Bellevue Entrepreneur Europe Small

European SMID caps, as measured by the MSCI Europe Small Cap ex-UK, rose 3.0% in January, compared with the STOXX Europe 600 +3.1% and the MSCI World +1.1% (in EUR). January was marked by heightened market volatility amid evolving geopolitical and policy developments. Early concerns surrounding Greenland eased following de-escalation during the World Economic Forum in Davos In the US, the nomination of Kevin Warsh as the next Fed Chair supported the USD and triggered a sharp correction in precious metals. In Europe, December inflation was confirmed at 1.9%, reinforcing the view that price pressures remain broadly. In France, developments were constructive with parliamentary approval secured for the 2026 budget. Elsewhere, discussions between Ukraine and Russia continued, although progress on territorial issues remained limited. The eurozone’s Composite PMI eased to 51.5 in January but continued to signal expansion, supported by a resilient services sector (51.9), while manufacturing showed signs of improvement from a low base (49.5). In terms of sectors, Energy (+17.6%), Utilities (+6.3%) and Real Estate (+4.3%) performed best while Consumer discretionary (-1.6%), Healthcare (-0.4%) and Financials (+0.9%) lagged the most.

Against this backdrop, the fund (B share, EUR) returned 4.0%, outperforming its benchmark by 104 bps.

Top detractors in the month were Carl Zeiss (-29.3%), Buzzi (-7.0%) and CTT (-16.3%). Carl Zeiss issued an unexpected trading update lowering FY 2026 expectations, citing weaker demand for diagnostic equipment, intensifying local competition in premium IOLs in China and continued limited visibility in the Chinese refractive market. The company expects to provide updated guidance by May as visibility improves. Buzzi suffered from peers results and initial 2026 indications suggesting that the US market remains sluggish for the moment. This should be offset by Europe, and notably Germany, where the Construction PMI reached 50.0 in December, underpinning positive volumes in 2026, in line with the improvement already witnessed during H2 2025. CTT fell in anticipation of a weak Q4 and ongoing destocking issues hampering growth of their highly profitable after-sales revenues.

Top performers in the month were Subsea7 (+17.5%), Jenoptik (+28.3%) and Montana Aerospace (+8.1%). Subsea7 was supported by the higher oil prices with most of energy services names rising around 10%. ASML published a strong Q4 2025 report, notably a massive order beat that bodes well for Jenoptik which generates around 20% of its revenues from the Dutch manufacturer of semiconductor equipment. No material news were published on Montana but defence and aerospace started the year on a strong note with double-digit returns across the sector.

Despite the challenging geopolitical newsflow in the first weeks of 2026, European markets and the EUR were stable and started the year on a strong note. In the aftermath of the Greenland controversy, we expect more European inner political cohesion as the consciousness as well as increased awareness regarding the need for faster decision-making processes. Defence companies should continue to benefit, as a higher proportion of spend should go to European companies and technologies with the aim of reducing US dependency. We enter 2026 with a well-diversified portfolio of high-quality companies offering idiosyncratic opportunities. We see excellent opportunities for European, and in particular European SMID, stocks to outperform, considering the unchanged historically low relative valuations and a much improved top-down backdrop for the old continent.