Business & Investment

MONTANARO EUROPEAN: Big returns from SMEs

MONTANARO EUROPEAN SMALLER COMPANY TRUST: The fund is making big profits from SMEs

London-based investment manager Montanaro eats, sleeps and breathes “good” small businesses.

The view of the investment is simple. SMEs offer investors the potential for superior long-term benefits, especially if they pay close attention to the environment, adopt fair labor practices and do not promote board greed.

This is the philosophy behind Montanaro’s £ 3 billion asset on behalf of investors, with all funds and trusts holding at least 60% of their investment in “good” SMEs.

A team of 11 in-house analysts is constantly scrutinizing the world looking for hidden investment gems that managers can include.

This approach to minnows has never been as successful as the investment trust Montanaro European SMEs.

The performance of the £ 182m fund over the past year in the face of a pandemic storm (overall 44% return) has been extraordinary and far superior to other trusts specializing in this particular area. I will.

Its three- and five-year investment records also beat its competitors.

The manager is George Cooke, who has had a tiller for the past eight years. He is keen to play his role in its success. He states that trust performance is primarily evidence of Montanaro’s in-depth investment approach to SMEs.

This will prevent managers from purchasing shares unless first approved by the company’s internal investment committee. It also means that holdings must be swiftly offloaded if the same committee believes it has exceeded its purpose. In other words, fund managers are not allowed to leave the slopes. It’s a team approach.

“European SMEs are an investment space that is overlooked,” says Cook. In summary, these are not easy to cover and represent labor-intensive asset classes from an analytical point of view. But, as our analysts do, there are several abundant options for those who are willing to do hard grafting.

Cook says many UK investors remain cold-hearted in investing in Europe, but believes that some of the small businesses based in Germany and Sweden are among the best in the world. I am.

“There are many entrepreneurs in Europe who run high-quality, high-growth SMEs,” he says. “Most are under investor supervision.”

The Trust currently has 56 holdings, all of which are listed. Montanaro does not invest in unquoted companies. The largest holding company is the Swedish accounting software company Fortnox, which dominates the domestic market. “The more we did in this business, the more we liked it,” Cook says. “We first invested in September 2017 and bought more shares in early 2019. It’s been very successful and we’re cutting our holdings a bit so we don’t get too dominant in our portfolio. I needed to. ”

Cook, who has his own money in trust, says most businesses in his portfolio are unaffected by any fallout from recent Brexit transactions. He believes that the greater “risk” is the future performance degradation of rival funds. This tends to occur when the equity market is in a bullish mood and does not impose a price premium on the kind of quality companies he prefers.

This is also pointed out by James Cartew, head of investment trusts at research firm Quoted Data. He states: “Focusing on quality can mean that investors are left behind as fund managers when engaged in the’garbage dash’. But in the long run, Cook’s quality approach should pay off.

The stock market identifier code for the trust is 0454351.

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MONTANARO EUROPEAN: Big returns from SMEs

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