EV SMALLER COMPANIES FUND
The EV Smaller Companies Fund is a long/short equity fund of which the most important characteristics are:
- actively managed concentrated long/short equity portfolio;
- consisting of shares of smaller quoted companies well known by the fund manager;
- geographically focused on Dutch, Belgian and German companies; and
- emphasis on risk management with balance between capital growth and capital preservation.
Smaller quoted companies
The fund invests primarily in smaller quoted companies with a market capitalization of between € 500 million and € 5 billion. Many of these smaller companies are not well known and receive less attention from sell side analysts, as income from transactions in these companies is much lower as compared to blue chip companies. Less attention means that the market for these companies is not as efficient and therefore offers more opportunities for conducting own fundamental research. The fund manager’s approach can best be described as ‘stockpicking’.
During the fundamental analysis of a company, both qualitative and quantitative aspects are being considered. The qualitative aspects focus extensively on the strategy of the company and the quality of the management. Within the quantitative aspects, the fund manager makes its own estimates regarding the future financial performance of a company based on its own model. The ‘Discounted Cash Flow’ method is central to the valuation of a company.