SICAV

European Smaller Companies Equity Fund

Seeking to identify tomorrow’s winning European growth companies.

ISIN LU0382931417 WKN A0RC40

3YR Return Annualised
(View Total Returns)

Total Assets
(EUR)

4.49%
€154.5m

1YR Return
(View Total Returns)

Manager Tenure

22.66%
4yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.80
6.14%

Inception Date 26-Nov-2008

Performance figures calculated in EUR

Other Literature

30-Sep-2020 - Ben Griffiths, Portfolio Manager,
Markets have surged since March on dramatic policy interventions around the world. Overall valuations have risen strongly and there has been an increasingly marked bifurcation within the market between those companies that are perceived to have benefitted from the structural changes and those that have been more adversely affected. Against this backdrop, we are working hard with our analysts to establish the medium- and longer-term outlook for the companies that we hold in the portfolio.
Benjamin Griffiths
Benjamin Griffiths, Portfolio Manager

Ben Griffiths is the portfolio manager for the European Smaller Companies Equity Strategy in the International Equity Division, covering European small-cap stocks and co-portfolio manager of the International Small-Cap Equity Strategy.  Ben is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd. 

 

Strategy

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of smaller publicly traded European companies.

Investment Approach

  • Invests in European small- and mid-cap companies capable of sustaining above-average, long-term earnings growth and selling at reasonable prices.
  • Benchmark-unconstrained approach exploits diverse opportunities in developed Europe, peripheral, and European Union (EU) accession countries.
  • Exposure to companies at different stages in the growth cycle offers the potential for more consistent performance across market cycles.
  • Long-term investment horizon emphasizes bottom-up stock selection as the primary source of excess return.
  • Dedicated London-based research team seeks companies with:
    • Attractive industry structure.
    • Compelling business models.
    • Strong growth prospects.
    • Solid management teams.
    • Reasonable valuations.

Portfolio Construction

  • Typically 70-100 stock portfolio
  • Diversification at the security, country, region, and sector levels offers the potential for attractive risk-adjusted returns
  • Bias toward high-quality stocks provides the potential for downside risk protection
  • Risk parameters
    • Emerging Europe exposure: maximum 10%
    • Typical position size: 0.50% to 5.00%
    • Low turnover expected
    • Expected tracking error: 3% to 7%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % 22.66% 4.49% 10.10% 12.71% 8.00%
Indicative Benchmark % 0.19% 0.58% 5.20% 9.53% 3.74%
Excess Return % 22.47% 3.91% 4.90% 3.18% 4.26%

Inception Date 26-Nov-2008

Manager Inception Date 31-Dec-2015

Indicative Benchmark: MSCI Europe Small Cap Index Net

Data as of  30-Sep-2020

Performance figures calculated in EUR

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 22.66% 4.49% 10.10% 12.71%
Indicative Benchmark % 0.19% 0.58% 5.20% 9.53%
Excess Return % 22.47% 3.91% 4.90% 3.18%

Inception Date 26-Nov-2008

Indicative Benchmark: MSCI Europe Small Cap Index Net

Data as of  30-Sep-2020

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 23-Oct-2020 Quarter to DateData as of 23-Oct-2020 Year to DateData as of 23-Oct-2020 1 MonthData as of 30-Sep-2020 3 MonthsData as of 30-Sep-2020
Fund % 1.69% 1.69% 12.92% 0.02% 11.05%
Indicative Benchmark % 0.80% 0.80% -9.62% -0.61% 6.22%
Excess Return % 0.89% 0.89% 22.54% 0.63% 4.83%

