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 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£25.2m

Data as at 31/03/2021.

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.

Jost Werke3.0
Aluflexpack3.0
Verallia 2.5
Pirelli2.4
Schibsted2.3
Thales Group3.1
Energiekontor2.6
Sedana Medical2.6
PNE2.4
Roche Holdings1.9
Mediobanca 4.5
AXA3.4
Banca Mediolanum3.2
BNP Paribas2.5
Allianz2.5
United Internet3.3
Crayon2.9
SESA2.6
Nagarro2.5
Hexatronic Group2.2
Capgemini3.4
Dustin2.9
H+H International2.8
Wienerberger2.5
Ringkøbing Landbobank3.3
Patrizia 2.4
S IMMO1.8
Partners Group Holding1.8
LEG Immobilien1.5
Total1.4

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
Capgemini3.4
AXA3.4
Ringkøbing Landbobank3.3
United Internet3.3
Banca Mediolanum3.2
Thales Group3.1
Jost Werke3.0
Aluflexpack3.0
Dustin2.9
Rest of Portfolio67.0

Source: SVM, as at 31/03/2021

Sector Exposure (%)

Financials21.2
Information Technology15.2
Industrials15.1
Materials10.7
Communication Services10.5
Consumer Discretionary7.0
Real Estate5.8
Health Care5.6
Utilities1.9
Consumer Staples1.7
Energy1.4

Source: SVM, as at 31/03/2021

Size Analysis (%)

Mega Cap (>€50bn)9.5
Large Cap (<€50bn)16.8
Mid Cap (<€10bn)42.5
Small Cap (<€1bn)27.4

Source: SVM, as at 31/03/2021

Geographic Analysis (%)

Other1.3
France23.2
Germany21.5
Italy12.8
Sweden9.0
Norway8.4
Switzerland7.8
Denmark6.0
Austria4.4
Netherlands1.7

Source: SVM, as at 31/03/2021

Currency Exposure (%)

Euro64.8
Norwegian Krone8.4
Swiss Franc7.8
Danish Krone6.0
Swedish Krona9.0

Source: SVM, as at 31/03/2021

Show piebar chart

This Month's Featured Stock

Hexatronic

Look at the annual report of any telecoms company and you will nearly always see one area of growth and that is the capex line. Unfortunately, this is an expense for the companies concerned but a necessary one as digital fibre networks are rolled out globally. There is little sign of this trend coming to an end as businesses and individuals alike seek ever increasing bandwidth to meet their digital demands. Hexatronic of Sweden is one of the key beneficiaries of this trend. As the company’s annual report states they produce and supply “Everything you need to build a world-class fibre network.” From cables to full blown systems this is precisely what they do through a network of 20 fully owned companies.

In the past the company has been heavily reliant on their home market of Sweden making for highly volatile results as the customer base comprised of a relatively small number of clients. However, through acquisition, this has gradually changed, and the company now boasts worldwide operations. But this is still where great opportunity lies. At the end of 2020 Sweden still represented 31% of net sales with North America at 21%, and the rest of Europe and the world at 39% and 8% respectively. Strong double-digit growth should, over time, alter this geographical anomaly although continued strong growth from Sweden means this could take some considerable time.

Meanwhile the company has upgraded its guidance for profitability as the growth they are experiencing impacts capacity utilisation very favourably. Valuation is still attractive especially compared to the peer group many of whom are struggling with growth thanks to substandard product portfolios.

Performance

Performance (%)

{{#if periods.length }}
{{/if }}
{{#each series }}
{{ displayName }}
{{ endValue }}
{{/each }}
FundIndex
1 month1.24.7
2021 YTD1.32.7
1 year71.234.4
3 years51.828.1
5 years100.670.6
Since launch*473.3213.7
Source: Lipper, as at 31/03/2021, 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
799.90p
0.83%
Class B
916.30p
0.84%

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

Source: State Street, as at 21/04/2021.

Commentary

The near 6% performance differential between the Dow Industrial Average and Nasdaq indices in March 2021 provides all the evidence required to illustrate the sharp rotation from the growth segment of the market to cyclicals over the course of March 2021. The promise of a strong growth rebound and potential return of inflation, thanks in a large part to the continued roll-out of Covid-19 vaccination programs, combined with arguably attractive valuations, meant that sectors such as travel, basic resources, financials and automotive dominated the top of the performance table. The winners of 2020 were always going to suffer in such a scenario and predictably underperformance was notable in those stocks who stood to benefit from the economic dynamics of the pandemic with technology shares proving most out of favour, hence the lacklustre Nasdaq returns.

