Bellevue Entrepreneur Switzerland (CH)

Swiss small and mid caps as measured by the SPIEX Index returned +0.5% in June, outperforming large caps (SMI -2.5%). Market sentiment shifted notably during the period, initially weighed down by escalating geopolitical tensions in the Middle East. A rapid ceasefire, combined with moderating inflation expectations, a more dovish shift from some Fed officials, and renewed optimism on global trade contributed to the S&P 500 reclaiming its all-time high. In the Eurozone, the ECB delivered a 25 bp rate cut, while the Composite PMI held steady at 50.2, signaling continued economic expansion. The SNB lowered its policy rate by 25 bps to 0%, as inflation has continued to fall. Encouragingly, the procure.ch Manufacturing PMI jumped to 49.6 in June (42.1 in May). Although still below the 50 expansion threshold for 30 consecutive months, the index is edging closer to stabilization, on the back notably of an improvement of the order component. From a sector perspective information technology (+7.3%), communication services (+4.3%) and healthcare (+2.0%) performed best while materials (-7.9%), consumer discretionary (-4.6%) and financials (-2.2%) lagged the most.

Against this backdrop, the fund rose 1.4%, 99 bps better than the SPIEX benchmark. Since the beginning of the year, the fund has returned 12.71%, 173 bps above the benchmark.

Main detractors in the month were Swissquote (-8.7%), Sulzer (-7.6%) and SFS Group (-6.7%). The SNB cutting policy rates by 0.25% to 0% will be a negative for the NII but Swissquote’s management should have taken this into account in their traditionally conservative FY guidance. We expect the continued strong trading activity also in crypto to compensate for lower NII. Sulzer, like many other industrial companies, is prone to some hesitance regarding large project investments as clients stay on the sidelines due to tariff and economic uncertainties. This could lead to some lumpiness in order intake. Despite some sluggishness in the Chemtech segment, we believe Flow and Services are thriving. For SFS the demand environment remains below expectations. Nevertheless the company is proactively addressing the cost structure allowing for stable margins and cash flow. 2026 and 2027 should allow for some European industrial demand recovery.

Main contributors in the month were Montana Aerospace (+41.3%), Kardex (+12.9%) and Accelleron (+17.6%). The aerostructure supplier Montana displayed strong profitability improvement in the Q1 update, with aerostructure EBITDA margins expanding to 18% (+400 bps). FY guidance was confirmed despite tariff uncertainties. Montana will considerably benefit from the ramp up of Boeing's and Airbus’ production in 2026, which will contribute to higher profitability and ROIC. Kardex had been lagging and benefited from several broker upgrades. We like the business for its attractive positioning in the promising intralogistics market and appreciate the good profitability and high ROCE. 75% of its revenues stem from Europe. Accelleron continues to enjoy strong demand in both their energy and marine end markets. Vessel newbuilds, retrofits related to alternative fuels and growth in backup baseload power for DC are all very positive. On top of this, 75% of revenues are service related and recurrent, which make the business model pretty resilient to tariff uncertainties

In Q2 Swiss small and mid caps strongly outperformed large caps, finishing the quarter 8.8% better than the SPI and 10.9% better than the SMI, similar to what we have seen in the European markets. July will be eventful with news from the US tariff negotiations and the start of the Q2 earnings season. On tariffs, progress is being made and the overall sentiment is for a more orderly process than initially feared, potentially leading to a first frame agreement. Swiss small and mid caps display strong competitive qualities and are very well positioned to respond to external shocks, even in the large export-oriented industrial segment. From a top down perspective we believe the German fiscal backdrop is still underappreciated. News flow on investment announcements should dissipate the scepticism and lead to a further good performance of European and Swiss equities.