Menu

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£26.7m

Data as at 30/06/2021.

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
Verallia 2.9
Ipsos2.9
Jost Werke2.6
Schibsted2.5
Energiekontor3.4
Thales Group3.0
Veolia3.0
PNE2.3
Roche Holdings2.1
SESA3.4
United Internet3.1
Nagarro2.7
Crayon2.6
Hexatronic Group2.4
Dustin3.6
Capgemini3.6
Rexel3.1
H+H International3.1
Wienerberger3.0
Mediobanca 4.5
Banca Mediolanum3.1
Allianz3.0
AXA3.0
Ringkøbing Landbobank3.2
Patrizia 2.4
Partners Group Holding2.0
S IMMO1.7
LEG Immobilien1.6
TotalEnergies1.2

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 4.5
Dustin3.6
Capgemini3.6
Energiekontor3.4
SESA3.4
Ringkøbing Landbobank3.2
Banca Mediolanum3.1
United Internet3.1
Rexel3.1
H+H International3.1
Rest of Portfolio66.0

Source: SVM, as at 30/06/2021

Sector Exposure (%)

Industrials19.1
Financials18.8
Information Technology15.2
Materials12.0
Communication Services11.6
Real Estate5.6
Consumer Discretionary5.1
Health Care4.7
Utilities3.0
Consumer Staples1.6
Energy1.2

Source: SVM, as at 30/06/2021

Size Analysis (%)

Mega Cap (>€50bn)6.4
Large Cap (<€50bn)19.2
Mid Cap (<€10bn)51.2
Small Cap (<€1bn)21.0

Source: SVM, as at 30/06/2021

Geographic Analysis (%)

Other1.4
Germany24.3
France24.0
Italy12.4
Norway9.0
Switzerland7.1
Sweden7.0
Denmark6.3
Austria4.7
Netherlands1.6

Source: SVM, as at 30/06/2021

Currency Exposure (%)

Euro68.4
Norwegian Krone9.0
Swiss Franc7.1
Danish Krone6.3
Swedish Krona7.0

Source: SVM, as at 30/06/2021

Show piebar chart

This Month's Featured Stock

Wienerberger

Austrian building products manufacturer Wienerberger operates under 3 divisions. Building Solutions manufactures and sells products for the walls and facades of both commercial and domestic buildings. The Piping Division supplies both plastic and ceramic pipes to infrastructure programmes. Finally, the North America unit is responsible for selling these products in this important geography.

The company has held up well during the pandemic with sales and profits now heading back to pre-Covid 19 levels. Strong demand is seen across all divisions and although there are inflationary pressures on costs this has so far been offset by healthy price increases.

In addition to this recovery in the core business Wienerberger is also an interesting self-help story. In particular is the target to enhance EBITDA by a further €135 million come 2023 with a 2020 baseline. Considering 2020 EBITDA amounted to €546 million this represents an uplift of almost 25% over the course of only 3 years and is in addition to any boost seen from organic growth or acquisitions. At the same time the Pipe Division is opening up interesting new areas of growth capitalising upon the EU’s new climate strategy which has a focus on minimising damage from climate change and a budget of €12 billion with which to achieve it. As Wienerberger is becoming one of the leading suppliers in this area they stand to benefit exponentially.

Trading on just over 10x 2023 earnings and offering a yield close to 3% we believe this company offers highly attractive exposure to European infrastructure growth and at a very attractive price.

Performance

Performance (%)

{{#if periods.length }}
{{/if }}
{{#each series }}
{{ displayName }}
{{ endValue }}
{{/each }}
FundIndex
1 month-0.21.9
2021 YTD6.711.0
1 year48.722.6
3 years57.633.5
5 years109.476.8
Since launch*503.5239.2
Source: Lipper, as at 30/06/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202148.722.6+26.1
20203.40.6+2.8
20192.58.2-5.7
20184.02.7+1.3
201727.929.0-1.1
Source: Lipper, as at 30/06/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
833.50p
0.42%
Class B
956.70p
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 03/08/2021.

Commentary

Central banks paid a prominent role in determining the direction of European Equity markets in June 2021. First came a distinctively supportive meeting from the ECB where growth expectations for Eurozone GDP were upgraded from +4% to +4.6% accompanied by a commitment to increase emergency asset purchases at, according to Christine Lagarde, a “significantly higher pace” than previously suggested. This is despite inflation for May coming in above the bank’s targeted rate of just below 2%. The fact that the ECB were not more hawkish on this inflation number strongly suggest they consider the price rises to be temporary thereby allaying one of the stock market’s greatest fears, that of run-away inflation. Unfortunately, the US Federal Reserve were not in such an accommodative mood going so far as suggesting rates would need to be raised at an earlier than expected date possibly as soon as 2022. This sent markets tumbling although some comforting words from Fed Chair Jerome Powell later in the month helped limit the fall out. These contradictory results from two central banks highlight the uncertainty of the situation concerning the inflationary outlook. Evidence of price pressures is abundant not least in Europe where we are witnessing increasing supply chain bottlenecks giving suppliers the power to name their price in many instances. This of course is the result of the rapidity in which economies are reopening and the speed at which manufacturers need to replenish their inventories meaning the resultant inflation may well be transitory, which is the scenario clearly envisaged by the ECB.

