The idiosyncratic growth drivers of European small caps

Niche capabilities make small caps attractive

The first quarter of this year has been tumultuous for European equities, driven by a combination of factors rather than one easily-identifiable theme. Smaller companies have not been immune from these mixed fortunes.

Encouragingly, European equities are now facing far gentler headwinds than at the start of the year. Investors have welcomed the end of the dollar/commodity shock, the recovery in the US growth economy should lead to dollar stabilisation (and stem forex volatility), anxieties around China have eased, and the European recovery continues (albeit at a mixed pace) with the expansion of Q1 GDP growth. However, the deflationary backdrop and mounting uncertainty around the implications of a potential Brexit persist, and could unsettle the more cautious European investor. In such times of unc...