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The fund went against the tide as the small-cap index fell
At the end of October, the NAV price for the fund’s A-class was 111.24. During the month, the A-class rose by 1.96 %, which represents a return of -3.47 % since the beginning of the year. Over the rolling twelve months, the return is -4.10 %.
The Large Cap index, OMX Large Cap rose by 0.93 % during the month, OMX Mid Cap rose by 0.38 %, while OMX Small Cap fell by 6.98 %.
The fund systematically follows the trend in the smallest companies on the stock exchange and uses dynamic risk control to quickly reduce exposure or collect profits when the trend weakens.
October showed the way that many micro-companies are undervalued
October was marked by an intense reporting season as many of the Swedish micro- and small-sized companies presented their results for the third quarter. The reports once again showed significant differences between companies, with some starting to see improved demand and profitability while others are still affected by a weaker economic environment.
At the same time, the valuations in the fund's portfolio remain relatively low. At the end of October, the combined P/E ratio for Finserve Micro Cap was approximately 12,4, compared to about 16.3 for the broader Swedish stock marketand 21 for OMX30.
The low P/E ratio is particularly interesting in combination with a gradually improving economic picture. If demand continues to recover, there is potential for earnings improvements in several of the fund’s holdings, while valuations provide room for a changed view of the micro-cap segment.
The reporting season also creates significant differences in the price development between individual companies. Finserve Micro Caps’ systematic trend and momentum strategy means that the fund gradually increases its exposure to companies where the positive trend is strengthened and reduces its exposure when the trend weakens.
With a broad portfolio, the fund's exposure to individual companies is limited. This allows the fund to capitalize on companies where performance and market sentiment are improving, while keeping the risk in individual holdings low.
With the continued reporting season, relatively low valuations and signs of a gradually improving economic environment, the starting point for Swedish micro companies is interesting. The focus moving forward is on which companies can translate improved demand into higher sales, margins and earnings.
The development of the fund and companies in October
The fund developed positively during the month, outperforming all three of Nasdaq Stockholm's main indices. Consumer companies contributed most to the development, followed by IT and medtech and biotechnology companies.
During the month the fund was overbought. nine of the ten best performing holdings in the portfolio. This illustrates how the systematic strategy can help to allocate capital more towards companies that show positive price development.
Best companies in the portfolio during the month, market capitalization and average weight per the last October
| Name | Return Oct | Average weight % | Market value |
| YUBICO | 35,35% | 2,93% | 11bnsek |
| ADDNODE | 32,33% | 2,03% | 8606msek |
| XBRANE BIOPHARMA | 28,64% | 1,01% | 267msek |
| The BULTEN | 25,35% | 1,10% | 1828msek |
| Senzime | 22,64% | 1,21% | 491msek |
The worst companies in the portfolio during the month, market capitalization and average weight per the last October
| Name | Return Oct | Average weight % | Market value |
| BIOINVENT INT | -76,34% | 0,51% | 249msek |
| INTRUM | -36,99% | 1,19% | 6322msek |
| C-RAD | -30,24% | 0,75% | 770msek |
| ALVOTECH | -17,10% | 1,10% | 18bnsek |
| STILL FRONT | -14,37% | 1,30% | 3167msec |
Did you know that?
Smaller companies can differ significantly from larger companies in terms of both risk and returns. Research shows that company size is a factor that can influence how stocks develop over time, although the differences vary between different periods and markets.
Source: Fama & French (1993), “Common Risk Factors in the Returns on Stocks and Bonds”, Journal of Financial Economics.
A fund strategy that differs from other funds
The fund's goal is to achieve good risk-adjusted returns, offer equity exposure to companies that few other funds own, and to weather downturns well through equal weighting and even sector exposure.
The fund's holdings are relatively equally weighted over time. Historically, the strategy of equally weighting a broad equity portfolio has resulted in higher risk-adjusted returns compared to market-value-weighted broad portfolios. This outperformance can be attributed to the strategy's ability to better handle downturns, unlike value-weighted portfolios that are often heavily concentrated in individual stocks. The strategy is based on trend-following investments when the fund receives capital, focusing on companies that exhibit low volatility and a clear positive trend.
Finserve Micro Cap invests primarily in companies listed on the regulated market. Over time, the portfolio consists of more than 100 companies listed primarily on the OMX Small Cap and OMX Mid Cap lists. Over time, the companies in the portfolio have an average company value of approximately SEK 2.5-3.5 billion. This value is significantly lower than the average among competitors' micro cap and small company funds.
Thanks to regular equal weighting, the trend strategy and the fact that the fund is one of the few fund owners in many of the companies, the fund has a low correlation with traditional micro cap and small company funds.