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European Smaller Companies Equity Fund

Seeking to identify tomorrow’s winning European growth companies.

ISIN LU1028171921 Bloomberg TRESCQG:LX

3YR Return Annualised
(View Total Returns)

Total Assets


1YR Return
(View Total Returns)

Manager Tenure


Information Ratio
(5 Years)

Tracking Error
(5 Years)


Inception Date 31-Jan-2014

Performance figures calculated in GBP

Other Literature

31-Aug-2019 - Ben Griffiths, Portfolio Manager,
European equities have been more volatile this year than last, mainly due to uncertainty about central bank intentions, trade policies and deteriorating economic fundamentals. Without a resolution to these issues we expect volatile conditions may continue. Even so, valuations among European small-caps relative to other groups now appear to be more reasonable. Amid the continuing market volatility, high-growth stocks have more appeal on a relative basis and continue to offer an attractive entry point for investors.
Benjamin Griffiths
Benjamin Griffiths, Portfolio Manager

Ben Griffiths is the portfolio manager for the European Smaller Companies Strategy and undertakes investment analysis covering European small-cap stocks. Mr. Griffiths is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

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Manager's Outlook

We expect that European equity markets to be more volatile in 2019 mainly due to uncertainty about central bank intentions, trade policies, and a deterioration in economic fundamentals.

The emergence of populist movements across the Continent, the tortuous Brexit process, and the deterioration in Italy's relationship with the European Union, have also contributed to an uneasy geopolitical backdrop, which we continue to monitor.

Murky Outlook

Externally, the outlook for economic growth has grown murkier, as intensifying concerns of a global trade war affect activity and investment intentions. Doubts remain about the U.S. economy's ability to withstand a shift to higher borrowing costs. Emerging market risks have also intensified, which may affect export markets for many European companies. Slowing growth in Asia, not least China, and geopolitical risks in the region cannot be ignored either.

Still, the European Central Bank's accommodative monetary policy stance and two years of improvement in corporate earnings have supported investor expectations. While the slowing economy has led to a reduction in earnings expectations for 2019, they are still moderately positive. Those for the smaller end of the market are slightly more favorable than for large-caps.

Brexit Uncertainty Deepens

On the negative side, Brexit uncertainty has intensified after the resignation of Prime Minister Theresa May, raising political and economic instability in the UK and worsening the outlook for the rest of Europe. The prospect of an agreed exit from the EU could be in the balance should a backer of a no-deal Brexit become the next prime minister. Whatever the outcome, the process of untangling one of Europe's largest trading partners from the single market will be complex and may have a severe impact on both economies.

We have held few, if any, UK companies with a domestic or cyclical exposure to the economy since the referendum on EU membership in June 2016 because they are the most at risk to faltering growth. We have taken a slightly more defensive tilt as we seek clarification on Brexit and have focused mainly on quality growth companies.

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 Q | GBP)

Annualised Performance

  1 YR 3 YR
5 YR
Since Inception
Since Manager Inception
Fund % -15.75% 8.80% 11.61% 10.24% 10.14%
Indicative Benchmark % -5.96% 8.10% 10.37% 9.39% 9.78%
Excess Return % -9.79% 0.70% 1.24% 0.85% 0.36%

Inception Date 31-Jan-2014

Manager Inception Date 31-Dec-2015

Indicative Benchmark: MSCI Europe Small Cap Index Net

Data as of  31-Aug-2019

  1 YR 3 YR
5 YR
Since Inception
Fund % -13.11% 13.19% 11.28% 10.97%
Indicative Benchmark % -3.28% 11.77% 10.10% 9.86%
Excess Return % -9.83% 1.42% 1.18% 1.11%

Inception Date 31-Jan-2014

Indicative Benchmark: MSCI Europe Small Cap Index Net

Data as of  30-Jun-2019

Performance figures calculated in GBP

Recent Performance

  Month to DateData as of 16-Sep-2019 Quarter to DateData as of 16-Sep-2019 Year to DateData as of 16-Sep-2019 1 MonthData as of 31-Aug-2019 3 MonthsData as of 31-Aug-2019
Fund % 0.87% -1.03% 7.09% -3.42% -1.26%
Indicative Benchmark % 1.57% 0.76% 16.26% -2.24% 3.32%
Excess Return % -0.70% -1.79% -9.17% -1.18% -4.58%

Inception Date 31-Jan-2014

Indicative Benchmark: MSCI Europe Small Cap Index Net

Indicative Benchmark: MSCI Europe Small Cap Index Net

Performance figures calculated in GBP

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.

