| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9% | 0% | 0% |
| 2025 |
|---|
| -8.2% |
REQ Global Compounders declined 8.2% in 2025, primarily due to AI narrative impacting 20% exposure to vertical-market software companies, tariff-related uncertainty affecting specialty chemical distributors, and weak performance from recent Röko IPO investment. Despite headwinds, portfolio companies demonstrated resilience through dual growth engines, completing 145 acquisitions while maintaining disciplined capital allocation. Management believes AI creates opportunities rather than uniform threats for mission-critical VMS providers with high switching costs, positioning trusted incumbents favorably versus new entrants. Data center infrastructure beneficiaries including Halma, Diploma, and Amphenol delivered strong performance from AI build-out tailwinds. Portfolio valuation improved to attractive 20.8x EV/EBITA from 23.8x, with modest market expectations below historical delivery capabilities. Companies maintain healthy acquisition pipelines and improving organic growth outlook. Management deployed capital opportunistically, becoming net buyers of Constellation Software, Topicus, and Lumine during drawdown. Long-term compounding potential remains intact with portfolio companies generating average 17% earnings CAGR over past decade through disciplined reinvestment at attractive returns.
REQ invests in acquisition-driven compounders that reinvest large shares of incremental capital at above-average returns, creating high long-term per-share value through combination of organic growth and acquisitions of smaller private firms.
Optimistic about long-term compounding potential of portfolios despite weak 2025 performance. Portfolio companies remain confident about prospects, supported by healthy acquisition pipelines and improving organic performance outlook. Current market expectations appear modest with earnings growth well below historical delivery and management's medium-term capabilities.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 12 2026 | 2025 Q4 | ADDTECH-B.ST, APH, BERG-B.ST, BRO, CSU.TO, DPLM.L, GREEN.ST, HEI, HLMA.L, IMCD.AS, INDU-A.ST, JDG.L, LAGR-B.ST, LIFCO-B.ST, LMN.TO, MOMENT.ST, NCAB.ST, NIBE-B.ST, ROKO.ST, ROP, TOI.TO | Acquisitions, AI, Capital Allocation, compounders, Decentralized, long-term, Quality, software |
JDG LN BRO CSU CN |
REQ Global Compounders fell 8.2% in 2025 as AI narrative pressured vertical software holdings despite differentiated risk profiles. Portfolio companies maintained acquisition discipline with 145 deals while demonstrating dual growth engine resilience. Management opportunistically added to Constellation Software, Topicus, and Lumine during drawdown. Attractive 20.8x valuation with modest market expectations supports long-term compounding thesis for quality acquisition-driven businesses. |
| Jul 30 2025 | 2025 Q2 | ADDT-B.ST, BEIJ-B.ST, BERG-B.ST, BRK-A, CSU.TO, DCC.L, HEI.A, HMS.ST, INDU-A.ST, LAGR-B.ST, LIFCO-B.ST, LMN.TO, NCAB.ST, NIBE-B.ST, TOI.TO | Acquisitions, compounders, Decentralization, Europe, long-term, Nordics, Quality | ROKO.ST | REQ's acquisition-driven compounders delivered solid first-half returns of 5-6% backed by strong fundamentals and 78 completed acquisitions. The strategy targets quality businesses that reinvest 75-80% of cash flow at high returns through small acquisitions. Key moves included cornerstone investment in Röko AB and increased Constellation family exposure to 20%, maintaining focus on long-term compounding through decentralized, entrepreneurial cultures. |
| Dec 31 2024 | 2024 Q4 | ADD.ST, ADDT-B.ST, AME, ATCO-A.ST, BERG-B.ST, BRO, BUFAB.ST, CSU.TO, DCC.L, IDUN.ST, IMCD.AS, INDU-A.ST, ITW, LAGR-B.ST, LIFCO-B.ST, MC.PA, MOME.ST | Acquisitions, Capital Allocation, compounders, Decentralization, Industrial, Nordics |
AME DCC.L VITEC.ST IDUN.ST |
REQ's acquisition-driven compounders delivered strong 2024 returns of 23.0% (Global) and 17.6% (Nordic) through 331 total acquisitions. The strategy targets decentralized companies reinvesting 75-80% of cash flows into small, frequent deals. Despite weak organic growth, portfolio companies generated record cash flows entering 2025, positioning them for continued compounding through disciplined capital allocation. |
