European Small-caps

There are three criteria for investment:

companies must display quality credentials that allow them to generate sustainably high returns on capital employed. Reinvesting at high returns drives economic value and share price performance;
companies must clearly demonstrate how ESG considerations are embedded in their business strategy. Every company faces material ESG risks that can have a direct impact on long-term share price performance; and
there must be an investment case. A quality company that embeds ESG is only a good investment where a valuation opportunity exists

We believe that the market is short-term focused and often misprices the compounding nature of quality companies. We take advantage of this through our long-term investment horizon of 3-5+ years. We run high conviction portfolios of 30-50 companies, where each position has a meaningful impact, without a tail of insignificant holdings.

We screen the investible universe on quality metrics and then undertake rigorous bottom-up research. Our team-based approach ensures that every investment is thoroughly challenged, while our ESG analyses is fully integrated into our investment process.

We have been successfully investing in European small-caps for twenty years, and running our Sustainable European Small-cap Strategy for fifteen.

Other small-cap strategies:

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News & Knowledge

2020, 01 October

The Dividend Letter

With the September launch of a sustainable version of our Global Dividend strategy, there is rarely a better moment to discuss how we treat ESG as part of our investment philosophy. The fact that we chose to launch a ‘green’ version of our fund doesn’t mean we ignored sustainability before. It is an important factor to consider in our high dividend universe, given that the space tends to be geared towards more ‘dirty’ industries compared to the broader market. It is our belief that a company cannot add value over the long term if its business model is unsustainable, be it because it is harmful to its environment or by being overtaken by cleaner technology. To put our beliefs into practice, our ESG approach has three pillars: Exclude, Integrate and Engage, with each more progressive than the one before. Exclude the violators from our universe, integrate sustainability into the investment process and engage with the companies where we can drive positive change.

White paper: Chinese equities

China is the world’s second biggest economy in GDP terms (and already the largest in purchasing power parity terms). China is expected to achieve absolute GDP parity with the US, depending on growth rates, within the next 10-20 years. This seems to be a forgone conclusion; it has the world’s largest population (at more than three times the size of the US population), a growing middle class and large rural population that provides a pool for future growth.

Time for investors to show up in the race to net-zero emissions

In this quarterly newsletter, we take a closer look at the world of responsible and sustainable investment. At Kempen Capital Management, Environmental Social Governance (ESG) factors are fully integrated throughout our investment process, and for us responsible investment means being good stewards of the companies that we invest in. We encourage positive change through engagement with the management of our investee companies and through actively using our shareholder voting rights.