Bellevue Entrepreneur Europe Small

European SMID caps, as measured by the MSCI Europe Small Cap ex-UK Index, declined 7.3% in March, outperforming European large caps (Stoxx Europe 600 -7.7%). The drawdown was driven by the escalation of the Iran conflict, including the temporary closure of the Strait of Hormuz, triggering a sharp energy shock with oil prices exceeding USD 100/bbl. Central banks remained on hold during the month, but with a clear hawkish bias given the risk of a supply-side energy inflation shock. Into month-end, first signs of de-escalation caused modest pullbacks in energy prices. The Eurozone Composite PMI edged down to 50.5 in March, signaling continued but slower expansion. Overall growth was dragged down by a sharp reduction in the service sector, while manufacturing proved resilient (51.6), with Germany hitting a 45-month high of 51.7. In terms of sectors, Energy (+5.9%), Utilities (-2.4%) and Consumer Staples (-3.2%) performed best, while Real Estate (-10.3%), Materials (-10.2%) and Industrials (-8.8%) lagged the most.

Against this backdrop, the Fund (B-share, EUR) decreased 7.1%, outperforming its benchmark by 12 bp. At the end of March, the fund is -0.48% ytd, an outperformance of 144 bp.

Top detractors in the month were Do & Co (-24.8%), Metso (-16.8%) and Invisio (-16.6%). Do & Co, the international airline caterer, came under pressure due to the potential air traffic slowdown amid rising oil prices. As a mining equipment provider, Metso is sensitive to rising interest rates. Nevertheless, it secured significant orders in the month, including a EUR 100 mn contract for a copper processing plant in Peru. We see the structural investment case as intact, but have decreased short-term exposure. The communication and soldier equipment specialist Invisio gave back all of its ytd gains with no news. The stock was raised to buy by a local broker at month-end.

Top performers in the month were Alzchem (+14.1%), Subsea (+9.3%) and Nordex (+5.6%). Alzchem benefited from the release of strong FY 2025 results, driven by solid growth in its specialty chemicals division. 2026 guidance with +6% revenue and +9% EBITDA was positive, easing ramp-up concerns. Also, rising geopolitical tensions continue to support demand in its propellant business. Subsea reported a solid Q4 with EBITDA, cash flow and order intake exceeding expectations. The backlog provides strong visibility while tendering activity remains high, supported by the recent surge in energy prices. After a strong FY 2025 results and a new mid-term guidance pointing to a doubling of EBIT over the next three years, Nordex’s share price continued its upward trend. The backdrop of the conflict in Iran has reinforced Europe’s urgent need to strengthen energy sovereignty, which in turn supports continued investment in renewables. Germany announced during the month an additional 12 GW of wind capacity, an increase of roughly 25%, to be deployed over the next four years.

The Middle East and Hormuz situation remain key uncertainties. The magnitude and duration of the conflict and its effect on the globaleconomy remain difficult to assess. Following a sensitivity analysis of the portfolio, we implemented selective adjustments with the aim to balance the fund relative to energy prices and interest-rate volatility. We reduced our exposure to travel & leisure and mining, while increasing positions benefitting from higher energy prices. We also increased cash by 2%, taking profits in some of our outperforming names. Overall, the fund performed relatively well and closed the month with slight outperformance. Interestingly, SMID did not underperform in the drawdown, despite higher exposure to industrials. We attribute this also to the structural exposure of industrial names to themes like defence, sovereignty, energy transition, electrification, which makes the segment less cyclical. We keep our strong position in industrials, hedged by the absence of consumer cyclical names.