What?
A concentrated and limited capacity pan-European small cap equity strategy aiming for significant long term absolute returns from a portfolio of neglected but high quality companies trading at compelling valuations.
Pan-Europe Small Cap
European Micro
Why?
Companies with less than $1bn market capitalisation are typically ignored by large global investors. Many believe that for a company to be that small it must have “issues” but the reality is many small and well-run companies with healthy prospects, solid balance sheets and strong franchises are simply ignored or overlooked. We view the limited capacity available in this space as a positive because it deters competition.
How?
The objective is to invest in companies at substantial discounts to intrinsic value and with a material margin of safety. The process is necessarily “greedy” in its search for both high quality and attractive price, which is a combination of features far harder to find within larger cap investment universes. The key valuation metric is cashflow because this is critical to very small companies. The focus is on building models and meeting company management – covering all the bases and not compromising. The discipline of running a concentrated portfolio is important in this regard. Up to 20% of the portfolio may be invested in special situations i.e where a company is experiencing shorter term operational or financial challenges. The due diligence and valuation criteria applied to these companies is correspondingly more stringent, but the risk/reward profile is very attractive. The portfolio is diversified across 6 categories of company that seeks to capture the economic and earnings sensitivity of individual ideas without recourse to any traditional style or index classification that reduces agility.