Perversely there was in fact little good news to be had from Europe in terms of the pandemic and its duration. What has now come to be regarded, at best, as a ham fisted approach to the vaccination program has resulted in another wave of the disease taking hold with a host of countries forced to announce further restrictions, all with the capability to further lengthen the economic pain already inflicted by Covid-19. This, however, did not halt the progress of the market with the MSCI Europe ex UK index increasing by +4.7%. If rising bond yields were part of the equation behind this rise the ECB did their best to stem this trend with a commitment to holding rates as well as an ever larger and faster government debt purchase program. The rationale behind this stance was that inflation has yet to show any serious signs of increasing within the Eurozone, a somewhat contrarian position when compared to the moves seen in the equity market.

The fund underperformed the market with an increase of +1.2%. As reflected in the index return the disparity between value and growth, or stocks deemed to be Covid-19 beneficiaries, was stark with the likes of Jost Werke and Banca Mediolanum handsomely outperforming while Lime Technology and Sedana Healthcare showing double digit declines. Of the latter only Sedana saw any stock specific news-flow with the CEO leaving the company. While disappointing we understand the rationale behind this move as the company moves from being R&D driven to a more commercial stance as the salesforce roll-out the company’s innovative inhaled anaesthesia device. For Lime Technologies there was discernible news flow and we put the move down to profit taking. We had already reduced our position following strong recent outperformance and are now happy with our holding as the company stands to benefit from the re-opening of economies as demand should increase for the company’s customer relationship management software which is already in high demand.

We used up the cash balance we have built while selling some of our more successful holdings such as Hypoport and reducing other positions such as Crayon and Energiekontor whose position sizes had grown to merit such a move. The proceeds were used to purchase some more value for the fund which included glass bottle manufacturer Verallia and Austrian brick manufacturer Wienerberger. The result is a more balanced portfolio well positioned to face the uncertainties presented by the timing, strength, and duration of the economic rebound we are likely to witness as economies slowly unlock.

Commentary by
Hugh Cuthbert
European Investment Manager
As at 31/03/2021.

The near 6% performance differential between the Dow Industrial Average and Nasdaq indices in March 2021 provides all the evidence required to illustrate the sharp rotation from the growth segment of the market to cyclicals over the course of March 2021. The promise of a strong growth rebound and potential return of inflation, thanks in a large part to the continued roll-out of Covid-19 vaccination programs, combined with arguably attractive valuations, meant that sectors such as travel, basic resources, financials and automotive dominated the top of the performance table. The winners of 2020 were always going to suffer in such a scenario and predictably underperformance was notable in those stocks who stood to benefit from the economic dynamics of the pandemic with technology shares proving most out of favour, hence the lacklustre Nasdaq returns.

Perversely there was in fact little good news to be had from Europe in terms of the pandemic and its duration. What has now come to be regarded, at best, as a ham fisted approach to the vaccination program has resulted in another wave of the disease taking hold with a host of countries forced to announce further restrictions, all with the capability to further lengthen the economic pain already inflicted by Covid-19. This, however, did not halt the progress of the market with the MSCI Europe ex UK index increasing by +4.7%. If rising bond yields were part of the equation behind this rise the ECB did their best to stem this trend with a commitment to holding rates as well as an ever larger and faster government debt purchase program. The rationale behind this stance was that inflation has yet to show any serious signs of increasing within the Eurozone, a somewhat contrarian position when compared to the moves seen in the equity market.

The fund underperformed the market with an increase of +1.2%. As reflected in the index return the disparity between value and growth, or stocks deemed to be Covid-19 beneficiaries, was stark with the likes of Jost Werke and Banca Mediolanum handsomely outperforming while Lime Technology and Sedana Healthcare showing double digit declines. Of the latter only Sedana saw any stock specific news-flow with the CEO leaving the company. While disappointing we understand the rationale behind this move as the company moves from being R&D driven to a more commercial stance as the salesforce roll-out the company’s innovative inhaled anaesthesia device. For Lime Technologies there was discernible news flow and we put the move down to profit taking. We had already reduced our position following strong recent outperformance and are now happy with our holding as the company stands to benefit from the re-opening of economies as demand should increase for the company’s customer relationship management software which is already in high demand.

We used up the cash balance we have built while selling some of our more successful holdings such as Hypoport and reducing other positions such as Crayon and Energiekontor whose position sizes had grown to merit such a move. The proceeds were used to purchase some more value for the fund which included glass bottle manufacturer Verallia and Austrian brick manufacturer Wienerberger. The result is a more balanced portfolio well positioned to face the uncertainties presented by the timing, strength, and duration of the economic rebound we are likely to witness as economies slowly unlock.

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