Four European equities funds managed by the international asset management arm of Berenberg private bank, have marked their three year anniversaries this month with consistent year-on-year outperformance against their benchmark indices. This has been the result of a disciplined implementation of Berenberg’s long-term investment approach which focuses on investing in quality companies with high growth potential and sustainable business models that are set to benefit from structural trends across the global economy.
The funds have all recently been awarded a 5-star rating by Morningstar and are in the top 10 percent within their peer groups.
Since their inception in October 2017, the all cap Berenberg European Focus fund returned +30.3 per cent compared to a decline of -6.5 per cent in the MSCI Europe Index and the Berenberg Eurozone Focus fund +26.3 per cent versus the -10.0 per cent of the MSCI EMU Index. Both funds are managed by veteran European equities investor Matthias Born, who has grown assets under management (AUM) in these strategies to over EUR538 million (GBP461 million) and EUR111 million (GBP103 million) respectively.
In the small and micro-cap space, the Berenberg European Small Cap fund which has over EUR421 million (GBP376million) AUM and the Berenberg European Micro Cap fund with EUR507 million (GBP479 million) AUM have also posted significant returns since their 2017 launch. Run by the seasoned small-cap expert Peter Kraus, the two funds recorded +31.9 per cent and +29.0 per cent over that period, respectively. This is significantly more than the performance of the MSCI Small Cap Index (-3.9 per cent) and the MSCI Europe Micro Cap Index (-0.7 per cent) over the same timeframe.
Matthias Born and Peter Kraus have worked together since 2005 and use in-depth fundamental research and a bottom up stock-picking approach to devise portfolios with holding periods of three to five years. The two all-cap funds follow a concentrated strategy of 40 to 50 holdings, whereas the small and micro-cap strategies follow a more diversified strategy with between 70 to 120 holdings. The managers are supported by a wider team of 12 equity specialists, all of whom share the same investment philosophy and invest in their own funds.
Across all strategies Berenberg invests in companies that benefit from structural shifts in the economy, like ageing populations and the consequent growing demand for healthcare services. One of the best performers in the European Small Cap fund is Ambu, the Danish diagnostic company specialising in endoscopy techniques, while the largest holding of the European Micro Cap fund is Sedana Medical, a Swedish company that develops and markets medical devices around the world. In the European Focus fund Swiss life science company Lonza has been a strong contributor, helped by healthy demand in their biologics and cell and gene therapy segments.
Technology and the ongoing shift towards digitisation is another key theme across all Berenberg strategies. One of the largest positions in both European all-cap funds since inception is Dutch high-tech equipment manufacturer ASML, a key supplier of lithography equipment to the semiconductor industry, set to benefit from the demand for ever-greater processing power.
Danish IT consultancy Netcompany, is another beneficiary of this trend. Founded in 2000 the company was an original holding in the Berenberg European Small Cap fund. It was later added to the all-cap Berenberg European Focus fund on account of its strong growth, an example of close collaboration between the Small Cap and All Cap team to pick winners.
Matthias Born, Head of Investments at Berenberg, says: “At Berenberg we take a long-term view. Performance since the launch of our European strategies has been outstanding but quality-growth investing is a long-term game. The European stock market has no equivalent to the US tech giants but underneath the surface there are plenty of genuinely innovative businesses in Europe. An active manager can outperform by drilling down into the market and by not overlooking the small and mid-caps, which we take care to include in our all-cap funds as well as in the small-cap fund. Our goal is always to find companies with a unique selling point and that will sustain growth over the long-term, regardless of market shocks or sudden crises.”
Peter Kraus, Head of Small-Cap equities, says: “Our European equity strategy has had an excellent start and it is an exciting time to be investing in European equities. The small and micro-cap space is intensively researched in some regions, such as the UK but elsewhere in the continent there is great scope for active management to beat the benchmark index and deliver alpha. For example, we have had particular success finding strong, resilient and innovative companies of all sizes, in the technology and healthcare space in Scandinavia. Swedencare, one of the top holdings of our Micro Cap fund is a prime example of the kind of high-quality business that could slip under investors’ radar without a willingness to explore all corners of the European market.”
In addition to European equites, Berenberg offers a number of funds covering a broad range of strategies, including global funds, such as the Berenberg Global Focus fund and specific ESG vehicles, such as the Berenberg Sustainable World Equities fund.