| Jul 1 2024 | 2024 Q2 | ATCO-A.ST, BEIJ-B.ST, BERG-B.ST, CSU.TO, DPLM.L, ELUX-B.ST, ERIC-B.ST, IMCD.AS, INDU-A.ST, JDG.L, LAGR.ST, LIFCO-B.ST, MEDC.ST, NIBE-B.ST, SAND.ST | Acquisitions, B2B, Compounding, Decentralization, Industrial, Sweden | - | REQ Capital's acquisition-driven compounder strategy delivered 14% returns in 1H 2024 through companies with dual growth engines and decentralized structures. Portfolio companies announced 99 transactions while maintaining strong cash generation and low debt levels. The fund capitalizes on Sweden's decentralized management legacy and sees significant European expansion opportunities for Nordic compounders in the vast SME market. |
| Dec 31 2023 | 2023 Q4 | CSU.TO, LUMN | Acquisitions, Capital Allocation, compounders, Decentralization, Nordics, private markets | - | REQ Capital invests in acquisition-driven compounders that systematically acquire smaller private companies at attractive valuations. The Global fund returned 42% in 2023 as portfolio companies completed 260 transactions. The strategy focuses on exceptional capital allocators that reinvest most cash flow at high returns while maintaining decentralized structures that preserve entrepreneurial culture and enable consistent M&A execution. |
| Jul 21 2023 | 2023 Q2 | ADD.ST, ADDT.ST, BEIJ-B.ST, CSU.TO, DPLM-B.ST, HEI, INDU-A.ST, LAGR-B.ST, LIFCO-B.ST, LUMI.TO, MTUM.ST | Acquisitions, Capital Allocation, compounders, Decentralization, global, Nordic, private markets, Quality | - | REQ invests in acquisition-driven compounders that acquire smaller private firms while maintaining decentralized structures to preserve entrepreneurial energy. Both funds delivered strong first-half 2023 returns (Global: 34.6%, Nordic: 37.6%) with portfolio companies completing 126 transactions. The strategy focuses on companies reinvesting 70-80% of cash flow at 15-20% returns through disciplined capital allocation and autonomous business unit operations. |
| Jan 31 2023 | 2022 Q4 | HEI, TDY | Capital Allocation, CashFlow, Compounding, Decentralization, M&A | - | |
| Jul 31 2022 | 2022 Q2 | - | Capital Allocation, Compounding, growth, M&A, ROIC | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIMassive capex cycle linked to AI representing increasing cash flow from hyperscalers. Signs that AI adoption is flatlining with unclear use cases for profitability. Reliance on Magnificent 7 for equity market performance continues with credit markets becoming increasingly sensitive to AI companies. |
Artificial Intelligence Hyperscalers Capex Technology Valuations |
GoldExceptionally strong performance with gold returning 65% for 2025 and silver 148%. Trend has continued into 2026 with gold rising 13.3% and silver 18.9% by end of January. Extreme moves following very strong performance last year. |
Precious Metals Commodities Safe Haven Inflation Hedge | |
CreditCredit spreads remained tight at historic levels with returns mainly generated by carry. Four of the largest credit issuers in 2025 were hyperscalers. Record-tight credit spreads present valuation concerns alongside high equity valuations. |
Credit Spreads Fixed Income Corporate Bonds Yield | |
GeopoliticalPresident Maduro taken from Venezuela, fracturing of Western alliance as Trump looked to acquire Greenland, protests in Iran violently suppressed. Tensions between countries may make cross-border transactions more difficult as countries favor national champions. |
Geopolitics Venezuela Iran Trade Policy International Relations | |
| 2025 Q2 |
CompoundingREQ focuses on acquisition-driven compounders that reinvest 75-80% of cash flow into organic growth and acquisitions at high returns. These companies demonstrate sustained exponential earnings growth through high reinvestment rates, strong returns on invested capital, and long duration of growth opportunities. |
Compounding Reinvestment Capital Allocation Long-term Growth |
AcquisitionsPortfolio companies completed 78 acquisitions in first half 2025, with Nordic companies announcing 65 deals. The strategy focuses on small, private acquisitions of niche businesses that generate incremental returns well above cost of capital. |
Acquisitions M&A Private Companies Niche Integration | |
DecentralizationREQ invests in companies with high-performing decentralized cultures where portfolio companies retain operational independence. This approach preserves entrepreneurial energy while maintaining strict financial requirements and performance accountability. |
