Don’t overlook the Euro-small cap opportunity
Ollie Beckett, Portfolio Manager of The European Smaller Companies Trust, provides an update on the Trust – discussing factors currently affecting the European market, including supply chain disruptions, higher inflation, and energy costs. Ollie also highlights how he is navigating this market environment and why European smaller companies might be positioned to benefit from the transition towards clean energy.
- After a strong 2021, European smaller companies have struggled to begin the year. The war in Ukraine has exacerbated supply chain disruptions and pushed up inflation, subsequently raising the prospects for faster-than-expected interest rate hikes.
- A focus on valuation was helpful higher interest rate expectations weighed on sectors with high valuations, growth-oriented technology stocks.
- The war in Ukraine has highlighted that the world needs to speed up the transition towards cleaner, renewable energy, and European smaller companies are positioned to benefit from this.
Please read the following important information regarding funds related to this article.
- If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
- Where the Company invests in assets that are denominated in currencies other than the base currency, the currency exchange rate movements may cause the value of investments to fall as well as rise.
- Most of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
- This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
- Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
- The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
- Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
- The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.
- Using derivatives exposes the Company to risks different from - and potentially greater than - the risks associated with investing directly in securities. It may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
- If the Company seeks to minimise risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or negative for performance.