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Lucerne Fund Gains 42% With Focus on European Growth Companies

Lucerne Fund Gains 42% With Focus on European Growth Companies

(Bloomberg) -- One of the best-performing hedge funds investing in Europe isn’t headquartered on the Continent, or even in the U.K. Instead, it’s making winning calls more than 3,000 miles away in Greenwich, Connecticut.

Lucerne Capital Management surged about 42% this year through November, according to an investor document seen by Bloomberg. From its offices in the U.S., it has managed to best its peers during a year when Europe’s stock benchmark has gained 25%.

At a time when hedge funds are struggling to outperform markets and keep investors, Lucerne’s success suggests that finding such an edge could be a way forward -- about one in 12 European-focused managers base their operations in the U.S. It’s both an unusual selling point and useful way to stay away from the crowd, according to Thijs Hovers, a partner and portfolio manager at the firm, which manages about $800 million.

“Every quarter, we meet with management teams in town from Europe and the access is great because there aren’t as many focused European funds here to take up all of the meetings,” Hovers, 45, said. “We’re not in the in-crowd of funds all talking to each other at the Starbucks and looking at the same names -- we’re a little away from all the noise.

Lucerne Fund Gains 42% With Focus on European Growth Companies

While Lucerne’s managers do most of their work from Connecticut, the firm has a research office in Amsterdam with four analysts. Hovers and founder Pieter Taselaar, both of whom are Dutch, also spend a week each month in Europe visiting companies and attending other meetings.

“Europe is becoming an increasingly interesting region for institutional investors that have historically focused on the U.S. and been underweight Europe,” said Hovers, who joined Lucerne in 2007 after stints at ABN Amro Bank NV and Rabobank. He declined to comment on the fund’s performance.

In fact, most of the firm’s assets come from U.S. investors, including family offices, endowments and foundations, while wealthy European families make up about a third of the capital. The rest is internal money.

This year’s advance is helping Lucerne more than make up for a rough 2018 when the fund lost about 22%, according to a separate investor document.

Lucerne is finding success with bets on growth companies including Spanish phone tower operator Cellnex Telecom SA, BE Semiconductor Industries NV, media and telecommunications giant Altice Europe NV and Cambridge-based software maker Aveva Group Plc.

Lucerne Fund Gains 42% With Focus on European Growth Companies

Shares of these companies have advanced more than 80% this year, with Altice Europe leading the pack. The stock has more than tripled as the company has cut debt through asset sales and expanded its mobile subscriber base in France.

Altice Europe’s shares may triple again to 15 euros ($16.68), Taselaar, 57, said last month at the Sohn London Investment Conference.

Wagers on Italian carmaker Ferrari NV and TKH Group NV, a Dutch technology company, have also helped drive Lucerne’s gains.

The equity fund, which focuses on pricing inefficiencies at mid-cap companies, particularly in the Netherlands, Germany, Italy and France, has returned 12% annualized since inception in 2002.

And the Lucerne team continues to see investing opportunities.

​“Europe is a very appealing universe to find high-quality companies that are trading at significant discounts” compared to some of their U.S. peers, Hovers said.

To contact the reporter on this story: Melissa Karsh in New York at mkarsh@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Alan Mirabella, Josh Friedman

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