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MANDARINE UNIQUE Small&Midcap R

LU0489687243

Presentation

The objective of the Mandarine Unique fund is to select European small and midcaps using an original approach.

Mandarine Unique effectively aims to select “unique stories” in terms of growth, i.e. companies with unique profiles that are capable of delivering steady growth over the long term.

The fund’s investment universe is made up of European small and midcaps with stock market capitalisations ranging between around €300m and €7bn. The advantage of this universe lies in its ability to provide exposure to a multitude of growth and innovation stories in terms of technologies, industries or services. Additionally, this “small & midcap” asset class has regularly outperformed the large cap universe over recent years.

The companies targeted by the fund must offer a “unique” profile that can be defined in four distinct manners:

  • an original business model without listed competitors in Europe
  • a leader in its sector with a worldwide market share above 25%
  • a business model uncorrelated to its sector (unique geographical exposure, particular development model)
  • a technology that can create / change a market

Beyond this “unique” profile, these companies often operate on niche markets where they benefit from strong pricing power, generally making them less sensitive to economic conditions.

Portfolio construction is based on a selection of 45 to 60 companies that are highly diversified in sector and economic terms. Thanks to this decorrelation, Mandarine Unique’s volatility remains lower than that of the market, in contrast with the commonly accepted view that funds invested in small and midcaps are more volatile than other equity funds …

A unique fund management offer, this conviction-based strategy offers true economic diversification in a portfolio.

Interview

CARON Frédérique

Date of assumption of fund management duties
1 December 2018

  • 2016-2018: HSBC GAM / Eurozone small and midcap fund manager
  • 2012-2016: ERASMUS GESTION / managing partner
  • 2002-2011: CCR ASSET MANAGEMENT / European small and midcap fund manager (2004)

Why should investors be interested in European small and midcaps?

Over the long term, these stocks outperform the general indices with a similar level of volatility. The principal years of underperformance have been those marked by an economic recession (as in 2008), the eurozone debt crisis in 2011 and the underperformance of the UK small caps following the Brexit vote in 2016.

The universe of European small and midcaps is very rich and diversified in terms of the number of companies and business models. It receives less coverage by the financial analysts (sell-side) and is therefore highly attractive for fund managers who pick companies using a fundamental approach.

Finally, these companies offer greater profit growth than the large caps and represent a major pool of opportunities for groups that wish to acquire leaders on attractive niche markets. In the current low interest rate environment, M&A represents an element of support for the small and midcaps.

Aren’t they riskier?

Over the long term, the small and midcaps show levels of volatility comparable to those of the general indices. We would nevertheless note that in cases of recession or steep market declines, these stocks can fall more sharply due to their lower liquidity. This is the reason why a sufficiently long investment horizon (5-7 years) is recommended for investments in this asset class.

What is the outlook for the coming months?

Even if it is difficult to make forecasts looking out six or twelve months, we can see that economic growth is slowing, even if remaining in positive territory. This should enable our companies to grow their revenues as well as their earnings per share. Granted, visibility remains low, with fears concerning worldwide economic growth, the difficult trade negotiations between the United States and China and political tensions linked to Brexit and Italy as well as France … Nevertheless, we remain confident concerning the ability of our companies to continue to grow. Volatility should also open up long-term investment opportunities in unique growth companies over the coming months.

Fund strengths and weaknesses

Advantages

  • An original approach to European small and midcaps
  • An experienced fund management team
  • Active conviction-based management without index constraints

Disadvantages

  • Structural under-exposure to certain sectors (notably banks and telecoms)
  • Risk involving stock market volatility
  • Risk of a loss of capital in case of market declines

The fund in detail

Code ISIN
LU0489687243

Type of fund
Luxembourg SICAV sub-fund

Management style (asset / liability)
Active

Currency
EUR

Recommended investment period
5 years

Synthetic risk indicator(1)
5

Frequency scoring
Daily

Appropriation of results (capitalisation / distribution)
Capitalisation

Domiciliation
Luxembourg

Management fees
2,20%

(1) The synthetic risk indicator gives an indication of the risk associated with a fund or a sub-fund. There are seven risk classes (from '1' to '7'), with '1' referring to the lowest risk and '7' to the highest risk. Risk classification is based on the calculation of the fund's standard deviation, a measure of dispersion around an average done on an annual basis of the returns obtained over the last five years, or over a shorter period if the fund has less than five years track record In other words, this indicator demonstrates how far the fund’s current performance deviates from its average long-term performance. The larger the deviation, the more the fund can fluctuate and therefore the greater the risk involved. The risk class may change over time. Greater market volatility, for example, can lead to an effective increase in the funds' risk profiles.