European markets continued to perform well during December. The positive sentiment remains generally macro-driven, as confidence grows that interest rates in Europe have likely peaked. Smaller companies continued to recover, performance-wise, relative to larger companies. The fund was up strongly over the month, given this environment.

The largest contributor to performance over the month was Pagero (business to business software) which received a bid approach at a significant premium to its pre-bid price level. Ox2 (wind farm developer) performed strongly over the month, as confidence grows that the business model has weathered a difficult year well. Notable positive contributions also came from Assystem (nuclear power consultant), Visiativ and Serviceware (both technology products and services), as well as D’ieteren (Autoglass windscreen repair owner), Deme (alternative energy infrastructure services) and Boliden (copper mining).

There were relatively few detractors from performance over the month. Fabasoft (software) suffered some profit-taking following a strong performance last month. Init Innovation in Traffic Systems (transport-related technology) was also moderately lower following a strong share price move in recent months.

There were no new additions over the month to the fund. EQS was sold following the bid for the company. The fund also exited Zaptec (electric vehicle charging solutions) following some concerns about the balance sheet.

The portfolio ended the year on a 6.2% free cashflow yield, with expected growth for the next three years expected to reach almost 11% on average for the portfolio’s holdings. The free cashflow yield represents a premium of almost 50% versus the broader market, growing at twice the expected rate of growth for the market generally. We look forward to 2024 and are excited about the prospects for the fund.