The Paris-based asset manager believes that smaller firms are at the forefront of innovation in multiple niche segments, combining strong growth potential with an attractive risk/return profile. 

Edmond de Rothschild Asset Management has launched the Edmond de Rothschild SICAV European Smaller Companies Fund, reflecting its conviction in smaller companies and its culture of entrepreneurship and innovation. 

The new fund aims to support small and midcap companies over the long term, to help them reach milestones in their growth across Europe, the firm said in a statement this week. By investing, particularly, in family businesses or companies with a strong entrepreneurial spirit that are still limited in size but which are in a phase of growth, the fund allows its investors to combine financial performance with a positive contribution to the real economy, the asset manager continued. 

In Europe, these companies represent 70 per cent of the job market, playing a key role in society’s structural trends (demographic transition, digitalisation and the environment).  

The fund’s investment strategy focuses mainly on European companies with market capitalisations of less than €5 billion ($5.4 billion) at the time of purchase, with earnings' growth prospects combined with environmental, social and governance suitability. 

The fund’s investment philosophy is based on three pillars:

-- conviction-based stock selection built on fundamental analysis with an approach “on the field”  
-- active investment management combined with a rigorous risk management process; and
-- a long-term investment vision contributing to the success of companies. 

Four essential criteria (“the Four Cs”) are assessed by the fund management team

-- growth of revenues (CAGR); 
-- competitive advantage in the market landscape; 
-- high free cash flow generation (Value Creation); and 
-- high quality of senior management teams (Chief)

The entrepreneurial spirit
Edmond de Rothschild said it has also developed an entrepreneurial approach to finance through its private equity strategies. “With this asset class, we provide concrete support for entrepreneurs developing their business plan by providing financing as well as genuine monitoring of their strategy,” the firm said.  

The Amethis strategy, part of the Edmond de Rothschild private equity partnership with a strong ESG focus, aims to develop the entrepreneurial wealth of SMEs in Europe and Africa, providing entrepreneurs with expertise in Europe, Africa and the Middle East. By tapping into this regional network, SMEs can go global successfully and deploy an export development plan, the firm said. 

The Trajan strategy aims to offer entrepreneurs who are transferring their businesses help with capital and their operations.

The strategy of futureproofing these companies and accelerating their growth, by scouting out suitable buyers, fits in with the process of preserving the regional economic fabric that is vital to France, the firm added.  

Edmond de Rothschild said it stands by its entrepreneurs while they develop their business plan, providing financing and engaging with the strategy they create.