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. 

31-Aug-2019 - Ben Griffiths, Portfolio Manager,
European small-cap shares fell in August in thin, volatile trade as fears that the global economy was heading for recession intensified due to an escalation in trade tensions between the U.S. and China. Within the portfolio, information technology (IT) was the worst-performing sector due mainly to a sizable negative effect from stock picking and, to a lesser extent, our overweight allocation. Our underweight exposure to real estate, a defensive sector that attracted investors, also curbed returns. Stock selection in communication services dragged further, counteracting the positive impact from our overweight. Health care and financials were the top performers, mainly due to our choice of securities. IQE, a leading global manufacturer of advanced semiconductor materials, performed worst in the IT sector. The shares have struggled since the company issued a profit warning in June due to a drop in demand for semiconductors caused by the U.S.-China trade war and the Chinese economic slowdown. On the positive side, Ambu, the Denmark-based provider of diagnostic and life-supporting devices for hospitals and rescue services, was the top performer in health care after announcing that it would end its partnership with its U.S. distributor and adopt a fully direct sales model.


Largest Holding Amplifon 2.21% Was (31-Mar-2019) 1.84%
Other View Full Holdings Quarterly data as of 30-Jun-2019
Top 10 Holdings 16.68% View Top 10 Holdings Monthly data as of 31-Aug-2019

Largest Top Contributor^

By 0.41%
% of fund 2.20%

Largest Top Detractor^

By -0.32%
% of fund 1.73%


Quarterly Data as of 30-Jun-2019

Top Purchase

Trainline (N)
Was (31-Mar-2019) 0.00%

Top Sale

Just Eat (E)
Was (31-Mar-2019) 1.18%

Quarterly Data as of 30-Jun-2019

30-Jun-2019 - Ben Griffiths, Portfolio Manager,

Stock-Specific Opportunities Emerged in Volatile Markets

A range of high-quality growth compounders spanning the information technology (IT), consumer discretionary, financials and industrials and business services sectors emerged amid market volatility during the quarter. Uncertainty about central bank intentions, economic fundamentals and trade policies triggered bouts of shifting sentiment and market direction. Even though we were active in adjusting the composition of the portfolio, sector positioning was little changed from the previous quarter. In these conditions, we still look to build a balanced portfolio with companies that we believe will increase earnings and market share over the medium term and weather economic and political risks such as Brexit.

Raised IT Overweight, Adding to WANdisco

We raised our large overweight allocation to the information technology (IT) sector, adding to our investment in UK-based WANdisco, a big data technology company and specialist in distributed computing, taking advantage of share price weakness.

IT is one of our largest absolute positions, which is consistent with our growth approach. We continue to favor companies in software, IT services, and semiconductors and semiconductor equipment, with innovative and resilient business models that are supported by solid bases of recurring revenues or driven by structural trends. Wirecard and Keywords Studios are our largest holdings in IT services. Within software, we hold WANdisco and First Derivatives, a provider of software and consulting services, particularly to finance, technology, and energy organizations. IQE is our largest investment in semiconductors.

We also hold video game developers, one of the fastest-growing segments of the entertainment industry. Our investments include Team 17, a UK-based company that is one of the longest-running independent video game developers, and Codemasters Group Holdings, a well-established UK-based developer and publisher known for its racing games.

Pared Underweight in Financials

We�cut our underweight allocation to financials, initiating in Tikehau Capital, an alternative asset manager and holding investment company, taking advantage of share price weakness.

