The SVM Continental Europe fund boasts a longstanding fund manager with nearly two decades of investment experience and a thorough investment approach that has been consistently and successfully applied over a number of years and through a fairly tough market environment.
Hugh Cuthbert has been running this fund since he joined Edinburgh-based firm SVM Asset Management in January 2006 and has a significant personal investment in the fund to keep his interests aligned with those of fund shareholders. As is typical of working for a boutique asset manager, Cuthbert has complete autonomy in running this fund.
He has little by way of analyst support but his extensive knowledge of European equities more than compensates for this.
While he leverages long-established contacts with sell-side analysts, he is mindful of relying too heavily on sell-side research and he complements this with his own valuation models and forecasts to find under-researched stocks trading at a discount to his assessment of intrinsic value.
His portfolio has a mid-cap bias and remains small in size with £16 million in assets, enabling the manager to be nimble in making changes to the portfolio. However, this also makes the annual report ongoing charge relatively high in comparison to peers and we would expect this to fall as assets grow.
The emphasis is on fundamental company analysis to gain a thorough understanding of the key drivers of a company’s growth and profitability to identify hidden value. Typically this involves focusing on medium or smaller-sized companies, as they tend to be less covered by the analytical community and so may be misunderstood by the market so offer better upside potential.
However, he will move into more defensive larger-cap names at times of market stress or if valuations look attractive. Their research extends to companies that are out-of-favour with the market, where volume, price or cost cutting exercises for example could lead to share price improvement or a re-rating. Ideas can also come from themes and trends. Position size depends on conviction. Cuthbert will set price targets and typically when a stock gets to 10% from full value, he prefers to sell. The fund aims to be fully invested.
