European small cap funds continue to power ahead, carried forward on the tide of IPOs and helped alon...
Jonathan Sharpe, fund manager of the Gartmore Capital Strategy Continental European Smaller Companies fund, says: "Technology, media and the internet are the big buzz areas. A lot of the stories that played out in the US 10 years ago will now be played out in Europe."
Marco Ricci, fund manager of Deutsche Asset Management's Europa fund, is less certain of the medium-term hegemony of tech and media stocks.
He says: "The market's development in the last three months gives us no a priori reason to focus exclusively on technology stocks in the long term. However, there is also no reason to believe that the next three months will be different to the last three months."
Ricci thinks that, although technology and media stocks are a current favourite, they will not necessarily remain so. He seeks opportunities in business services, consumer goods and trade, for example.
Nonetheless, he recognises the unstoppable advance of technology in the long term. He says: "I see no slowdown in the democratisation of the information age. So there will be no slowdown in telecoms and there will continue to be new standards and new technologies."
Small companies have for a long time presented a challenge to growth-seekers. This has now turned around. From the start of last year until the end of February, the HSBC JC smaller Europe (ex UK) index has risen an impressive 47.4%, Sharpe's fund has risen 168.6% and Ricci's has gained 155.9%.
Small cap, high-growth market places, like the Neuer Markt and the Nouveau Marche, have played an important part in maintaining interest and liquidity in the Easdaq.
Sharpe thinks markets are less efficient in Europe than in the US, partly because there are simply more countries and fewer analysts. This provides plenty of moneymaking opportunities for fund managers.
His fund is divided into two sections - low risk, long-term core holdings and higher risk, short-to-medium term stocks.
Companies like Primacom fall into the first category. Primacom is the only pure play on German cable TV and it is benefiting from the consolidation of the German Cable TV market.
Into the latter category fall companies like Ricardo.de, a leading German online auctioneers. Online success can be short-lived, so this type of holding will typically stay in the portfolio for three to six months.
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