Montanaro European Income

Managers Alex Magni and George Cooke focus on small and medium-sized businesses in Europe, which offers a huge choice of investments that are under-researched by the wider market. Each holding in Montanaro European Income fund will also offer an attractive dividend yield, or the potential for dividend growth.

Previously LF Montanaro European Income.

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Our Opinion
Fund Managers
Key Facts
Fund Performance
Risk
Company Description
Investment process
ESG

Our Opinion

We really like Montanaro’s well-defined philosophy and process, which this fund uses, and the fact that the manager has the support of a large team that thrives as small and mid-cap specialists. Montanaro European Income fund offers something very different to its peers, as it looks to provide a stable and growing income stream from a broad range of European companies.

Fund Managers

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Fund Managers

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Alex Magni, who earned his Ph.D. in Engineering from Imperial College, began his career at Cazenove & Co in 2000, covering German Small & Midcap stocks. In 2004, he co-founded Clear Capital, focusing on UK Small & Midcaps and utilizing primary data. By 2010, Alex was with HSBC’s European Business & Commercial Services team, achieving high rankings in the Extel survey. He joined Montanaro in October 2015. Alex also holds an M.Eng in Chemical Engineering from Imperial College.

George graduated with a BA in Management Studies and an MA with Distinction in Corporate Strategy & Governance from the University of Nottingham. He began his career on Aon Benfield’s graduate scheme, working as an Analyst in the ReSolutions department, where he specialized in insurance and reinsurance capital and runoff issues. During this time, he earned a Diploma in Insurance and became a CFA Charterholder. George joined Montanaro in July 2010, where he manages the European Income Fund, European Smaller Companies Fund, European Smaller Companies Trust, and Global Select Fund, and covers the Healthcare and Insurance sectors.

Alex Magni, who earned his Ph.D. in Engineering from Imperial College, began his career at Cazenove & Co in 2000, covering German Small & Midcap stocks. In 2004, he co-founded Clear Capital, focusing on UK Small & Midcaps and utilizing primary data. By 2010, Alex was with HSBC’s European Business & Commercial Services team, achieving high rankings in the Extel survey. He joined Montanaro in October 2015. Alex also holds an M.Eng in Chemical Engineering from Imperial College.

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George graduated with a BA in Management Studies and an MA with Distinction in Corporate Strategy & Governance from the University of Nottingham. He began his career on Aon Benfield’s graduate scheme, working as an Analyst in the ReSolutions department, where he specialized in insurance and reinsurance capital and runoff issues. During this time, he earned a Diploma in Insurance and became a CFA Charterholder. George joined Montanaro in July 2010, where he manages the European Income Fund, European Smaller Companies Fund, European Smaller Companies Trust, and Global Select Fund, and covers the Healthcare and Insurance sectors.

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Key Facts

Asset type Equity

Annual Income (Historic) -

Sector Europe Ex UK

Gearing-

Fund Size-

Fund Manager Start Date 01 January 2022

Ongoing Charges Figure (OCF) -

Payment Date(s) Jan, Apr, July, Oct

Annual Management Charge (AMC) -

Fund Performance

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Risk

With a focus on small and mid-cap companies, this fund is likely to exhibit higher risk than its mega-cap competitors. Despite this, over the long-term, smaller companies have exhibited better risk-adjusted returns. Montanaro European Income fund’s primary risk is in the individual investments it makes. However, the detailed investment analysis process should identify the inherent risks with the stocks, which helps mitigate the chances of the companies failing. There is a dedicated risk team that monitors the fund and produces a quarterly internal report where the managers are assessed on the risks the fund has taken, and how these match-up with their investment cases.

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Company Description

Montanaro is a small and medium-sized companies’ specialist renowned for its large team of analysts and high quality small-cap research. The company started off in the UK before growing globally as its success has continued. The firm was founded by Charles Montanaro in 1991 and now looks after more than €3 billion for clients through its 11-strong dedicated investment team. It is private and independently owned.

Fund Performance

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Risk

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With a focus on small and mid-cap companies, this fund is likely to exhibit higher risk than its mega-cap competitors. Despite this, over the long-term, smaller companies have exhibited better risk-adjusted returns. Montanaro European Income fund’s primary risk is in the individual investments it makes. However, the detailed investment analysis process should identify the inherent risks with the stocks, which helps mitigate the chances of the companies failing. There is a dedicated risk team that monitors the fund and produces a quarterly internal report where the managers are assessed on the risks the fund has taken, and how these match-up with their investment cases.

Quote from the Fund Manager

Occasionally we find a stock with no sell side coverage and that no one has ever heard of. These are the ones that get us excited.

Alex Magni

Lead Manager

Investment process

Montanaro has a simple philosophy: invest in companies you can understand, buy things which are growing, back quality management, engage with your companies and don't over trade. Wider macroeconomic factors are ignored. This fund is no different, buying quality mid and small-cap stocks from across Europe. This area of the European market is preferred because of the better dividend cover, growth, choice and upside on offer.

The process is built around two key tenets: identifying companies that are both good businesses and good investments. This begins with Montanaro’s own internal screening process, before the team of analysts conduct their own research. This includes meeting management, site visits, talking to industry contacts and talking to customers and suppliers. A company must also pass a corporate governance and an environmental and social checklist for which there is additional analyst support.

Once a company passes this stage, the analyst will present their conclusions to the investment committee who will challenge their assumptions. If the company passes, it will be added to the approved list, which consists of around 200 companies. Further analysis will then be undertaken, by building a detailed financial model.

The fund focuses on businesses that are easy to understand and therefore complex sectors such as biotech, insurers or banks are avoided. Sectors including oil & miners are also likely to be a low weight, especially in the large exploration and extraction companies - though there may be exposure to the industry in the service and product providers.

All holdings must yield when initially purchased, although George’s primary focus is on dividend growth.

Risk

With a focus on small and mid-cap companies, this fund is likely to exhibit higher risk than its mega-cap competitors. Despite this, over the long-term, smaller companies have exhibited better risk-adjusted returns. Montanaro European Income fund’s primary risk is in the individual investments it makes. However, the detailed investment analysis process should identify the inherent risks with the stocks, which helps mitigate the chances of the companies failing. There is a dedicated risk team that monitors the fund and produces a quarterly internal report where the managers are assessed on the risks the fund has taken, and how these match-up with their investment cases.

ESG

ESG - Integrated  

ESG is embedded throughout the investment process at Montanaro. Once an idea has been identified, analysts will spend several days examining the business. They will complete a “Quality Checklist”, Montanaro’s Ethical & ESG checklist, and a financial model. Ethics is scored on pass or fail of revenue exposure to certain restricted areas. Individual scores are given for E,S and G categories out of 10. A final ESG Checklist score is then aggregated. Companies with scores of 5 or below are candidates for engagement. The ESG score plays a significant role in whether a business can be added to the "Approved List" by the Investment Committee.

Companies on the Approved List will be closely monitored by Montanaro’s Sustainability Committee for their ESG scores. This gives an indication of whether companies are improving in matters of ESG. Any points of concern will be noted and engagement with the company will follow. The Sustainability Committee will consider if businesses still continue to meet Montanaro’s ESG standards and are able to challenge the approval of businesses if they fail to do so.

Related Insights

The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.