Inception Date 26-Nov-2008

Indicative Benchmark: MSCI Europe Small Cap Index Net

Indicative Benchmark: MSCI Europe Small Cap Index Net

Performance figures calculated in EUR

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

30-Sep-2020 - Ben Griffiths, Portfolio Manager,
The MSCI Europe Small Cap Index fell in volatile trade in September on concerns that a second wave of coronavirus infections could derail a nascent economic recovery. Signs that the next round of U.S. fiscal stimulus could be delayed until after the presidential election also weighed on sentiment. Within the portfolio, an overweight in health care and our choice of securities in financials and industrials and business services were the main contributors to relative performance. Conversely, stock picking in communication services, real estate and consumer staples, along with an underweight in real estate, held back returns the most. Amplifon, a leading retailer in hearings aids and accessories, was the top-performing holding in health care. The shares rose as the company experienced a strong recovery from the coronavirus crisis and gained market share after raising spending on marketing. On the negative side, the main underperformer among our real estate holdings was Instone Real Estate, a Germany-based homebuilder. The shares slipped on profit taking after reaching a month high on the launching of an unexpected capital increase to help fund its new Valuehome business and exploit land market opportunities.

Holdings

Total
Holdings
100
Largest Holding ASOS 2.34% Was (30-Jun-2020) 1.75%
Other View Full Holdings Quarterly data as of 30-Sep-2020
Top 10 Holdings 20.25% View Top 10 Holdings Monthly data as of 30-Sep-2020

Largest Top Contributor^

ASOS
By 0.14%
% of fund 2.33%

Largest Top Detractor^

Ambu
By -0.70%
% of fund 2.31%

^Absolute

Quarterly Data as of 30-Sep-2020

Top Purchase

THG Holdings (N)
0.99%
Was (30-Jun-2020) 0.00%

Top Sale

Kambi (E)
0.00%
Was (30-Jun-2020) 1.55%

Quarterly Data as of 30-Sep-2020

30-Jun-2020 - Ben Griffiths, Portfolio Manager,

Reduced Overweight Sectors

Over the quarter, we added four new names and eliminated 10, leaving us with 98 stocks in the portfolio. We also trimmed names that have done exceptionally well, such as in health care and consumer discretionary, and those where we lost conviction.

The strategy's profile continues to reflect our focus on durable growth companies with a sustainable competitive advantage. We have maintained a bias toward health care and information technology, and we also have an overweight position in communication services, largely due to our holdings of computer gaming stocks.

Although we remained overweight to micro-cap names (names with a market capitalization of less than USD $500 million), we took selective advantage of relative strength to cut our exposures if we could not identify any meaningful fundamental change. Since the start of the year, eight of the 19 names that we exited were in the micro-cap bucket.

Industrials and Business Services

We further increased our underweight in industrials and business services and changed the composition of our holdings. We sold Stemmer Imaging, a Germany-based provider of machine vision technology, which has not met expectations, and Konecranes, a Finland-based industrials cranes manufacturer, that is likely to struggle in the economic slump caused by the coronavirus.

We also opened positions in Italy-based specialty filters-maker GVS at its market launch, Homeserve, a UK-based home assistance company that provides policies for repair services, and Howden Joinery, the leading supplier of kitchens in the UK.

The machinery industry is our largest overweight. We own Weir Group, a global manufacturer of industrial pumps and fracking equipment; Va-Q-Tec, which designs and manufactures customized vacuum insulation panels; and Rotork, the world's leading designer and manufacturer of heavy-duty industrial valve actuator devices.�

We are also overweight professional services and industrial conglomerates. In the former, our largest position is Intertrust, an international trust and corporate management company. In the latter, we own shares in DCC,�which provides international sales, marketing, and support services. The company offers diversified exposure to the UK/Irish economies and has an impressive long-term record of growing earnings and dividends.

  • We exited our position in Stemmer Imaging, a bet we placed at the company's IPO in 2018. However, its subsequent performance has been disappointing, and the company now faces challenging conditions. We decided to recycle the funds in more interesting opportunities.
  • We participated in the initial public offering of Italy-based GVS, a global high-quality maker of filters for medical devices, such as ventilators, specialist filters for the auto industry and biohazard masks. The family-owned business is exposed to growing markets and has a long track record of double-digit growth. The company has been expanding to meet increased demand from hospitals due to the coronavirus pandemic.

