Bellevue Entrepreneur Europe Small

European SMid caps, as measured by the MSCI Europe Small Cap ex-UK Index, rose 2.8% in February, outperforming the MSCI World Index (+1.1% in EUR) and the S&P 500 Index (-0.4% in EUR). The outperformance was supported by a pronounced market rotation out of software and services as next-generation AI model releases renewed disruption concerns. Capital rotated toward more defensive businesses characterized by heavier asset bases and lower obsolescence risk, which are more prevalent in Europe and especially within European SMid caps. German factory orders also surprised to the upside, suggesting early evidence that fiscal spending is beginning to feed through to the real economy. However, these constructive signals were overshadowed by the coordinated US and Israeli strikes on Iran, lifting oil and gas prices amid concerns over potential supply disruptions and spreading instability. The Eurozone Composite PMI rose to 51.9 in February, signaling continued expansion. Activity was supported by a resilient services sector (51.9), while manufacturing moved into expansion territory (50.8). In term of sectors, Energy (+13.1%), Utilities (+7.6%) and Real Estate (+7.5%) performed best while Health Care (-2.9%), Information Technology (-0.9%) and Financials (-0.4%) lagged the most.

Against this backdrop, the Fund (B-share, EUR) returned 3.1%, outperforming its benchmark by 33bps. YTD as of end-February, the Fund is up 7.2%, an outperformance of 141bps.

Top detractors in the month were Bechtle (-21.8%), Sopra Steria (-14.9%) and Alten (-23.1%). While we expect the upgrade cycle toward AI-ready PCs and the German fiscal stimulus to sustain IT investment, rising memory prices are likely to pressure hardware demand, potentially weighing temporarily on business for resellers such as Bechtle. Sopra and Alten have suffered from continued derating as the market shuns business models potentially exposed to AI automation. We have drastically cut our positions as we wait for the dust to settle. We think IT services companies have potentially a role to play in the transition to AI, growing their share of AI-driven revenues as their clients seek advice on how to efficiently operate.

Top performers in the month were Nordex (+26.9%), Cloetta (+19.0%) and Rovi (+17.9%). Nordex’s 2026 revenue target points to an acceleration in top line growth supported by increased tender activity, also the new mid-term margin target was above expectations. This drives strong consensus earnings upgrades of >35%. Cloetta reported strong Q4 2025 results, with improved profitability. Within its branded packaged goods segment, recent cost actions are beginning to bear fruit, positioning the company for revenue acceleration and further margin expansion in 2026. Rovi delivered stronger than expected Q4 2025 results, beating already revised expectations thanks to robust CDMO performance and effective cost control. For 2026, Rovi is guiding for 8 to 12% revenue growth as new contracts ramp up.

The events in Iran have challenged equity markets, also in Europe obviously. In the aftermath of the coordinated bombings on February 2026 we have reviewed our portfolio for sensitivity to higher energy prices. We also assessed potential secondary effects, including inflation and interest rate sensitivity. In terms of immediate actions, we have reduced our exposure to airline caterer Do&Co. The company’s key clients include Turkish Airlines and other carriers with significant exposure to the Middle East. Overall, the portfolio is well balanced and we have limited exposure to highly energy-intensive businesses (the names in this category also enjoy strong pricing power). Our industrials exposure is geared to structural winning – and still valid - themes like electrification and energy sovereignty offering resilience in an energy stress test scenario.