Three-times winner: Lupus alpha Smaller German Champions - the fund for promising German Small & Mid Caps  

In March 2017 the Lupus alpha Smaller German Champions received the acclaimed Morningstar Award for the third time in succession – the fund was the winner in the category "Best Germany Small/Mid Cap Equity Fund". In this way Morningstar is conferring a distinction not only for a very successful German equity fund which has grown by more than 12% each year on average since it was launched but also for the management team that supports the fund managers Björn Glück and Peter C. Conzatti.

This award shows what potential this sector has to offer - keyword: German small and medium-sized businesses. In terms of a long-term comparison the Small & Mid Caps are ahead as the following diagram shows: 

In the pictured indices can not be invested. These indices ensure the illustration. Past performance is not a reliable indicator of future performance. Sources: Bloomberg, own calculations; As of 28.02.2017

Fund managers are confident that they can achieve an above-average investment result again in 2017 – and they are going all out to retain the Morningstar Award.  

The Lupus alpha Smaller German Champions is comitted to investment in the very promising German Small & Mid Caps – high-growth MDAX and SDAX quality stocks. These are first and foremost internationally very well positioned companies which are also frequently market leaders in their sectors – German hidden champions. The Fund's investment goal is to take advantage of the whole value chain of German Small & Mid Caps. These companies profit both from the positive domestic economy in Germany and also from the growing world economy – as providers for German blue chips and also thanks to their export orientation.

Broad distribution as a buffer  

Moreover, the managers at Lupus alpha Smaller German Champions have the opportunity to invest on two levels - they can go for cyclical as well as defensive stocks in order to meet the need for security expressed by many investors which has become much more intense since the financial crisis in 2008. On account of the distribution of investments the portfolio investment risk with volatility most recently measured at 18.52% (as of 28.02.17; source: Bloomberg, own calculations) is at a relatively modest level when compared with the DAX which is above 24%. The moderate volatility and the average growth in value since the launch on 3 August 2001, i.e. 12.48% p.a. (as of 28.02.17; source: Bloomberg, own calculations) make the Lupus alpha Smaller German Champions an attractive investment to which investors have already invested 308 million euros.

Small beats large  

In general, the investment risk involved in Small & Mid Caps is lower than usually assumed. This is firstly because in most cases smaller companies are less affected by the geopolitical climate than large corporate groups. The second reason is that this investment sector has many owner-operated companies in which business decisions, investments or new projects are considered very carefully. After all, the owner usually has a large number of shares and is therefore in the same boat as the investors. Among these hidden champions company-specific factors are clearly in the foreground for which reason the portfolio managers at Lupus alpha concentrate on them and carry out intensive research for each individual investment.

Information advantages produce good returns

Smaller companies normally attract less attention from analysts. This means that some company and market data has not yet been factored into the stock price. These market inefficiencies are systematically exploited by the experts at Lupus alpha as they carry out the most intensive analysis for every company that appears interesting or in which they are already invested. They do this on the basis of the customary balance-sheet figures, turnover and development trends, cash flow and share valuations but also by on-site visits and meetings with corporate management. The Lupus alpha team makes over 1,000 contacts with companies each year which provides a good insight into the way decision-makers think and the direction in which the companies are heading. The aim is to make the most precise assessment of the perspectives of a company, the foreseeable sales trend and the potential for profit in order to have an indication of the further share price development

3 questions for... Björn Glück „We are stock pickers“  

 

2017 may have some surprise or other in store for investors. What does that mean for Small & Mid Caps? 

Björn Glück: Actually, a relatively high level of volatility is to be expected in the financial markets in 2017. This is due not least to the growing protectionist and separatist tendencies in some countries as well as US economic policy which is still very hard to predict. On the other hand, on account of their high degree of adaptability, smaller companies have proven repeatedly that they are able to compensate relatively quickly for the loss of entire markets. They have often extended their sales markets across the whole world which creates a sound base. Also, I am relatively optimistic that we will soon see a rational economic policy in the USA and that Brexit will be handled sensibly. All in all 2017 could be a good year for equities because the economic situation is now improving significantly.     

Which sectors are you looking at this year?

Björn Glück: As a matter of principle, we are not pursuing any special sector-oriented approach because we are interested in individual stocks. However, there are very interesting companies in the technology sector at the moment. That is why there is currently a predominance of more cyclical stocks from the industry and technology sector, especially the semiconductors sector. Moreover, the Fund is positioned in the telecommunications market. 

What do you look at when you select companies?

Björn Glück: We are stock pickers. This means that as a matter of principle we only pick companies for the Fund when we are fully confident about them. The primary factors for selection are the earnings performance, market position, the market environment and of course an attractive valuation. We verify all these factors by personal meetings with the management of the companies in order to get a reliable impression. At the same time we consciously allow ourselves the freedom to deviate from the consensus and thus exploit market opportunities. And in this way we have done rather well in recent years. 

The three-time winner remains optimistic

The perspectives for Lupus alpha Smaller German Champions are promising. This is due not only to the proven management capacity of those responsible for the Fund and the success of the oldest mutual fund to invest in German Small & Mid Caps. The rating agency Morningstar distinguished the Fund with the acclaimed Morningstar Award for the third time in succession – the fund was the winner in the category "Best Germany Small/Mid Cap Equity Fund". Furthermore, the Small & Mid Caps sector overall has better prospects than the large caps sector. In the last 17 calendar years the smaller stocks have done better in 13 years than the big ones known as large caps. The good perspectives are supported by the positive economic prospects for Germany and many international markets. The portfolio managers Björn Glück and Peter C. Conzatti are showing a lot of optimism which has rubbed off on the investors who have now invested 308 million euros in the Fund.

Distinguished solutions from Lupus alpha

With one of the largest, specialised Small & Mid Caps teams in Europe Lupus alpha has been offering products for more than 15 years for investments in European Small & Mid Caps which now have a long and convincing track record.

The fund solutions that have received many awards include the Lupus alpha Smaller German Champions. Find out more about these proven investment solutions:

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