Health Care

We reduced our overweight exposure to the health care sector, which is still a key long-term bet, pruning Ambu, a Denmark-based provider of diagnostic and life-supporting devices for hospitals and rescue services, after strong performance and exiting LivaNova, a UK-based medical device manufacturer.

Our largest industry allocations are life sciences tools and services, biotechnology, and health care providers and services. Eurofins Scientific, a leading global provider of bioanalytical laboratory testing services is our main holding in the first industry. In biotechnology, we hold Galapagos, a Belgium-based clinical-stage biotechnology company. In the health care providers and services industry, we own shares in Amplifon, an Italian company that distributes, adjusts, and personalizes hearing aids.

Within health care equipment and supplies, we are optimistic about innovative companies with strong competitive positioning and leading technology in niche markets. We are invested in Ambu, which is the largest holding in the portfolio. We also own shares in Elekta, a Sweden-listed medical technology company.

  • We sold our holding in LivaNova, a global medical technology company with strong leadership positions in neuromodulation and cardiac surgery, to recycle funds into more interesting opportunities. First-quarter results showed revenue and earnings missed estimates, while the company issued lower guidance for the year, due to the interruption of elective surgical procedures caused by the coronavirus.

Communication Services

We reduced our overweight in communication services, exiting Cineworld, an operator of movie houses in the UK, central and Eastern Europe, and Israel, and Russian internet company Mail.Ru, which offers a range of online communication products and entertainment services.

Our largest industry bet is entertainment, where we hold shares in four games developers, one of the fastest-growing segments of the industry. Our holdings include Codemasters Group Holdings, a UK-based video game developer and publisher; Team17, a company that is one of the longest-running independent video game developers; Frontier Developments, a world management games specialist; and Stillfront, a Sweden-based publisher of digital games.

We are also overweight interactive media and services, where we hold Scout24 Holding, an online classified advertising company that operates mainly in Germany.

  • We exited Cineworld as the coronavirus has caused great uncertainty for the business, leading to closures of cinemas, delays of major releases, and funding strains relating to the Cineplex acquisition.
  • We exited our position in Mail.ru to raise funds for investment in more attractive opportunities. The company withdrew guidance for 2020 due to the uncertainty caused by the coronavirus, and we lost confidence in the management.

Consumer Discretionary

We also trimmed our overweight allocation to the consumer discretionary sector. We exited Basic-Fit, Europe's largest fitness group, and B&S Group, a Luxembourg-based consumer goods distributor. We pared Mips, a maker of helmets for reducing rotational forces on the brain caused by impacts to the head.

We own a broad swath of companies, with our largest industry bets in internet and direct marketing; textiles, apparel, and luxury goods; leisure products; and hotels, restaurants, and leisure. In internet and direct marketing, we own shares in Takeaway.com, a leading online takeaway food delivery aggregator, and Trainline, the UK's leading online rail and coach booking platform.

Our textiles, apparel, and luxury goods holdings include Watches of Switzerland, a retailer of watches and jewelry in the UK. Our leisure product names include Mips and Thule, a Sweden-based company that develops and manufactures sport, outdoor, and cargo products. In hotels, restaurants, and leisure, our largest position is Kambi, which provides online sports betting services.

  • We exited Basic-Fit, taking advantage of a recovery in the share price since the market correction in March. We believe the business model based on new gym openings will struggle due to reduced consumer spending and social distancing.

Financials

We reduced our underweight in financials, opening a position in Hiscox, a specialist non-life insurer.

We remain overweight the capital markets industry, focusing on the relatively higher-quality asset managers that are durable growth companies. Our largest holdings include Intermediate Capital, a UK-based specialist asset manager, and XPS Pension Group, a UK-based holding company that�is engaged in the pensions actuarial, consulting, and administration business.

We are underweight in banks. In addition to the headwinds deleveraging, litigation issues, and increased regulation, they must now cope with a sharp recession and a more prolonged period of low interest rates that will further erode earnings.�Our holdings include�Bawag, Austria's fourth-biggest bank, and Italian financial services company FinecoBank Banca Fineco.

