Lannebo Europe SmallCap is managed by Danish fund managers Carsten Dehn and Ulrik Ellesgaard with extensive experience in stock-picking of European small caps. Their ambition when joining Lannebo Fonder’s team a year ago was to conduct active management – in the true sense of the word – and to seek, analyse and invest in quality companies with growth potential. Today, on the one-year anniversary of the fund’s inception, the managers have delivered a return five percentage points over the benchmark index (the corresponding figure is 12.5 percentage points for the 2017 calendar year)*. The portfolio is concentrated to approximately 40 holdings and the investment horizon is on average three years. The fund managers have a broad mandate as they assess companies across Europe, which can provide good risk diversification between countries and currencies. Just as important to finding interesting companies to invest in, is avoiding the land mines.
Carsten Dehn and Ulrik Ellesgaard:
What is the foremost explanation for the fund’s high return?
The market is in our favour where the recovery in Europe is both broad and strong; but above all, our process works. We have managed to avoid land mines while simultaneously finding interesting high-quality companies not fully covered by analysts, hence undervalued shares.
What characterizes your investment philosophy and process?
– We avoid land mines such as companies with weak business models that operate in competitive markets;
– We focus on quality companies, ie. companies with high return on capital employed, a strong balance sheet, good corporate governance, strong market position and pricing power;
– Our emphasis is on companies not fully covered by analysts.
What are the critical success factors going forward?
More of the same! We will continue to be extremely disciplined – regardless of whether there is market tail- or head-winds. Plus, we truly appreciate and value the Lannebo Fonder culture, which is characterized by a high level of confidence in each manager to maintain their disciplined investment process.
Why are European small caps interesting long-term?
Our investment universe is extensive where 8,000 of Europe’s 9,000 listed companies are small caps (market cap <5 billion euros). Our assessment is that small caps will continue to be interesting because:
– Small caps have higher risk-adjusted returns than large caps because they are often more focused with higher earnings per share;
– Small caps typically have fewer analysts that follow them compared to large caps, and as such there are opportunities for risk-adjusted excess returns compared to the benchmark;
– Also, we do not believe that European small caps are overvalued given the growth forecast for Europe.
*Performance as of October 16, 2017. The fund is available in SEK and EUR.
|Lannebo Europe SmallCap (SEK)||MSCI Europe SmallCap Index (SEK)||Lannebo Europe SmallCap (EUR)||MSCI Europe SmallCap Index (EUR)|
|1 month 5.3 %||1 month 3.8 %||1 month 4.4 %||1 month 3.3 %|
|3 months 7.9 %||3 months 4.5 %||3 months 7.2 %||3 months 4.3 %|
|6 months 16.2 %||6 months 7.6 %||6 months 16.4 %||6 months 8.2 %|
|YTD 29.7 %||YTD 17.0 %||YTD 29.6 %||YTD 17.2 %|
|Since inception 27.0 %||Since inception 21.9 %||Since inception 28.5 %||Since inception 23.6 %|
Read the latest monthly report