Mirabaud - Discovery Europe ex UK D H GBP Acc
Why is this fund on our radar?
While Mirabaud Discovery Europe ex-UK’s relatively small carries an element of risk, which we describe in the section below, equally a smaller fund can be nimbler and its managers can contemplate investing in businesses that are too small for bigger funds to own. In doing so they may be able to buy into companies at an earlier stage and benefit from growth before other investors. Smaller companies can, on paper, be riskier, but the team’s focus on strong balance sheets and defensible business models helps to mitigate that, and the fund’s ESG framework should also reduce the potential for portfolio companies to be mired in controversy around ESG issues – which in Europe are treated with seriousness. The fund’s strong performance translates into excellent quantitative scores for both consistency, with a high batting average, and good risk adjusted returns, which is notable in a sector generally considered to be volatile, and these are the key reasons for it making it onto our list. Strong returns have come in an area of the market that has not attracted much attention from investors in recent years, but with investors’ money flowing into large cap European equities for the first time in several years, it may only be a matter of time before some of that trickles down to small caps, which would give this fund an additional tailwind.
Skip to Our VerdictPerformance
Mirabaud Discovery Europe ex-UK has delivered strong performance over five years, with an annualised return of 12.7% - that’s the average return it has delivered per year – well ahead of the 6.6% delivered by the average fund of its type1.
The fund has also beaten the returns from its benchmark index - the MSCI European Smaller Companies ex UK - which has delivered 4.9%%. The broader market ETF iShares MSCI Europe ex UK has an annualised return of 9.8% over the same period, so the fund has not only done better than comparable smaller companies measures, but also beaten the main European market (figures are to 09/12/2025).
We can see from the chart below that the fund’s performance compared to the peer group and benchmark can vary significantly. In the last five years, this variance has been largely on the upside, with 2021 and 2024 both stand out years for the fund against its comparators. The key take home here is that a high conviction fund such as this may also have years when it lags the index.
discrete annual performance
Source: Morningstar
Past performance is not a reliable indicator of future results
We can examine this variability more clearly in the next chart. Here the fund’s performance is divided by both the benchmark and the IA European smaller companies peer group, which means that when the lines are sloping up left to right the fund is outperforming and vice versa when the lines are sloping down. Overall, the fund has delivered outperformance against both comparators but the chart illustrates that when markets are anxious and risk-averse, smaller companies suffer, and in the first phase of the pandemic, the fund underperformed sharply. This is just part and parcel of investing in small caps and overall the fund has produced extra reward for the extra the risk.
relative performance since inception
Source: Morningstar
Past performance is not a reliable indicator of future results
1 Based on comparison with annualised performance of the IA European Smaller Companies sector
Portfolio
The managers of Mirabaud Discovery Europe ex-UK focus on smaller companies that, as they put it, don’t really need the stock market. These are companies that have strong balance sheets and are cash generative and growing, and are often family owned. The manager describes these as ‘smarter, safer and circular’ businesses.
Companies with these characteristics tend to be off-radar for investment banks and consequently under-researched meaning it is possible for the managers to gain an information advantage. New positions are added when the market cap is below €2bn, although the fund can run winners up into the mid-cap space, and tends to be fairly concentrated, currently 39 names with the largest ten being c. 47% of the total. Meeting companies directly and getting a good feel for the operations and the people is important to the team.
Mirabaud Discovery Europe ex-UK is an Article 8 fund under SDFR, sometimes referred to as ‘light green’ meaning that its ESG policy is promoted as part of its strategy, but sustainability and impact are not core objectives (which would make it ‘dark green’). This is another area where smaller companies are under-researched and have less comprehensive reporting and so again, it requires a hands-on approach by the team. They break this down into three themes:
- Safer: increasing safety, compliance and regulation;
- Smarter: better harnessing technology to improve quality of life, and;
- Circular: reducing waste and using the planet’s resources more efficiently.
The fund therefore excludes certain sectors, such as defence, and tends to only include companies with the top 80% ESG scores in the team’s ESG scoring system. Defence is currently an important theme in many European equity funds and its exclusion here is notable, although clearly MDEE’s performance record illustrates that leading performance can be generated without it. The largest holdings are shown below together with sectors and market cap, which illustrates the point that MDEE is truly a small cap fund, with most holdings coming in below the €2bn threshold, with those above that level having been bought when still below.
largest holdings
| company |
country of listing |
market cap (€) |
GICS Sector |
weight (%) |
| Norma Group SE |
Germany |
€0.5bn |
Industrials |
5.8% |
| Cicor Technologies Ltd |
Switzerland |
€0.9bn |
Information technology |
5.1% |
| KSB SE & Co KGaA |
Germany |
€1.7bn |
Industrials |
5.0% |
| Ambea AB |
Sweden |
€1.0bn |
Healthcare |
4.8% |
| Credito Emiliano SpA |
Italy |
€4.2bn |
Financials |
4.8% |
| Neinor Homes SA |
Spain |
€1.4bn |
Consumer discretionary |
4.7% |
| Swissquote Group Holding SA |
Switzerland |
€9.4bn |
Financials |
4.7% |
| AcadeMedia AB |
Sweden |
€0.5bn |
Consumer Staples |
4.4% |
| Gaztransport Et Technigaz SA |
France |
€6.1bn |
Energy |
4.2% |
| Cembra Money Bank AG |
Switzerland |
€3.7bn |
Financials |
3.8% |
Source: Mirabaud, Kepler as at 30/06/2025
Overall, the fund offers investors a focused portfolio of small companies with a greater domestic European bias than a core large cap equity fund, and the ESG screening also sets the fund apart from many competitors, while not being an impediment to strong performance.
Our Verdict
Mirabaud Discovery Europe ex UK is a true small cap fund, focusing on sub-€2bn market cap companies (which, believe it or not, is a small company in this context!). This makes it unusual in a world where very often ‘small-cap’ really means even larger companies than this . The small cap angle is interesting right now because while European equities have had a strong year in 2025, fuelled by significant capital flows, the smallest companies haven’t seen the same inflows, and remain cheap relative to their bigger cousins even as expectations about earnings growth are picking up. Further, looming large in the current list of positives for Europe is Germany’s plan to stimulate the economy with a vast infrastructure spending programme. Many the of the more domestically orientated companies already benefitting from this reside in the lower reaches of the stock market, in contrast to Europe’s mega-cap ‘global champions’ that have driven market performance in recent years. Thus, the fund is well-positioned in stocks likely to benefit from not only the longer-term growth that small-caps can offer, but potentially from a long-awaited turn in sentiment that could provide a significant tailwind to valuations.
Key Risks
- Smaller companies can be more risky and volatile than larger companies
- This is a relatively small fund with above average costs and redemptions could cause liquidity issues
- ESG screening excludes sectors such as defence, which may not suit all investors
