As Europe prepares for slow or close to non-existent growth in the coming year and with the Cypriot crisis still at the forefront of their minds, investors are keen to access small and mid-cap names showing signs of life.
With this in mind, Citywire Global has uncovered the European equity small and mid-cap specialists posting consistent outperformance over the past five years.
From a pool of 84 managers with a five-year track record in the Citywire database, we find just three who have succeeded in outperforming the average European equity small and mid-cap manager in each of the past five years.
So who are the outperforming trio and what strategies or tactics have kept them ahead of their peers?
Nicholas Williams, Barings
Best period of outperformance vs. average manager: +8.46% (2012/13)
Despite being UK-domiciled, this Ucits fund is registered for sale across 12 different regions and can also boast the second strongest absolute performance out of the three funds over the five years.
Nicholas Williams, who has 22 years of investment experience, has concentrated his investments in the German (19.2%) and French (18.8%) markets, while investing in a diverse range of stocks. In total, he holds 102 positions, with Norwegian geoscience data firm TGS-NOPEC being his largest single stock (1.9%).
In his February fund update, Williams announced the initiation of a minor position in Sky Deutschland and a slight increase in his holding in Wirecard. He said the online payment provider had experienced unjustified share price weakness.
Frank Hansen, Allianz GI
Best period of outperformance vs. average manager: +6.96% (2010/11)
Next up is Allianz Global Investor’s Frank Hansen. The Citywire A-rated manager, who predicted a ‘golden age’ for small caps in 2011, is also CIO of European small and mid-caps for the German investment firm.
At present, Hansen has a slight underweight to industrials while having a significant overweight in the IT sector. He currently has 15.8% of the fund invested in IT-related names. Elsewhere, he also has a pronounced underweight to the UK market, with 15 percentage points less than the index allocation.
Hansen recently relinquished his position on Allianz’s blockbuster fund Concentra, with Matthias Born retaining the lead manager post and Andreas Hildebrand being added the €2 billion German equity fund.
Kenneth Nicholson, Standard Life Investments
Best period of outperformance vs. average manager: +10.08% (2008/09)
Rounding out the consistent trio is Standard Life Investment’s Kenneth Nicholson, who can also boast the strongest period of outperformance among the three managers in our analysis. This came in 2008/09 and actually reflects a period in which he lost less than the average manager, who was down 45.31% over the 12 month period.
In the €74.9 million European Smaller Companies strategy, Nicholson has the bulk of his fund positioned in the UK (36.3%) and German (24%) markets, while having almost one-third of the portfolio exposed to industrials.
According to the most recent factsheet, his largest overweights was to Italian financial firm Azimut Holding, which was 2.8 percentage points above benchmark, while he held a significant underweight to Aberdeen Asset Management. Here he holds one percentage point less than the index.