Damien McIntyre
A volatile start to 2026 has masked some solid fundamentals in European markets, but the valuation gap that exists between European small caps relative to both history and their large cap peers makes them an attractive hunting ground for investors, says GSFM CEO Damien McIntyre.
The US/ Iran war and the macro uncertainty this has created has delayed European recovery, but not derailed it, McIntyre says.
“There are good opportunities when investors take the right approach in the right sectors, particularly where trade buyers and private equity firms continue to show interest in merger and acquisition activity.”
McIntyre says when it comes to investing in European small caps investors should prioritise quality companies with significant growth potential.
“By focusing on sectors where there are favourable structural trends, such as healthcare, food and beverage, and defence and technology, investors are gaining exposure to companies that display resilient business models, regardless of the broader macro landscape,” he says.
McIntyre says one of the keys to success in European small caps is an “active engagement” approach with the companies held in a portfolio.
“The world is in a state of flux as geopolitical risks escalate around the globe. In this context, investors can benefit from adopting a value-driven strategy and identifying compelling opportunities at the company level.
“This has long been the tactic of private equity investors – they find and then invest in promising companies for the long haul. And it’s an approach that can also serve investors in global small cap equities as well. Adopting an active ownership approach of “friendly activism” can reap strong benefits over the long term.”
McIntyre says this is the approach taken by Alantra EQMC. “By making a significant investment in a growing small cap company, up to around 25 per cent, Alantra has the power to initiate and encourage real change.
“Small cap companies offer investors the opportunity to get in at ground level and benefit from the growth that happens as companies mature. Small caps are also generally an under-researched sector of the market, with most analysts focussing on larger cap companies. But this creates real potential for those analysts willing to do the research.
“An important consideration, however, is where the company you are investing in is domiciled. Not every jurisdiction offers the regulatory and legislative certainty of Europe.
“A focus on European listed companies – not as a European play but rather investing in those companies that have a global growth exposure to other parts of the world – can be a strategy that adds good value.
“There are some European small cap companies that are great global businesses that are leaders in their niches. They are ripe for growth, and with the right direction, can also become a target for mergers and acquisitions.
“Active ownership approach from a fund manager can help accelerate a small cap company’s path to becoming a mid-cap company, thus creating shareholder value.”