Star Tracker: catching up with the small cap leaders

Top small cap managers of 2009

At the beginning of 2010, Citywire Global ran the rule over the European small cap sector to find the top performing names over the previous 12 months.

Some things have not changed – with the sector still consisting of 111 fund managers – although four of the previous top 10 are no longer valid, either due to the closure of their fund or departure from it.

Henderson HF Pan European Smaller Companies

Manager: Ollie Beckett
Returns in previous analysis (2009): 99.54%
Returns in updated analysis (December 2009-October 2012): 30.8%

Far and away the best performer last time out, Henderson’s Ollie Beckett came closest to breaching the 100% returns barrier. This most recent analysis sees the Euro Stars AAA-rated manager post over 30% and outperform his benchmark by nearly 9 percentage points.

In the €470 million fund, Beckett runs a diversified funds made up of 114 holdings. This with an overweight to industrial goods, technology and basic materials, which compares to a 10% underweight in financials. His largest country allocations are to the UK (21%), Germany (15%) and Switzerland (12.5%).

Invesco Continental European Small Cap Eq

Manager: Erik Esselink
Returns in previous analysis (2009): 90.5%
Returns in updated analysis (December 2009-October 2012): 35%

Second up is another Euro Stars AAA-rated manager in the shape of Erik Esselink. Under the second analysis, Esselink, who has seen his Invesco European Small Cap fund closed in the intervening period, has posted a stronger return in euro terms than Beckett.

Like Beckett, Esselink’s main area of investment has been industrial names (23.3%) and France (30%). Although, he also has a strong penchant for financials (20%) and peripheral Europe, with Italy (20%) and Ireland (8%) making up large parts of his exposure by region. This is along with a 3.9% off benchmark bet on the Gabonese Republic.

Vontobel Fund European M&S Cap Eq

Manager: David Houston
Returns in previous analysis (2009): 73.01%
Returns in updated analysis (December 2009-October 2012): 22.85%

Still in the field of Euro Stars rated managers, David Houston of Euronova Asset Management is the first manager in the catch up analysis to have underperformed his benchmark. Houston returned 22.85% in euro terms while his benchmark, the MSCI Europe Small Cap TR USD, rose 32.17%.

The main areas of investment in the €119 million fund are the German (20.8%) and UK (19.2%) markets, with software firm United Internet AG & Co making up the single largest position at 2.8%. IT as a whole is favoured sector, comprising 23% of exposure by sector, second only to industrials (32.8%).

Metzler European Smaller Companies

Manager: Lorenzo Carcano
Returns in previous analysis (2009): 63.48%
Returns in updated analysis (December 2009-October 2012): 22.84%

Lorenzo Carcano is one of the few managers in this area to have added further funds in the European small cap space since the previous analysis. In September 2011, Metzler handed the Euro Stars A-rated manager a small and micro-cap strategy to complement his existing smaller companies approach.

In the existing fund, Carcano has underperformed his benchmark by 4% over the past three years. He has focused investment on eurozone countries (50%), while piling into industrial goods and services (22%). His largest single stock positions are food and beverage company C&C Group (1.72%) and industrial packaging firm D S Smith (1.7%).

OYSTER European Mid & Small Cap

Manager: William Sharp
Returns in previous analysis (2009): 63.48%
Returns in updated analysis (December 2009-October 2012): 23.2%

Very recently renamed and refocused to include mid-cap companies as well, Oyster said it had undertaken the change to William Sharp’s approach in order to reflect the changing outlook for the small cap universe in Europe.

A former Performance Clinic subject, the former AXA fund manager said he enjoys the flexibility offered by the fund. He has his largest geographic exposure to the UK market (28.9%), while consumer discretionary (24.2%) stocks make up his largest allocation by sector.

However, according to his most recent factsheet, the former Citywire AAA-rated manager trimmed his consumer discretionary sector exposure by 5% over the past month. This is while reducing his holding in top stock jewellery brand Pandora by 3.6% to 4.2%.

Fidelity Funds – European Smaller Cos

Manager: Colin Stone
Returns in previous analysis (2009): 62.58%
Returns in updated analysis (December 2009-October 2012): 30%

Rounding out our catch-up is Fidelity’s small cap specialist Colin Stone, who has marginally underperformed his benchmark over the past three years. Stone has returned 30% while his Citywire benchmark, the MSCI Europe Small Cap TR EUR, rose 32.16%.

The 25-year market veteran has focused investment in the €630 million fund on IT names (20.65%) and has a large weighting towards the UK market. Allocation to the UK makes up 43.5% of his geographic exposure.