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Discover LONVIA Capital’s fund that defies benchmark rules
ESG funds

Discover LONVIA Capital’s fund that defies benchmark rules

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25 AUG, 2023

By RankiaPro Europe

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LONVIA Avenir Mid-Cap Europe

It is a Luxembourg-domiciled fund that seeks to outperform the MSCI EUROPE SMID Cap (NR, EUR) index, which is its benchmark and invests in a specific selection of small and mid-cap companies whose business models, the team considers them to be sustainable and long-term value creators, whose social, environmental and corporate governance policies are outstanding and, in addition, whose activity is aligned with the United Nations Sustainable Development Goals (SDGs). Basically, a fund that can fall into the sustainable part of the portfolio of small and medium-sized companies in Europe.

Regarding the fund manager, LONVIA Capital is an independent fund manager that follows a long-term investment philosophy. This philosophy is transversal to its funds and consists of identifying quality companies with economic models that they consider sustainable and that truly generate added value for shareholders over the long term.

Given the fund manager's philosophy, it is not surprising to see that the fund we are analyzing is very actively managed, with high conviction as we like to say, and that its benchmark is more for comparative and reference purposes, although the fund can deviate without restriction from it. Just as an example, at the end of June 2023, the fund had 62 instruments invested, while its benchmark had over 1,200.

The differences in size and quality with respect to the benchmark are due to the fact that the team only invests in companies that, after a complete analysis, stand out and present a relevant potential for development, that are well positioned in their market, and that have strategies of growth, innovation and evolution, investment in human capital, diversification of clients and geographic expansion.

The fund's Portfolio Manager is Cyrille Carrière, who is the President and CIO of LONVIA Capital, and has a long career managing small and mid-cap funds in Europe. Until mid-September 2020, he managed small - mid-caps strategies at Groupama AM, among which were Groupama Avenir Euro (since 2012) and G Fund - Avenir Europe (since 2014). Previously, he was responsible for small - mid-caps funds at Barclays Wealth from 2008 to 2012. Today at LONVIA Capital, Cyrille manages the LONVIA Avenir Mid-Cap Europe and LONVIA Avenir Mid-Cap Euro funds.

At the end of June 2023, this strategy had more than EUR 280 million of assets under management.

Performance of the LONVIA Avenir Mid-Cap Europe fund (Institutional Class)

Accumulated profitability

YTD1 month3 months1 year3 yearsSince the launch
Fund9.69%-0.73%0.30%6.48%-1.59%
Benchmark6.59%0.89%-0.49%8.74%-16.48%
Difference3.10%-1.62%0.79%-2.27%--14.89%

Source: LONVIA Capital. Launch: 20/10/2020.

Net annual return


2022
20212020*20192018
Portfolio-38.20%40.21%6.87%--
Benchmark-20.71%22.55%12.46%--
Difference-17.48%17.66%-5.59%--



*Launch: 20/10/2020. Note: Past performance is not predictive of future returns. Fund returns may increase or decrease as a result of changes in exchange rates. Source: Factsheet LONVIA Avenir Mid-Cap Europe, as of 30-06-2023.

Before talking about performance in isolation, it is important to mention two important issues related to the same idea: high conviction fund for the long term. This means, first: that we should look at its results (ideally) in 3 and 5 years, which is difficult in this case since the fund was launched in 2020. How to do it then? Considering the second point: the philosophy of the investment team, the foundation they have in each bet, the relationship with the company, and the monitoring of the portfolio.

Now, let's look at the results. In the graph above you can see that the fund has had a positive performance since its launch, although not superior to its benchmark index. We already know that the index is only for comparison purposes and that the team selects according to sustainability aspects because, in the long term, these companies would perform better and deliver more value to their shareholders. The team's ability is demonstrated by the fact that the fund is capable of, over time, having positive and outstanding results compared to the index as can be seen in its accumulated return.

Risk analysis (Institutional Class)

1 year
Portfolio volatility24.61%
Index volatility18.22%
Tracking Error11.89%



Source: Factsheet LONVIA Avenir Mid-Cap Europe, as of 30-06-2023.

It is a risk-taking fund, with a significant TE. It is a product for investors looking to separate themselves from the index.

Other indicators for LONVIA Avenir Mid-Cap Europe fund

This image has an empty alt attribute; its file name is Other-indicators-for-Lonvia-Avenir-Mid-Cap-Europe-fund-1.png

Source: sheet by LONVIA Capital

One of the best examples of the fund's active management is the sector and geographic allocation with respect to its benchmark, the MSCI EUROPE SMID Cap (NR, EUR). Here we can see clear differences between the fund's sectors of interest and the benchmark. It is identified that the investment team is betting on Technology, Health, and Industrials, with the former being a relevant bet, 54.2% vs. 6.7% of the index (breakdown, result of stock picking.)

On geographic allocation, we also see marked differences in practically all countries, highlighting its bet on: Germany, 26% vs. 11.3% of the index, Sweden 23.9% vs. 9.1%, United Kingdom 5.2% vs. 26.7 and Luxembourg 1.7% vs. 0.

Undoubtedly, this vehicle brings a lot of diversification to a portfolio containing a fund or an ETF more similar to the benchmark in the small-mid caps Europe asset class.

Conclusions

AdvantagesInconveniences
-Management philosophy, team with experience in the type of asset and local presence.
-The investment process focused on the long-term sustainability of companies.
-SFDR Article 9 fund, impact.
-Appropriate size for the strategy.
-In some of its classes, it has a Performance Fee
-Given the high conviction of the fund, the client needs to be aligned with the long-term interest and sustainability of the investment team.
-Track Record of less than 3 years (although it will be 3 years in just 2 months)



The LONVIA Avenir Mid-Cap Europe fund is a very active fund, with specific and very different bets compared to its benchmark, with an experienced team and a philosophy very much in line with the times in which investors are interested in investing in a sustainable way.

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