Decentralization Autonomy Culture Entrepreneurial Independence | |
QualityThe fund targets highest-quality companies with consistent track records of profitable growth, disciplined capital allocation, strong free cash flow generation, and EBITA margins above 15%. Quality is prioritized over quantity in investment selection. |
Quality Margins Cash Flow Profitability Discipline | |
ResiliencePortfolio companies demonstrated resilience through uncertain macroeconomic conditions, defending margins and continuing acquisition activity. Companies benefit from diversified cash flows across products, industries, and geographies with low debt levels. |
Resilience Diversification Margins Defensive Stability | |
| 2024 Q4 |
AcquisitionsPortfolio companies completed 185 acquisitions in Global Compounders and 146 in Nordic Compounders during 2024. The companies focus on small, frequent acquisitions typically ranging from EUR 1-20 million in sales, with 95% under EUR 50 million. This programmatic M&A strategy allows for trial-and-error approaches without material risk while building acquisition expertise over decades. |
M&A Private Markets Deal Flow Integration Growth |
DecentralizationThe fund emphasizes companies with decentralized structures that grant substantial autonomy to business units while maintaining accountability through financial metrics. This approach preserves entrepreneurial spirit, enables customer proximity, and allows companies to grow big by staying small. The pull integration strategy lets acquired companies determine their own pace of integration. |
Autonomy Entrepreneurship Culture Integration Management | |
IndustrialSignificant focus on industrial companies, particularly through Momentum Group which supplies critical aftermarket components for Swedish industrial machinery. The industrial theme encompasses maintenance, repair, and operations (MRO) products, with over 750,000 SKUs serving fragmented customer bases with high barriers to entry due to technical expertise requirements. |
MRO Components Manufacturing Aftermarket Distribution | |
CompoundingThe core investment philosophy centers on acquisition-driven compounders that consistently reinvest substantial portions of cash flows into small private acquisitions at attractive returns. These companies demonstrate high reinvestment rates (75-80%), attractive returns on capital, and dual engines of organic and acquisitive growth over decades. |
Reinvestment Cash Flow Returns Growth Capital Allocation | |
NordicsStrong geographic focus on Nordic markets through REQ Nordic Compounders fund, which targets Nordic-listed companies pursuing frequent small acquisitions. Portfolio companies are expanding beyond Nordic borders, with 62% of 2024 acquisitions located outside the Nordics compared to 55% in 2023, accessing larger addressable markets. |
Sweden Nordic Regional Expansion Markets | |
| 2024 Q2 |
DecentralizationREQ emphasizes decentralized organizational structures as a core investment pillar, where management delegates responsibility down the organization. This approach enables companies to maintain entrepreneurial agility while scaling, with decision-makers close to customers and lean corporate headquarters. |
Organizational Structure Management Philosophy Entrepreneurship Autonomy Efficiency |
CompoundingThe fund focuses on acquisition-driven compounders that consistently generate high free cash flows and reinvest at attractive returns. These companies demonstrate dual growth engines through organic expansion and acquisitions, creating sustainable long-term value creation. |
Capital Allocation Reinvestment Cash Flow Growth Engines Value Creation | |
Industrial DistributionPortfolio companies operate in B2B markets offering critical products and services across business cycles. Many holdings are involved in industrial distribution, specialty chemicals, and niche manufacturing with strong pricing power and high margins. |
B2B Distribution Specialty Products Pricing Power Industrial | |
SwedenThe letter extensively discusses Sweden's rich legacy of decentralized management and acquisition-driven companies, tracing back to industrial pioneers and influenced by leaders like Jan Wallander and Hans Werthén. Sweden's transparent business environment and trust culture create fertile ground for acquisitions. |
