Bellevue Entrepreneur Swiss Small & Mid

Swiss SMID caps as measured by the SPIEX Index returned +2.4% in July, strongly outperforming large caps (SMI; -1.1%). The EU’s preliminary agreement with the US ahead of the August 1 tariff deadline helped reduce immediate uncertainties and supported market sentiment. The customs negotiations with the USA were ultimately less successful for Switzerland, given a customs duty rate of 39%. While both the Fed and the ECB held rates steady in July, market expectations of a US rate cut increased. The eurozone’s Composite PMI rose to 51 from 50.6, indicating continued expansion across both manufacturing and services. In Switzerland, the procure.ch Manufacturing PMI fell to 48.8 in July (49.6 in June), impacted by lower order backlogs while protectionism concerns rose. From a sector perspective, consumer discretionary (+5.2%), industrials (+4.9%), and healthcare (+4.5%) performed best, while consumer staples (-7.1%), real estate (-3.4%), and materials (-2.0%) lagged the most.

Against this backdrop, the fund rose 3.6%, 125 bps better than the SPIEX benchmark. Since the beginning of the year, the fund has returned 15.9%, 279 bps above the benchmark.

The main detractors for the month were SoftwareOne (-15.7%), Also Holding (-8.2%), and Lindt (-10.3%). SoftwareOne suffered from generally mixed performances reported by companies in the IT services sector in Q2. While Dynamics 365 showed encouraging acceleration in the second quarter, trends currently remain subdued for value-added resellers impacted by Microsoft changing its incentive scheme and investment decisions taking longer than expected due to tariff uncertainties. This also impacted Also Holding, with the market overlooking good H1 results showing an acceleration of organic growth to above 10% for the period. Lindt’s H1 like-for-like growth came in strong at +11.2%, around 250 bp ahead of expectations, with strong pricing more than offsetting weaker volumes. However, the company missed its EBIT margin of 11%, and FY margin guidance was slightly downgraded to the lower end of 20 to 40 bp.

The main contributors for the month were Accelleron (+33.2%), Huber+Suhner (+23.0%), and Burckhardt Compression (+13.2%). In an ad hoc release, Accelleron raised its FY 2025 sales growth guidance to 16%–19% (from 4%–6%), maintaining EBITA margin guidance at 25%–26%. We had upped our position in Q1, expecting supportive trends in both marine and energy. Huber+Suhner announced significant orders for Polatis optical circuit switches from a global hyperscaler, a milestone for its strategic DC growth initiative, which is expected to generate substantial sales over the next three years. Huber+Suhner recently opened a new dedicated large-scale production site for optical switches in Poland. While no specific news has been released, Burckhardt is well positioned to benefit from the intensifying global LNG trade and transport. Mid-term further growth drivers are ammonia and hydrogen, while solar is holding up well.

While a 15% tariff on US imports from the EU is not good news per se, subjectively it seems the lesser evil. For Switzerland things did not go as planned, but markets have been very well behaved. Exporters in Europe and Switzerland will take a hit, but as Gavekal Research commented in their “chart of the week”, the broader European domestic economy will mitigate the shock. Notably, a recovery in bank lending across the eurozone is becoming visible, thanks to the ECB’s interest rate cuts. This is also good news for Swiss companies. On another topic, the Q2 reporting season is well underway, with 80% of companies having reported. There are plenty of traps out there, from USD weakness to the tariff-induced activity paralysis, but all in all companies managed rather well. The market displayed minimal tolerance for weak results (Renault, Puma, Novo, etc.) with above-average negative reactions. Finally (and out of pure personal interest), we leave you with a recent comment from J.P. Morgan: «SMID PMs should deliver more alpha than their large-cap peers for the foreseeable future (as has been the case over the last decade), given our view that SMID remains an asset class that is better suited than large caps for active management. This is, in part, due to the fact that SMID caps are less exposed to passive flows, which are increasing the volatility of large caps, worsening their risk-adjusted returns.»