Portfolio manager comments — Q2 2024
Fund performance was positive in Q2 after an optimism in May that then weakened in June. Small caps as a group had a significantly greater impact than large caps, both in Europe and the US, when investors preferred to invest their assets in “mega caps”, i.e., the largest companies.
TIG, Alpha FMC, Do & Co, Calliditas, Future and Atalaya Mining were the strongest contributors during the period, while YouGov, Bakkafrost, Indivior, Demant and Allfunds lagged. The fund added companies such as Camurus, Comet Holding, BE Semiconductor, Intercos, Medcap and Raspberry Pi. We also increased in Fortnox, Embla and Trainline. The purchases were financed by holdings in TIG, Marlowe, Allfunds, Mowi, Prysmian, Securitas, Dometic, Next 15, Azimut and Atalaya Mining.
After several green shoots within small caps with an increased risk appetite in May and slight improvements to flows in certain regions, optimism weakened in June. Investors’ interest then returned to the larger caps, particularly in the US, fueled significantly by AI. European small caps continue to show more attractive valuations relative to large caps, which is unusual from a historical perspective given that small caps have normally had stronger performance than large caps over a longer period. Given this, it is would not be unexpected to see a continuation of the high acquisition activity into the approaching quarters.
The fund has gradually increased its exposure to larger equities in our investment universe that have the drivers we have identified, as well as in equities that take advantage of lower interest rates and an expected strong growth. The thematic drivers that we have identified remain relevant and we are beginning to see an increasing number of concrete examples from companies using AI to increase sales and efficiencies, which is extremely exciting.