IN-DEPTH: Q&A with Till Hufnagel on the launch of Spur Value Partners
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An interview with Till Hufnagel, discussing the launch of Spur Value Partners.
After nearly a decade as portfolio manager at Petrus Advisers, you decided to launch your own activist fund, unveiled as Spur Value Partners in April. What drove you to pursue your own venture?
I have been investing, as have most of the team here, for five to 10 years in the European mid-cap space. We like it. The team coming along has been focused more on traditional activist themes such as operational improvement and capital structure improvements but not as much on special situations as the Petrus strategy had embraced. So, we thought we would just go our own way and left in February to set up Spur Value Partners.
We are based between Switzerland and London and are working toward a fund launch later in the year, targeted for around September.
As Spur Value Partners, are there any particular sectors that you are looking at in terms of opportunities?
We tend to focus on sectors where we have deep expertise, including software, services, industrials, energy, financials, real estate and parts of the consumer and media value chains. Overall, we have seen quite a staggering development over the past decade where capital has moved more and more toward U.S. markets attracted by a perceived sound macroeconomic background combined with substantial technology and innovation driven growth. This development has resulted in a very substantial valuation gap between Europe – a continent perceived to be in structural decline - and the U.S.
Wherever we look, Europe is trading at all-time discounts compared to North America. And the mid-cap space in Europe has been hit particularly hard. As capital has left Europe, stock market liquidity has dried up and valuations in the mid-cap space have been affected particularly hard. Consequently, the European mid-cap space is also trading at historical lows against larger cap companies.
We tend to focus on companies that have a value angle. When we invest in software companies, they are typically not fast-growing software businesses and tend to be highly cash generative. That is the case for most industries we work in. And to add another axis of relative under-performance: Value stocks in Europe have substantially underperformed growth stocks over the past one to one and a half decades. Taking all these substantial valuation discounts of European mid-cap companies with a value aspect together, we deem the underlying universe quite cheap compared to what we see as a fair fundamental value. I'm not saying we're betting on that to change, but it's a good starting base in relative terms.
Within that, the macro environment has lots of challenges, operationally, etc. This means there is an inherent necessity for companies to look at improving [their] potentials and applying self-help. Consequently, we believe the current environment is quite attractive for finding new opportunities.
DMI’s Q1 stat report found that while activism activity was relatively flat in markets such as Germany and France compared to the same period in 2024, the number of demands advanced at U.K.-based companies doubled. How do you view the activism landscape in the U.K. market compared to others in Europe?
We have run campaigns in the U.K. in the past and we felt quite a bit of resistance from the side of large institutional investors to activist investing. It was helpful that we had been engaging with large institutions for many, many years and we were able to overcome that initial resistance and convince people, but we found it not as easy as you might think.
Markets like Switzerland are much more capitalist in the approach to activism, and much more direct if needs be in supporting activist campaigns. Even Germany can be easier in our experience. The U.K. has – similar to Germany – been a market that investors have written off, for structural and other reasons. It has become cheap compared to history while there are fantastic companies within the U.K., so it's a good hunting ground for activists. We have also noticed a more direct approach working in the U.K. We've seen people really going after entire boards and running proper proxy battles – an approach we have seen historically only in the U.S. The experience of the U.S. in changing boards and fighting proxy battles is well ahead of most of Europe but it looks like the U.K. is starting to catch up.
We deem that a net-positive environment as stakeholders, and shareholders in particular, are realizing that they have power and should use it.
The opening months of the year have brought a lot of uncertainty to the markets with the new administration in the U.S. advancing its plan to impose tariffs. How do you think this might impact activism in Europe as the year pushes on?
It is impossible to answer precisely right now. There are too many uncertainties and I think there's too much uncertainty in the hands and decision making of Donald Trump.
Europe has been under pressure including from the likes of China in many parts of Europe being flooded by cheap chemicals and other products, etc. And there are numerous structural concerns starting with demographics, rigid labor markets, lack of innovation, etc.
On the positive side however, Europeans seem to finally be open to realizing, “we’ve got to fight together as team Europe because, otherwise we'll die.” This is not a bad thing. Europe also seems to realize we have to become more commercial.
Many companies we speak to do not know what to do in reaction to tariffs because there's so much uncertainty around the ongoing negotiations. But they're preparing. Most companies globally have become much more flexible than historically because of firstly, the financial crisis, and then COVID obviously put a lot of pressure on companies to be able to respond quickly to change.
Also, the picture is often not as clear as it might seem. Most European companies we invest in have substantial operations in North America. Many of them are in fact less affected by tariffs than their American peers, simply as a result of substantial operations on the ground combined with well-planned supply chains. So even on the micro level, it is unclear that U.S. corporates will benefit more than European competitors. And bigger picture, share price reactions since Liberation Day show a clear message: investors expect U.S. companies to suffer more than international ones.
We believe and hope solutions will be found soon. Interestingly, for the first time in about a decade, we see more interest in moving capital into Europe because people have come to the conclusion that they cannot have all their eggs in North America. China is not necessarily an easy place to invest in right now with recession and deflation risk. There is also more tariff risk than anywhere else. India is still a relatively small market to invest in.
There are other areas too, such as Japan which has been attracting capital. But overall Europe has become, in relative terms, more attractive. It is probably not what the U.S. administration has been trying to achieve, but it might end up strengthening the morale and the discipline, and in the end the attractiveness of Europe.
The engagement style of activists operating in Europe is very different to that of their U.S. counterparts. Much of that engagement takes place behind the scenes with parties striving to reach agreeable terms. Given market volatility, do you feel companies will be even more open to settle in such a climate?
We have seen a clear trend over the past five years of more settling as part of an overall trend of embracing activism. In our experience, stakeholders have become much more open to negotiating as numerous examples have shown that activists can add value. When I look back 10 years at Petrus Advisers, literally every single discussion with a board would end up in a fight. Over the last three to five years, the number of proxy fights, for instance, has come down to nearly zero, and we've managed to settle pretty much all the time, sometimes with a certain public notion to it, but without a full fight, and mostly behind closed doors.
This can change depending on how aggressive the activists are and what the underlying situation is about. Certainly, now with more macro uncertainty, I'd say it's hard to predict whether that by itself will drive more settlements. But clearly, it's driving the need for companies to be even more prepared to respond to and manage this evolving environment, while being closely watched by engaged shareholders.
