Bellevue Entrepreneur Europe Small: 15 years of entrepreneur investing

The 15-year anniversary is an important milestone because it demonstrates the durability of the strategy across very different market environments. Longevity in active management should not be taken for granted: according to the latest SPIVA Europe report, less than 60% of European equity funds survive a 10-year period. For us, this milestone is therefore more than a celebration of the fund’s history. It is a validation of the investment philosophy, the consistency of the process, and the resilience of the team. Our objective is clear: to keep applying the same discipline and to be here celebrating the fund’s 20th anniversary in five years’ time.

It is one of the more compelling backdrops we have seen in some time. The asset class has endured a difficult multi-year period, but the recovery that began in 2025 has continued to build through 2026. Importantly, this has been supported by improving fundamentals. Earnings have remained resilient, and the latest reporting season saw an increasing number of companies exceed expectations. Despite this improving outlook, valuations remain attractive. European small caps continue to trade below their historical average multiples and at a significant discount to large caps. This is historically notable. Small caps have typically commanded a valuation premium, reflecting their superior long-term growth potential. For long-term investors, this combination of improving fundamentals and depressed valuations creates an attractive opportunity.

European small and mid-cap companies are exposed to some of the most powerful structural shifts currently shaping the global economy. Electrification, AI infrastructure, energy efficiency, industrial automation, and reshoring, to name a few, are all generating substantial demand for highly specialized businesses.

What makes this opportunity particularly attractive is the scale of these markets relative to the size of many companies in the small and mid-cap universe. Even a modest share of a structural growth opportunity can translate into meaningful revenue and earnings growth. Importantly, many of these companies are not simply benefiting from these trends; they are leaders within specific niches of the value chain. This gives them strong competitive positions, meaningful pricing power, and potentially long growth runways that extend well beyond a single cycle. As these businesses become less dependent on traditional cyclical demand and more aligned with durable secular growth drivers, the market could increasingly reassess their quality and earnings potential. Over time, this shift could create the conditions for a valuation re-rating.

Entrepreneurial ownership is one of the defining features of the strategy. We believe companies led or influenced by founders, families, or significant long-term shareholders can benefit from stronger alignment between management and investors. This alignment can show up in disciplined capital allocation, conservative financing, operational focus, long-term strategic thinking, and a willingness to invest through cycles. In small and mid-cap companies, these qualities can be especially powerful and have a direct impact on value creation. That said, ownership alone is not enough. We remain selective, focusing on owners and management teams with strong governance, a proven record of value creation, sound capital allocation, and respect for minority shareholders.

The philosophy rests on three pillars:

• First, we focus on European small and mid-cap companies, a broad and diverse universe offering attractive long-term growth potential, while remaining structurally less researched and less efficient than large caps. This combination creates fertile ground for fundamental, active investors. 
• Second, we invest in entrepreneur-led companies where ownership and shareholder interests are meaningfully aligned. 
• Third, we apply strict valuation discipline. We assess intrinsic value through bottom-up fundamental analysis and seek to invest only when the risk/reward is compelling. Typically, we require a meaningful discount to intrinsic value, providing both upside potential and a margin of safety.

This approach makes the strategy diversified and style-agnostic. We can invest across Value, GARP and Growth companies, provided the valuation is justified by the fundamentals. Overall, the process seeks to identify high-quality, entrepreneur-led European small and mid-cap companies trading below intrinsic value.

Our edge comes from specialization, access, and patience. With more than 2000 names, the European small and mid-cap universe is broad, fragmented, and less efficiently covered than large-cap markets. It requires local knowledge, sector expertise, company access, and detailed primary research. Our pan-European team setup helps us understand local market structures, governance practices, competitive dynamics, and management quality. Patience is equally important. Many investors focus on short-term earnings momentum or near-term macro concerns. We are willing to look through temporary uncertainty when we believe the long-term value-creation potential remains intact. This allows us to invest in strong businesses when they are misunderstood, overlooked, or temporarily out of favor.

The past 15 years have certainly tested investors and help explain why we are proud of this milestone. Just to name a few, we have navigated the Eurozone crisis, Brexit, COVID-19, the war in Ukraine, the 2022 interest-rate shock, tariffs, and renewed geopolitical tensions in the Middle East. These periods have reinforced how we think about risk. We view risk as the permanent loss of capital, rather than short-term volatility or benchmark-relative fluctuations. Since these events are difficult to predict, our approach is not based on forecasting the next crisis. It is built around owning companies that can withstand difficult environments. That is where our quality bias is essential. We invest in companies with strong business models, resilient balance sheets, pricing power, and aligned long-term owners. In our experience, these businesses not only tend to navigate crises better, but often emerge stronger as weaker competitors retrench.

One of the most important lessons has been the importance of balance-sheet strength and management quality. Our biggest mistakes have typically come from underestimating leverage or not being sufficiently critical of management teams and capital allocation decisions. Debt can be unforgiving in small and mid-caps. When cyclical pressure meets an overleveraged balance sheet, temporary weakness can quickly become a permanent loss of capital. By contrast, companies with strong balance sheets have optionality. They can invest through the cycle, acquire weaker competitors, or buy back shares when valuations are attractive. We still place great emphasis on financial resilience. Today, around 30% of the portfolio is invested in companies with net cash positions, and average net debt to EBITDA is below 1x. In our view, the combination of balance sheet strength and disciplined management is powerful, and often underappreciated by the market.

Since inception, the fund has delivered an annualized net return of roughly 11%, equivalent to approximately five times the initial capital invested. The strategy has also outperformed its benchmark and ranks in the top quartile versus peers over the period. We are proud of this track record, but we remain focused on the future: preserving the discipline of the process, identifying high-quality entrepreneur-led companies, and continuing to compound capital for our investors over the long term. 

The core opportunity remains intact. European small and mid-caps continue to be under-researched, inefficiently priced, and rich in entrepreneur-led businesses with strong competitive positions. At the same time, valuations remain attractive after a difficult period for the asset class. Our focus is unchanged: apply disciplined fundamental research, invest with aligned owners, avoid permanent capital loss, and compound capital over the long term. That is the same philosophy that has guided the fund over the past 15 years, and it is the philosophy we intend to carry into the years ahead.