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European markets set for exponential growth, says Mandarine Gestion

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Small cap European equities have started the year with a strong run, boosted by a weak Euro, calming of the conflict in the Ukraine and a diminishing chance of Greece leaving the eurozone.  

Against a backdrop of better eurozone GDP growth expectations, analysts have lifted their forecasts for company earnings growth in 2015 and 2016.
 
Thanks to more favourable economic indicators in Europe, the Stoxx Europe Small 200 index has gained 16.5% year-to-date and Mandarine Unique has tracked the market rally closely. Fund performance in March was boosted by good results from consumer goods companies including luxury down jacket retailer Moncler and Signet, which was buoyed by jewellery sales in the US.
 
Mandarine Unique has made a number of changes to its portfolio in recent months with the sale, among others, of AB Foods (concerns regarding margin trends at Primark), Gerresheimer (relatively unconvincing growth profile in 2015) and Telecity (financial details of buyout offer from Interxion lack clarity).  In March the fund managers bought AutoTrader (positive environment for UK used car market), Ontex (world leader in own brand diapers) and Irish maritime transport company ICG.
 
Diane Bruno, Mandarine Gestion Unique Fund, says: “Europe is a much more attractive investment proposition than it was 12 months ago.  Small and mid caps can be global market leaders in niche markets which are often neglected by their larger peers.  They can boast higher global market shares in their respective areas than larger companies which allows them to reap the same scale effects as large caps, limits new competitors with strong barriers to entry and benefit from pricing power.  The valuation premium of small and mid caps remains below its long-term average and therefore makes an attractive proposition to investors looking for alpha.”
 
The Mandarine Gestion Unique Small & Mid Cap Europe, a sub-fund of the Mandarine Funds SICAV, celebrates its five year anniversary with a return of 136% since inception in 2010, compared to +85%* for its benchmark index, the Stoxx Small 200 DR.
 
The Fund’s consistent outperformance (it has beaten its benchmark in every year since its inception in 2010) is based on a robust and highly differentiated investment approach.  The fund is managed by a three-strong all female team of highly experienced small and mid cap fund managers. It currently has EUR 420 million assets under management and holds a five star rating from Morningstar.
 
The investment strategy focuses on small to mid-cap European companies which have superior business models and considerable market share in niche markets. These companies benefit from strong pricing power, making them less sensitive to general economic conditions, and therefore less volatile than the overall market. 
 
Harry Dickinson, managing partner at Harrington Cooper, which distributes the fund in the UK, says: “Over the last decade, small and mid caps have outperformed their large cap peers in the majority of years and we expect them to do so again as a European recovery takes hold. We are seeing strong demand from fund selectors who are consistently telling us that there is a dearth of truly excellent European small cap managers available in the UK market.  The Mandarine Unique Fund offers a differentiated approach and an impressive track record.  It is just the type of asset manager that Harrington Cooper aims to represent because its funds are high-conviction, have high Active Share and its fund managers are motivated to generate alpha for their investors.”

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