  • We initiated a position in Hiscox after an exaggerated decline in the shares amid concerns the company would have to raise substantial amounts of capital to cover business interruption cover claims due to the coronavirus. The company said that only a relatively small number of clients might seek to make a claim, and the sharply lower share price presented us with the opportunity to buy a unique financial asset�which, in our view,�could grow strongly over the long term.

Sectors

Total
Sectors
10
Largest Sector Health Care 20.30% Was (31-Aug-2020) 18.96%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2020

Indicative Benchmark: MSCI Europe Small Cap Index

Top Contributor^

Financials
Net Contribution 1.39%
Sector
0.10%
Selection 1.29%

Top Detractor^

Consumer Staples
Net Contribution -0.40%
Sector
-0.02%
Selection
-0.38%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

Health Care
By11.11%
Fund 20.30%
Indicative Benchmark 9.20%

Largest Underweight

Industrials & Business Services
By-10.57%
Fund 13.46%
Indicative Benchmark 24.03%

Monthly Data as of 30-Sep-2020

30-Sep-2020 - Ben Griffiths, Portfolio Manager,
We made some changes to the portfolio in September as market volumes swelled. New opportunities presented themselves in consumer discretionary, which prompted us to increase our overweight allocation. We invested in a German recreational vehicles business that we feel has a long runway for growth due to ageing populations and the disruption to social relationships caused by the coronavirus. We raised our underweight allocation to financials, exiting Flow Traders, a Netherlands-based electronic liquidity provider specialising in exchange-traded products. The stock has performed decently but not as well as we had hoped given the heightened market volatility.

Countries

Total
Countries
15
Largest Country United Kingdom 39.29% Was (31-Aug-2020) 37.68%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2020

Indicative Benchmark: MSCI Europe Small Cap Index

Top Contributor^

United Kingdom
Net Contribution 3.08%
Country
-0.23%
Selection 3.31%

Top Detractor^

Denmark
Net Contribution -0.57%
Country
0.05%
Selection
-0.62%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

United Kingdom
By9.03%
Fund 39.29%
Indicative Benchmark 30.26%

Largest Underweight

Sweden
By-5.18%
Fund 9.08%
Indicative Benchmark 14.26%

Monthly Data as of 30-Sep-2020

30-Sep-2018 - Ben Griffiths, Portfolio Manager,
By paring back our position in the aforementioned online payments processor, we reduced our exposure to Germany. Our country positions otherwise did not change materially during the month.

Team (As of 01-Oct-2020)

Benjamin Griffiths

Ben Griffiths is the portfolio manager for the European Smaller Companies Equity Strategy in the International Equity Division, covering European small-cap stocks and co-portfolio manager of the International Small-Cap Equity Strategy.  Ben is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd. 

Ben’s investment experience began in 1999, and he has been with T. Rowe Price since 2006, beginning in the Equity Division. Prior to this, Ben was employed by Baillie Gifford as an investment manager. 

Ben earned a B.A. in investment analysis from Stirling University and an M.Eng. in engineering science from Oxford University. Ben also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2016
  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    0
Andrew Clifton

Andrew Clifton is a portfolio specialist in the Equity Division at T. Rowe Price. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Mr. Clifton has over 30 years of investment experience, nine of which have been at T. Rowe Price. Prior to joining the firm in 2010, he was an executive director at UBS Global Asset Management. Prior to that, he was a vice president at Merrill Lynch.

Mr. Clifton earned a B.Sc. in economics from the London School of Economics and an M.Sc. in econometrics from the University of Southampton.

  • Years at
    T. Rowe Price
    10
  • Years investment
    experience
    31

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (EUR) Minimum Subsequent Investment (EUR) Minimum Redemption Amount (EUR) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A €1,000 €100 €100 5.00% 160 basis points 1.77%
Class I €2,500,000 €100,000 €0 0.00% 95 basis points 1.05%
Class Q €1,000 €100 €100 0.00% 95 basis points 1.12%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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