Threadneedle Pan European Smaller Companies Fund celebrates excellent year

The Threadneedle Pan European Smaller Companies Fund has just celebrated a superb first year of performance.

Launched at the end of November 2005, the GBP27.6 million fund has delivered eye-catching returns thanks to a focused bottom-up stock selection strategy. The portfolio has generated 42.5% in GBP terms over one year, placing it first out of 15 funds in the IMA European Smaller Companies sector.

Philip Dicken, who manages the fund, commented: “The fund’s excellent start illustrates once again Threadneedle’s expertise in specialist areas such as smaller companies. We have been bullish on European stocks for some time and I am particularly pleased to have been able to extract so much value from a sector that many analysts felt was over-priced at the start of the year.”

Dicken points to rigorous proprietary research as the driver behind the fund’s successful first twelve months: “In our view, the key to outperformance is in-depth company knowledge. Smaller companies, particularly in continental Europe, are under-researched and therefore conceal value. Thanks to a well-resourced team and a commitment to go out into the market and meet as many as 700 company managements each year, we have been able to unlock a good deal of that potential.”

Dicken is confident that further strong returns are achievable in 2007. “Benign fundamentals mean that European equities are still set fair. Inflation is under control, earnings growth continues to be robust and M& A activity is set to continue. Small caps, while no longer as cheap as blue chips, should continue to benefit from structural factors such as the growth of individual technologies, low-cost outsourcing to emerging economies and the rapid improvement in global trade.”

“As the European economy approaches its late cycle phase, many growth stocks are still trading on unjustifiably low valuations,” concludes Dicken. “The small cap arena is well stocked with attractively priced companies with excellent growth potential. I’m looking forward to unearthing many more opportunities in 2007.”