Bestinvest says
We believe that smaller companies are a key part of a balanced portfolio, especially within European smaller companies, which tend to be less researched and thus offer greater opportunities compared to UK Smallers. However, medium term returns have been disappointing for this fund and as such we suggest investors switch into one of our recommended alternatives in the sector.
The fund’s investment objective is to achieve capital appreciation through investment in smaller European companies. The portfolio is constructed from the bottom up with little regard to sector or country exposure. The managers believe broker research on mid and small cap companies is limited, so company visits are a key part of the investment process. Quantitative screens are also used to help focus research. The managers use their fundamental research to divide the investment universe into 3 types of companies:
"A" companies operating in industries where demand exceeds supply;
"B" companies - cyclical stocks or franchises in transition, where the balance of supply and demand varies over time;
"C" companies operating in industries where supply exceeds demand.
The portfolio is focused around A companies, but may also seek trading opportunities in B companies. C companies are avoided.