Nordic Industrial Heritage Business Culture Trust Transparency | |
| 2023 Q4 |
AcquisitionsPortfolio companies completed 260 transactions in 2023 versus 249 in 2022, demonstrating continued robust M&A activity. Companies maintain disciplined acquisition approach while expanding geographically outside the Nordics. The acquisition engine serves as a key growth driver alongside organic growth. |
M&A Private Markets Bolt-on Integration Targets |
DecentralizationDecentralized structures enable entrepreneurial independence and customer intimacy while maintaining acquisition pace. Companies avoid forced synergies and integration, instead focusing on preserving entrepreneurial culture. This organizational design is essential for sustaining multiple small private transactions annually. |
Autonomy Entrepreneurial Independence Structure Culture | |
Capital AllocationPortfolio companies reinvest 70-80% of cash flow at 15-20% returns on capital over extended periods. Companies demonstrate exceptional capital allocation skills through disciplined acquisition strategies and self-financed growth. The P/WC metric of 45% ensures self-sustaining business models. |
Reinvestment Returns Cash Flow Discipline Self-financed | |
| 2023 Q2 |
DecentralizationREQ emphasizes acquisition-driven compounders that maintain decentralized structures to preserve entrepreneurial energy. The best performers avoid forced integration and instead give business units high autonomy, treating them as actual owners while sacrificing efficiency gains to maintain vibrant entrepreneurial culture. |
Autonomy Entrepreneurship Business Units Ownership Culture |
QualityREQ defines quality as companies with consistent ability to reinvest significant portions of free cash flow at high returns over extended periods. Their approach differs from typical quality investing by focusing on acquisition-driven compounders that provide access to smaller private entrepreneurs who are profit-oriented. |
Free Cash Flow Returns Capital Allocation Private Markets Compounders |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 12, 2026 | Fund Letters | Oddbjørn Dybvad | BRO | Brown & Brown, Inc. | Financials | Insurance Brokers | Bull | New York Stock Exchange | Acquisitions, Brokerage, cashflow, dividends, Insurance | Login |
| Jan 12, 2026 | Fund Letters | Oddbjørn Dybvad | JDG LN | Judges Scientific plc | Industrials | Scientific & Technical Instruments | Bull | New York Stock Exchange | Acquisitions, Decentralization, dividends, Researchfunding, Scientificinstruments | Login |
| Jan 12, 2026 | Fund Letters | Oddbjørn Dybvad | CSU CN | Constellation Software Inc. | Information Technology | Application Software | Bull | New York Stock Exchange | Automation, Integration, Missioncritical, Pricingpower, Recurringrevenue, Regulation, Switchingcosts, Verticalsoftware | Login |
| Jul 1, 2025 | Fund Letters | REQ Global Compounders | ROKO.ST | Röko AB | Industrials | Industrial Conglomerates | Bull | Nasdaq Stockholm | acquisition-driven, capital allocation, compounder, Decentralized, EBITA margins, European, growth, industrial conglomerate, private equity, Sector-agnostic | Login |
| Dec 1, 2024 | Fund Letters | REQ Global Compounders | VITEC.ST | Vitec Software Group AB | Information Technology | Application Software | Bear | NASDAQ Stockholm | Acquisition prices, capital allocation, Cash culture, Equity raises, Exit decision, High debt levels, Organic investments, Self-funded growth, vertical market software, Weak returns | Login |
| Dec 1, 2024 | Fund Letters | REQ Global Compounders | IDUN.ST | Idun Industrier AB | Industrials | Industrial Conglomerates | Bull | NASDAQ Stockholm | Acquisition pipeline, Acquisition-driven compounder, Balance sheet strengthening, Early stage, EBITA margins, FCF growth, High insider ownership, Management stability, Resilient portfolio, Swedish industrials | Login |
| Dec 1, 2024 | Fund Letters | REQ Global Compounders | AME | Ametek Inc | Industrials | Electrical Components & Equipment | Bull | NYSE | Acquisition-driven compounder, Advanced technology, Aerospace, Cultural continuity, Decentralized operations, energy, healthcare, instruments, Internal promotion, margin expansion, Niche markets, Precision components, specialty materials | Login |
