There’s nothing quite like local expertise when it comes to ensuring a comprehensive analysis of SMEs and midmarket companies on a European scale. Unearthing top notch nuggets requires long-term monitoring as well as regular contact with management teams, competitors and suppliers in order to properly assess a company’s strategy, competitive advantages and positioning. These companies are generally not widely covered by brokers (see chart below): certain offer strong growth prospects and therefore represent a wealth of opportunities.
Companies overlooked by most brokers
Universe: Euro Stoxx & MSCI EMU - Source: Sycomore AM, Factset
Synergy Smaller Cies: a club of six managers specialised in the eurozone
The Synergy Smaller Cies fund, created in 2003, is co-managed by six small and midcap experts, spread over six eurozone countries. Each manager shares the same investment philosophy: stock picking based on in-depth and independent fundamental analysis.
Each manager focuses on his domestic market and invests in around ten very strong convictions
Each manager focuses on his domestic market and invests in around ten very strong convictions. The result is a quality portfolio of convictions of around 75 lines. De facto, the Synergy Smaller Cies fund has a low turnover: our managers support these companies’ growth over the long term.
Moreover, our co-management approach fosters portfolio uniformity in terms of market capitalisation. The portfolio’s median market capitalisation is €1.3bn (1).
An itinerant quarterly management committee meeting
On a daily basis, each expert manages his own segment independently. To nurture the flow of exchanges, an itinerant management committee meeting, alternating between the six regions covered by the fund, is organised on a quarterly basis. This meeting allows the managers to report on the stocks held and any portfolio changes. It is also an opportunity for each manager to introduce his convictions through site visits, providing his foreign partners with local understanding. For everyone involved, these meetings are an opportunity to share information regarding the competitive landscape, suppliers and customers of the companies screened. An open dialogue has been established among the fund’s managers since its inception, still an uncommon practice in our industry.
A long-term philosophy, a quality portfolio
Historically, the quality of fundamental research carried out locally has allowed the fund to build a portfolio of companies which benefit from average earnings growth exceeding the indices and quite steadier. This was particularly true during the recession in 2008 and 2009. The fund saw a return to earnings growth during the 2010 rebound, as shown in the chart below.
Data at 30 June 2017, A shares - Source: Sycomore AM, Factset
Driven by a long-term philosophy, the Synergy Smaller Cies fund aims to generate a regular performance, exceeding that of the MSCI EMU Small Cap index
Driven by a long-term philosophy, the Synergy Smaller Cies fund aims to generate a regular performance, exceeding that of the MSCI EMU Small Cap index and in line with average earnings growth of the companies in portfolio. The proof lies in the figures. Since its inception, the fund has posted an annualised performance of +10.5% (2) (versus +10.1% (2) for its benchmark index, the MSCI EMU Small Cap), whereas the average earnings growth of the companies in the portfolio climbed +10.2% (2) over the same period.
If you have been impressed by the Sycomore Sélection PME fund (soft closed since January 2017), take advantage of Sycomore AM’s expertise in small caps, combined with that of five local specialists in the eurozone.
(1) Data as of June 30th 2017
(2) Data as of June 30th 2017, A share class
Warning regarding risks
The fund does not guarantee returns or performance and might entail capital loss. Prior to investing, please read carefully the key investor information document available on our website sycomore-am.com.
Communication promotional in nature. This communication has not been prepared in accordance with regulations to promote the independence of financial analysis. Sycomore Asset Management or management companies involved with the preparation of this document are not subject to the ban on conducting transactions on the instruments mentioned by the publication of this communication.