We remain overweight the capital markets industry, focusing on the relatively higher-quality asset managers that are durable growth companies. Our largest holdings include XPS Pension Group JTC, a fund management company; and Flow Traders, an electronic liquidity provider based in the Netherlands, which specializes in exchange-traded products.


We are underweight banks and insurance, which generally have been stunted by deleveraging, litigation issues, and increased regulation. Among banks, we hold Finecobank, an Italian financial service company that specialize in online brokerage, and Van Lanschot, a Dutch diversified bank that is now increasing its focus on wealth and asset management. In the insurance industry, we hold Sabre Insurance, a UK-based provider of auto insurance, and DFV Deutsche Familienversicherung, an innovative online German insurer�specializing in health, property and casualty insurance at cheaper rates than the established companies.

  • Tikehau Capital is rapidly transforming itself from a principal investment holding company into a leading European alternative asset manager. We expect the alternative asset management division, which manages assets of EUR ?13 billion, to grow strongly thanks to Tikehau's reputation, track record and fundraising efforts.

Adjusted Mix of Consumer Discretionary Stocks

We further adjusted the composition of our holdings in the consumer discretionary sector, modestly raising our exposure. We exited LeoVegas, a mobile gambling company, after disappointing performance amid increasing regulatory pressure. We also sold our position in Just Eat, one of Europe's largest food carryout ordering websites, and reduced our position in Takeaway.com Holding, a leading online food carryout service in Europe. Just Eat's recent performance has disappointed as well-financed competitors such as Deliveroo enter an increasingly crowded field. We took profits on Takeaway.com Holding after a strong performance this year.

We added three new listings, Trainline, the UK's leading online rail and coach booking platform; Watches of Switzerland, a retailer of watches and jewelry in the UK; and Loungers, the only operator of all-day caf�-bars of scale in the UK. We also opened a position in Hellofresh, a Germany-based online provider of meal kits, taking advantage of share price weakness.

We own a broad swath of companies with our largest bets in the internet and direct marketing; retailing; leisure products; and hotels, restaurants, and leisure industries. In internet and direct marketing, we own shares in Takeaway.com, one of the largest holdings in the portfolio; ASOS, a leading global online fashion retailer; and Trainline. In specialty retail, our biggest position is SMCP SAS, a French fashion retailer. Our leisure product positions include Mips, a maker of helmets for reducing rotational forces on the brain caused by impacts to the head, and Thule, a Sweden-based company engaged in the development and manufacture of sport, outdoor and cargo products. In hotels, restaurants, and leisure, our largest position is Malta-based Kambi, which provides outsourced online sports betting services.

  • We participated in the market launch of Trainline, the UK's leading online rail and coach booking platform, which is benefiting from favorable structural trends. Bookings increasingly are being made online, and this shift still has a long runway; end markets are growing as consumers increasingly adopt rail and coach travel; and there is a regulatory drive to liberalize the supply side, particularly in Europe. The company has been upgrading its platform, which should support operating leverage and boost operating profit.

Industrials and Business Services: Raised Underweight

We adjusted our positions in industrials and business services, increasing our underweight allocation to a sector that is likely to struggle as the economy loses momentum. We exited our holdings in Varta, a maker of lithium-ion batteries, and Aalberts Industries, a Dutch specialist in industrial services and flow control. We added Polypipe, the largest manufacturer of plastic piping systems in the UK and a top 10 player in Europe.

We are overweight professional services and industrial conglomerates. In the former, our largest position is Intertrust, an international trust and corporate management company, followed by Alpha Financial Markets, a leading global consultant to the asset and wealth management industry. In the latter, we own shares in DCC, an ex-venture capital company that 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 own some holdings in the machinery industry, though we are underweight. Our investments include Norma, a Germany-based maker of clamps, connectors, and fluid systems that we expect to benefit from the trend of engine downsizing and carbon dioxide emission control and from the stronger global focus on leakage control of gases and fluids. We also have positions in Spirax-Sarco Engineering, a UK-based fluids control business that is expanding into overseas markets, and Konecranes, which is increasing the number of cranes under its control.