| Dec 1, 2024 | Fund Letters | REQ Global Compounders | DCC.L | DCC plc | Energy | Oil & Gas Storage & Transportation | Bull | LSE | Asset Divestiture, attractive valuation, Business Simplification, cash conversion, Energy Distribution, Extraordinary dividends, LPG, Return on capital, Strategic Refocusing, Underperformance | Login |
| TICKER | COMMENTARY |
|---|---|
| ADDTECH-B.ST | As Niklas Stenberg, CEO of Addtech, once pointed out: "Doing acquisitions is something that many can do, but achieving organic growth is a proof that you do something that develops companies." Addtech's subsidiary, Caldaro, is regarded as the "Rolls-Royce" of industrial joysticks, serving customers in the agriculture, crane, construction, forestry, and maritime industries. Most active acquirers during the year include Atlas Copco (29 acquisitions announced), Lifco (16), Indutrade (13), Addnode (10), and Lagercrantz (10). The four largest Swedish acquisition-driven compounders —Addtech, Indutrade, Lagercrantz, and Lifco —were valued at approximately 16x forward-looking EV/EBITA ten years ago. At the time, these valuations were often perceived as demanding relative to the broader market. However, supported by sustained returns on capital of around 20% and consistent earnings growth, these companies compounded value over the subsequent decade. As a result, they generated an average total shareholder return of approximately 775% over the period with average EBITA growth of 394%, significantly outperforming the Stockholm Index, which delivered a total return of 197% including reinvested dividends. |
| APH | Amphenol — a long-time leader in high-speed interconnect solutions — has seen similarly robust demand as data-center architectures evolve to support higher power densities and faster networking requirements. |
| BERG-B.ST | For example, it is no wonder that, since its IPO 50 years ago, Bergman & Beving, with its spin-offs, continues to grow earnings by 15% annually. The deeply ingrained culture, practices, behaviours, and mindset are what make it unique, not the products or services it sells. During the year, we initiated two new positions and exited one. In March, we participated in Röko's IPO. Since listing, the share price has declined by 19% despite EBITA growing by 11%. In June, we initiated a position in Berner Industrier, which has appreciated by 60% since our entry. We also fully exited our remaining position in Instalco in early March. Over the past two years, we have invested in Idun Industrier, Beijer Alma, Bergman & Beving, and Medcap at points when their long-term potential was not yet fully reflected in market valuations. From Constellation Software's 375× and Heico's 1,100× return under the Mendelson family's ownership, to Sweden's Bergman & Beving (and its spin-offs) compounding over 7,500× —"The Compounders" unveils a profound truth: if you build the right organizational structure and stay the course, time becomes your greatest superpower. |
| BRO | The share price of the US insurance broker Brown & Brown fell 21% in 2025 despite growth in operating cash flow of 24% during the first 9 months. We believe the main reasons for the decline in the share price are the «wait and see» attitude toward the outcome of the largest acquisition in the company's history during the year and weaker-than-normal trading, due to a softening market with downward rate pressure. The acquisition of Accession has a transaction value of 9.8bn USD. To put the Accession transaction into perspective, since 1992, Brown & Brown has completed 611 acquisitions for a total transaction value of approximately 15bn USD. Despite a highly successful track record of acquiring small companies, the market clearly wants to see proof that Brown & Brown can also create value from a significant acquisition like Accession. Acquisitive growth of this scale brings challenges, including the risk that the anticipated benefits from the Accession transaction might not be fully realized. In general, we are skeptical of transformative deals like Accession, at least when combined with an equity issue. On the other hand, as a specialist insurance broker, we also see rationale for building even more scale. Importantly, there is nothing wrong with cash generation at Brown & Brown. The company increased its dividend by 15% in 3Q, marking the 32nd consecutive year of increases. |