The two ways pull from central banks resulted in a muted response from equity markets with the MSCI Europe ex UK index increasing by +1.9%. The fund lagged the index with a return of -0.2%. Three stocks declined by more than 10%, German property manger Patrizia, Swedish cable and equipment supplier Hexatronic and medtech company Sedana also from Sweden. For both Sedana and Patrizia there was nothing in the way of news flow to drive the moves which we put down to the defensive nature of both business models at odds with the current enthusiasm for reopening plays. Hexatronic was downgraded by one of the few analysts who cover the stock citing the greater than 60% return the shares have seen from the start of the year to the end of June. We are holding on to the shares as we believe the company can post a level of profitability currently not expected by the market. Our best performing stock was Aker Carbon Capture which rose by more than 17% over the course of the month boosted by the company’s unique technology which helps industry combat the threat of climate change.

Our holdings in French bank BNP and games maker Nacon were sold over the course of the month booking profits in both cases. In their place we purchased Rexel and Apontis Pharma. While the former is an ideal candidate to benefit from resurging economies through its global wholesale electrics business the latter stands to benefit from its interesting business model which combines pharmaceuticals which are currently taken on an individual basis. This ensures a stricter adherence to drug regimes for what are often elderly patients.

Commentary by
Hugh Cuthbert
European Investment Manager
As at 30/06/2021.

Central banks paid a prominent role in determining the direction of European Equity markets in June 2021. First came a distinctively supportive meeting from the ECB where growth expectations for Eurozone GDP were upgraded from +4% to +4.6% accompanied by a commitment to increase emergency asset purchases at, according to Christine Lagarde, a “significantly higher pace” than previously suggested. This is despite inflation for May coming in above the bank’s targeted rate of just below 2%. The fact that the ECB were not more hawkish on this inflation number strongly suggest they consider the price rises to be temporary thereby allaying one of the stock market’s greatest fears, that of run-away inflation. Unfortunately, the US Federal Reserve were not in such an accommodative mood going so far as suggesting rates would need to be raised at an earlier than expected date possibly as soon as 2022. This sent markets tumbling although some comforting words from Fed Chair Jerome Powell later in the month helped limit the fall out. These contradictory results from two central banks highlight the uncertainty of the situation concerning the inflationary outlook. Evidence of price pressures is abundant not least in Europe where we are witnessing increasing supply chain bottlenecks giving suppliers the power to name their price in many instances. This of course is the result of the rapidity in which economies are reopening and the speed at which manufacturers need to replenish their inventories meaning the resultant inflation may well be transitory, which is the scenario clearly envisaged by the ECB.

The two ways pull from central banks resulted in a muted response from equity markets with the MSCI Europe ex UK index increasing by +1.9%. The fund lagged the index with a return of -0.2%. Three stocks declined by more than 10%, German property manger Patrizia, Swedish cable and equipment supplier Hexatronic and medtech company Sedana also from Sweden. For both Sedana and Patrizia there was nothing in the way of news flow to drive the moves which we put down to the defensive nature of both business models at odds with the current enthusiasm for reopening plays. Hexatronic was downgraded by one of the few analysts who cover the stock citing the greater than 60% return the shares have seen from the start of the year to the end of June. We are holding on to the shares as we believe the company can post a level of profitability currently not expected by the market. Our best performing stock was Aker Carbon Capture which rose by more than 17% over the course of the month boosted by the company’s unique technology which helps industry combat the threat of climate change.

Our holdings in French bank BNP and games maker Nacon were sold over the course of the month booking profits in both cases. In their place we purchased Rexel and Apontis Pharma. While the former is an ideal candidate to benefit from resurging economies through its global wholesale electrics business the latter stands to benefit from its interesting business model which combines pharmaceuticals which are currently taken on an individual basis. This ensures a stricter adherence to drug regimes for what are often elderly patients.

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

None
None
None
None
None
None
None
None
None
None
None
None
Nexus logo
None
None
None

Contact our sales team

With markets dominated by news flow it is important to keep abreast of the influences that are guiding our investment decisions.

Get in touch

The Value Key

The Value Key blog allows our active fund managers and analysts to share their views on a range of topics.

Read the blog