A ‘European smaller companies’ fund does exactly what it says on the tin and only invests in the shares of smaller companies in Europe.
Smaller companies are typically defined as those that have a market capitalisation of less than €5bn (£3.5bn).
Far from being just looking at small scale businesses these funds offer exposure to a broad portfolio of innovative and fast-growing firms that managers in this field feel have greater potential to benefit from merger and acquisition activity.
It is vital that advisers grasp what drives performance of these funds and the part they can play in an investor’s portfolio.
This guide will explain the pros and cons of european smaller companies funds, the impact of economic developments on this type of vehicle and the potential returns that investors can expect.
Contributors of content to this guide are Ollie Beckett, manager of Henderson Horizon Pan European Smaller Companies fund; Alain Caffort, co-manager of the Pictet Small Cap Europe fund; Nick Williams, head of mid and small cap equity team and manager of the Baring Europe Select trust at Baring Asset Management and Laurent Inglebert, investment manager at Aberdeen Asset Management.