stability Board this organisation’s purpose is to both increase and improve company reporting on the impact of operations on the climate and the risks involved. Few are as advanced in this process as Axa who, in 2020, produced their 4th Climate Report. This report describes the progress the company is making toward implementing the objectives of the Paris Agreement. Central to Axa’s approach is the indicator they term “warming potential” which attempts to measure the impact of the group’s investments on global warming. Over the years the focus on this metric has led to the exclusion of the most polluting industries from the company’s own portfolio or a commitment to do so over a given time frame.

While Axa should be commended for their actions, we still believe there is more they can do regarding their approach to environmental, societal and governance matters, not least in the area of management remuneration. Currently the pay structures of the CEO and CFO have, in our opinion, a weak incentive for ESG performance which represents only 10% of total potential pay out. We have contacted Axa on this matter and there appears to be a willingness to listen. We look forward to the 2021 report to see if this can be backed up with action.

Performance

Performance (%)

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FundIndex
1 month8.02.1
2020 YTD37.78.2
1 year37.78.2
3 years44.419.1
5 years93.766.3
Since launch*465.9205.6
Source: Lipper, as at 31/12/2020, 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
748.20p
0.43%
Class B
855.50p
0.42%

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

Source: State Street, as at 22/01/2021.

Commentary

After the vaccine inspired November rally, it looked like equity markets might tread water in December 2020 as on-going Brexit trade deal talks and an increasingly worsening Covid-19 situation placed a cap on the previous month’s enthusiasm. Indeed, as far as Brexit was concerned the mood music appeared to sour following a meeting between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen with the former describing the situation as “tricky”. Possibly a negotiating tactic but if so, it was effective as the deal was finally signed before year end. With the final tome running into over 2,000 pages it is too early to assess the impact of its conclusions, but markets gave an initial nod of approval celebrating at least the removal of uncertainty. Unfortunately, the pandemic brought no such good news particularly as evidence of a new more transmissible strain emerged in the UK. The result was a swathe of lockdowns across much of Europe and beyond. Yet markets once again posted a positive return with the MSCI Europe ex UK Index rising by 2.1%. Although the Brexit result contributed to the return, the continued supportive action from governments and central banks was most likely behind the enthusiasm. The ECB meeting resulted in a commitment to low interest rates for the duration of the pandemic as well as a significant boost to both the length and size of its emergency plan. In the US, after much prevarication Congress approved its own spending bill resulting in $900 billion of Covid-19 aid as well as a further $1.4 trillion of more standard government spending and corporate tax cuts.

The fund outperformed the index in December posting a rise of 8.0%. Lime Technologies of Sweden recovered from the decline in the share price post the company’s third quarter results which had shown a slowing in growth. The CEO at the time had indicated the temporary nature of this issue so we believe this month’s rally of over 30% was justified. Sedana Healthcare also rose over 30% during December bolstered by continued good evidence of the efficacy of their novel inhaled anaesthesia product. Refrigerated transport provider va-Q-Tec was the worst performer over the course of the month, however, we also sold our position limiting the impact of the near 16% decline. The shares have been fantastic performers this year hence our sale and while the decline in December is most likely a result of the approval of Covid-19 vaccines other than the Pfizer Biontech product which do not require the same extreme levels of refrigeration. va-Q-Tec is highly likely to prosper despite this, however, the valuation of the shares had started to reflect even the most optimistic of scenarios.

Equity markets finished the year with positive returns since the lows in March. Should the global vaccine roll-out prove to be successful there is scope for a strong economic rebound in 2021 as economies emerge from the torpor of lockdown. With fixed interest markets offering little in the way of returns we remain positive on the outlook for the coming year.

Commentary by
Hugh Cuthbert
European Investment Manager
As at 31/12/2020.

After the vaccine inspired November rally, it looked like equity markets might tread water in December 2020 as on-going Brexit trade deal talks and an increasingly worsening Covid-19 situation placed a cap on the previous month’s enthusiasm. Indeed, as far as Brexit was concerned the mood music appeared to sour following a meeting between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen with the former describing the situation as “tricky”. Possibly a negotiating tactic but if so, it was effective as the deal was finally signed before year end. With the final tome running into over 2,000 pages it is too early to assess the impact of its conclusions, but markets gave an initial nod of approval celebrating at least the removal of uncertainty. Unfortunately, the pandemic brought no such good news particularly as evidence of a new more transmissible strain emerged in the UK. The result was a swathe of lockdowns across much of Europe and beyond. Yet markets once again posted a positive return with the MSCI Europe ex UK Index rising by 2.1%. Although the Brexit result contributed to the return, the continued supportive action from governments and central banks was most likely behind the enthusiasm. The ECB meeting resulted in a commitment to low interest rates for the duration of the pandemic as well as a significant boost to both the length and size of its emergency plan. In the US, after much prevarication Congress approved its own spending bill resulting in $900 billion of Covid-19 aid as well as a further $1.4 trillion of more standard government spending and corporate tax cuts.

The fund outperformed the index in December posting a rise of 8.0%. Lime Technologies of Sweden recovered from the decline in the share price post the company’s third quarter results which had shown a slowing in growth. The CEO at the time had indicated the temporary nature of this issue so we believe this month’s rally of over 30% was justified. Sedana Healthcare also rose over 30% during December bolstered by continued good evidence of the efficacy of their novel inhaled anaesthesia product. Refrigerated transport provider va-Q-Tec was the worst performer over the course of the month, however, we also sold our position limiting the impact of the near 16% decline. The shares have been fantastic performers this year hence our sale and while the decline in December is most likely a result of the approval of Covid-19 vaccines other than the Pfizer Biontech product which do not require the same extreme levels of refrigeration. va-Q-Tec is highly likely to prosper despite this, however, the valuation of the shares had started to reflect even the most optimistic of scenarios.

Equity markets finished the year with positive returns since the lows in March. Should the global vaccine roll-out prove to be successful there is scope for a strong economic rebound in 2021 as economies emerge from the torpor of lockdown. With fixed interest markets offering little in the way of returns we remain positive on the outlook for the coming year.

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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Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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