Evli's small company fund, Evli Finnish Small Cap, has won the award for best Finnish equity fund at the annual fund and fund house awards organised by fund research house Morningstar in Finland.
This is now the third time that Evli Finnish Small Cap has been ranked number one in its award category. The previous first places came in 2012 and 2016. The winners in the fund categories are selected on the basis of 1, 3 and 5-year returns and 3 and 5-year risk.
"We are very proud of this award. Thanks to Portfolio Manager Janne Kujala's long-term work, the Evli Finnish Small Cap fund is one of our most successful funds. At Evli we focus on creating clear investment strategies for our funds and we have a disciplined investment process with an integrated ESG approach," says Mikael Lundström, Head of Evli Funds.
In recent years too, it’s been small cap funds that have dominated the top ranking of equity funds investing in Finland. Portfolio Manager Janne Kujala believes that the reason for this success is the potential of small cap funds to generate big returns for investors who do the necessary background work.
"It's a market where the effort you put in makes it easier to make new discoveries. Many companies whose share price have risen by many multiples, often start out small. In Finland, some recent examples include Qt Group and Revenio Group. Investors have a better chance of hitting the jackpot if they focus on looking for small companies to invest in."
These are the types of companies portfolio managers are now keeping an eye on
An experienced portfolio manager like Kujala, who has been managing the fund since 2004, has seen many such stories in the world of small cap investing. While many of the same factors reappear when he looks for interesting companies to add to the fund’s portfolio, the companies are always unique with their own characteristics - the perfect investment rarely comes along.
"When analysing an investment, basic things to consider include the market in which it operates in terms of structural growth, and which sustainability issues are most important to that company. Ideally, the company will also have a track record of good profitability and growth, strong cash flow, a business that is not too cyclical and a size large enough to invest in the digital transformation. In addition to a historical track record, future growth is also very important. In this context, one of the things that is of interest is the size of the market that can be reached and the means by which the company will seek to grow in this market."
Kujala gives an example of two companies that are currently performing well, both of which have strengths he’s looking for in small cap investments.
"A good example from Finland could be Talenom, which combines in an interesting manner many of the characteristics that you ideally want an investment to have."
"Over in Sweden, there is a very different type of company, MIPS, which makes MIPS helmets. Although they are proven to be the best head protection in accident situations, MIPS does not sell or manufacture helmets itself. The company licenses its technology as intellectual property to various companies. MIPS does not therefore need to invest in helmet factories and distribution chains itself. Instead, it receives a licencing fee for each helmet sold that incorporates its technology. Thus, its profitability is at a top level, with years of very strong growth in helmets for cycling and skiing. However, the market potential is not limited to sports helmets, as other helmet applications are still an untouched market for MIPS. This is an excellent situation from an investor's point of view," says the portfolio manager.
Read more: Evli Finnish Small Cap fund
For more information:
Janne Kujala, Portfolio Manager, Evli Finnish Small Cap B and Evli Swedish Small Cap, +358 40 579 1957
Morningstar Awards 2022 (c). Morningstar, Inc.
All Rights Reserved. Awarded to Evli Finnish Small Cap fund for best Finnish equity fund in Finland.
