Tariff risks have a smaller impact on European small and mid caps

• Birgitte Olsen
  Head Entrepreneur Investments
  Bellevue Asset Management

Ms. Olsen, what distinguishes Bellevue Entrepreneur Europe Small from other small cap funds?

For 17 years, we have been pursuing a focused and proven investment concept that achieves above-average risk-adjusted returns. The Entrepreneur investment philosophy is based on a clear focus on fundamental bottom-up stock picking around owner-managed companies that are characterized by financial strength, innovation, high profitability, and long-term thinking. Our three-person international team with many years of experience successfully selects both growth and value stocks in a diversified portfolio of 35 to 45 positions, regardless of style.

Bellevue has been successful in this approach since 2011, with outstanding absolute and risk-adjusted performance over both short and long periods.

Why do small and mid caps offer an ideal buying opportunity right now?

Historically, European small caps are currently trading at their lowest relative P/E ratio since 2007 compared to large caps. Fundamentals and balance sheets are solid, with many small and mid cap companies in excellent financial shape. They are also less affected by international politics, as they focus more strongly on their domestic markets than large-cap companies. 

With over 2,000 stocks, the segment offers a broad investment universe. Due to low analyst coverage, there are significant opportunities for active fund management to generate targeted alpha.

What currently makes Europe so attractive?

It is a remarkable constellation of positive factors: Germany’s paradigm shift in fiscal policy and the expected economic upturn, supported by the ECB’s continued accommodative monetary policy. Added to this is the very attractive valuation of European equities in international comparison – especially compared to the US.

Germany’s defense and infrastructure program, worth around EUR 500 bn, and rising European defense spending will provide important impetus over the next five to ten years. All in all, this creates opportunities for European companies – and interesting entry points for investors, as can already be seen from the positive capital flows.

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