Bellevue Entrepreneur Europe Small

European SMID caps, as measured by the MSCI Europe Small Cap ex-UK, rose +2.5% in December, closing the year up +19.8%. As expected, the Federal Reserve delivered a further 25 bps rate cut at its December meeting, lowering the target range to 3.50%-3.75%, its third consecutive reduction this year, reflecting a softening labor market despite inflation remaining somewhat above target. In Europe, the ECB kept policy rates unchanged, supported by gradually easing inflation and indications that subdued growth is stabilizing. Political risk eased in two of the region’s largest economies: in France, the government narrowly passed its budget, sustaining a fragile minority administration, while in Germany the Bundestag approved a pension reform package, allowing Chancellor Merz to avoid an early coalition crisis. Eurozone’s Composite PMI declined to 51.9 in December but continued to signal expansion, supported by a robust services sector (52.6), while manufacturing remained in contraction (48.8) for a second consecutive month. In term of sectors, Financials (+4.7%), Consumer Discretionary (+4.2%) and Materials (+4.1%) performed best while Energy (-1.5%), Real Estate (-0.6%) and Healthcare (-0.5%) lagged the most.

Against this backdrop, the Fund returned 3.3%, outperforming its benchmark by 81 bps. This brings the annual 2025 performance to +26.6%, outperforming its benchmark by 681 bps.

Top detractors in the month were Carl Zeiss Meditec (-10.2%), TAG Immobilien (-10.0%) and Virbac (-3.1%). Carl Zeiss issued cautious 2026 guidance, reflecting continued limited visibility in the Chinese refractive market. This outweighed stronger-than-expected Q4 results, with revenues up 10% and the adjusted EBIT margin reaching 13%, supported by a strong recovery in microsurgery. TAG suffered from rising LT rates as Germany is loosening its fiscal policy against a backdrop of ECB QT. Following a strong 17% share price increase in October and November after solid Q3 results, Virbac’s shares experienced modest profit-taking. The company continues to benefit from accelerating revenue growth and margin improvement.

Top performers in the month were Alzchem (+20.0%), Montana Aerospace (+14.4%) and Nordex (+13.0%). Alzchem announced a EUR 120m expansion of its creatine production capacity. Ramping up in H2 2027, it is expected to contribute triple-digit million revenues with positive margin impact for the group. The company also introduced a small share buyback programme. Following the deception around its conservative short-term guidance Montana recovered in December as investors looked though the 2026 destocking effect into a stronger 2027 momentum. Nordex signed a major agreement with Alliant Energy that could unlock up to 1,060 MW of wind capacity, representing about EUR 950 mn or 13% of annual revenue. While still pending regulatory approvals, the deal underscores strong demand for Nordex’s current product range in North America which could emerge as a new powerful growth engine.

2025 was a rebound year for European SMID caps despite ­ – or because of – striking negativity around European equities and historical low valuations. It was also an excellent year for the Bellevue Entrepreneur Europe Small Fund, capitalising on nearly 700 bps outperformance. We called out maximum pessimism and our value oriented stock picking discipline was rewarded. 2026 is no different. There is still much concern around Germany, fiscal spending and Europe in general. European valuation multiples have in part normalised, but not yet for Small caps. A majority of companies are in excellent shape after three years of economic stagnation and geopolitical displacements. Costs have been addressed, productivity lifted and pricing power protected. We look forward to another year of Entrepreneur stock picking. On behalf of the Bellevue and the Entrepreneur Team, we thank you for your trust and wish you good investing in 2026.