  • We exited Varta, taking profits after strong performance since the start of the year. We do not expect the shares to rise much further as the company expects growth to be slower this year. We sold our holding in Aalberts Industries because slowing economic growth is likely to weigh on cyclical stocks in the months ahead. While Polypipe, our new holding, is trading at levels that reflect a UK discount caused by Brexit uncertainty, the company has continued to deliver mid-single-digit organic growth and improved margins, beating targets set at its 2014 launch onto the market.

Deepened Real Estate Underweight

We further reduced our exposure to the real estate sector, selling our holding in Gecina, a France-based real estate investment trust that owns office properties in Paris. The sector has become less attractive amid uncertainty about the central bank intentions on monetary policy.

Our holdings include Ado Properties, which owns high-quality residential assets in Berlin; two homebuilders, Aedas Homes in Spain and Instone Real Estate in Germany; and Inmobiliaria Colonial, a Spanish REIT that operates a high-quality portfolio of offices in Madrid, Barcelona, and Paris.

  • We exited Gecina as because a record amount of office space is expected to be delivered in 2019 even as demand for offices has contracted sharply. Meanwhile management is planning to increase its project pipeline despite a stretched balance sheet and ongoing dividend hikes.


Largest Sector Health Care 18.40% Was (31-Jul-2019) 17.77%
Other View complete Sector Diversification

Monthly Data as of 31-Aug-2019

Indicative Benchmark: MSCI Europe Small Cap Index

Top Contributor^

Information Technology
Net Contribution 0.88%
Selection 0.22%

Top Detractor^

Consumer Discretionary
Net Contribution -1.21%


Quarterly Data as of 30-Jun-2019

Largest Overweight

Health Care
Fund 18.40%
Indicative Benchmark 9.49%

Largest Underweight

Industrials & Business Services
Fund 11.96%
Indicative Benchmark 21.68%

Monthly Data as of 31-Aug-2019

31-Aug-2019 - Ben Griffiths, Portfolio Manager,
We further reduced our exposure to the health care and IT sectors sector, taking profits on strong performance in individual stocks and rebalancing the portfolio to cope with increased market volatility. Both sectors remain our largest overweight exposures, which is consistent with our growth approach. We always have a high exposure to durable growth companies in these sectors, and we expect them to make good progress this year. We increased our large exposure to the consumer discretionary sector, adding to newly acquired names.


Largest Country United Kingdom 37.07% Was (31-Jul-2019) 38.36%
Other View complete Country Diversification

Monthly Data as of 31-Aug-2019

Indicative Benchmark: MSCI Europe Small Cap Index

Top Contributor^

United Kingdom
Net Contribution 0.70%
Selection 0.92%

Top Detractor^

Net Contribution -0.72%


Quarterly Data as of 30-Jun-2019

Largest Overweight

United Kingdom
Fund 37.07%
Indicative Benchmark 31.53%

Largest Underweight

Fund 0.00%
Indicative Benchmark 3.88%

Monthly Data as of 31-Aug-2019

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 31-Aug-2019)

Benjamin Griffiths

Ben Griffiths is the portfolio manager for the European Smaller Companies Strategy and undertakes investment analysis covering European small-cap stocks. Mr. Griffiths is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Griffiths has 18 years of investment experience, 11 of which have been with T. Rowe Price. Prior to joining the firm in 2006, he was an investment manager with Baillie Gifford.

Mr. Griffiths earned a diploma in investment analysis from Stirling University and an M.Eng. in engineering science from Oxford University. Mr. Griffiths has earned the Chartered Financial Analyst designation.

  • Fund manager
  • Years at
    T. Rowe Price
  • Years investment
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 29 years of investment experience, eight 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
  • Years investment

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A €15,000 €100 €100 5.00% 160 basis points 1.73%
Class I €2,500,000 €100,000 €0 0.00% 95 basis points 1.04%
Class Q €15,000 €100 €100 0.00% 95 basis points 1.11%

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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