| CSU.TO | In this report, we present an in-depth analysis of our insights and perspectives on the topic. Once again, our companies demonstrated the resilience of their dual growth engines: when organic growth slows, acquisitions provide an effective counterbalance. Our positions in Constellation Software (hereafter referred to as CSI), Lumine Group, Topicus, and Roper — together around 20% of the fund — have been a meaningful detractor to performance. In the book, we also dive deep into Constellation Software, where we have been invested for almost a decade. Despite the recent 35% decline in its share price, total returns remain more than 6x since we first invested, equivalent to a 23% CAGR even after the pullback in 2025. Accordingly, we were comfortable with our VMS exposure prior to the drawdown and are even more comfortable today, which is why we have deployed capital opportunistically and have been net buyers of Constellation Software, Topicus, and Lumine throughout this period. Back in September, just three days after CSI hosted its AI seminar, Mark Leonard announced his resignation as President for health reasons, creating short-term uncertainty. Although the timing was abrupt, he will remain on the board, and likely continue to oversee many of his long-standing responsibilities. In practice, his role had already shifted in recent years away from day-to-day operations and toward shaping cultural norms, guiding experimental initiatives, and contributing to the most complex transactions — rather than the operating-level work and routine M&A activity handled by the groups. In our view, the structural impact of this leadership change is limited. CSI has never operated as a traditional top-down organization; its five operating groups function independently within broad frameworks set by headquarters. Each group has its own CEO, culture, and approach to M&A. Daily operations, capital deployment, and acquisition processes continue unchanged. This is the strength of a deeply ingrained decentralized model — a "culture of cultures" refined over decades of trial and error. As a result, the organization does not rely on any single individual. Leonard's successor, Mark Miller, further reinforces this continuity. A more than 25-year veteran of CSI, he joined through the acquisition of Trapeze — the company's very first purchase in 1995 — and most recently served as Chief Operating Officer. Within the Volaris group, the largest of CSI's operating units, he has played a central role in driving a significant portion of its acquisitions. Miller also holds a significant personal equity stake, underscoring his long-term alignment with shareholders. His experience, historical involvement, and alignment send a strong signal of stability. The cultural foundations Leonard helped shape have been passed down through multiple generations of managers, to the point where there is effectively no key-man risk. CSI is, by design, a culture of cultures: each operating group functions as its own "kingdom," with its own methods, incentives, and acquisition philosophies. There is nothing homogeneous about how CSI operates — and this diversity in decision-making is one of its core strengths. It is also a nuance the market often overlooks. Ultimately, CSI was deliberately built so that no single individual — including its founder — is indispensable. That design is what underpins its durability. |
| DPLM.L | A company not mentioned in the book is Diploma. Meeting the former leadership team, Bruce Thompson and Nigel Lingwood, in London in 2014, Diploma was still early in its growth journey, but the essential ingredients were clearly in place. One of our biggest lessons from Diploma is that culture can outlast any single individual. When Johnny Thompson took over from Bruce Thompson in February 2019—an external hire, which is rare among our companies —the compounding did not skip a beat. Since 2014, Diploma has produced a total shareholder return of 10x, or a 21% CAGR. Within this category, Halma and Diploma (together representing roughly 9% of the fund) delivered strong, broad-based performance, supported by multiple businesses benefiting from the build-out of high-performance computing and data center infrastructure. Their exposure spans sensing, photonics, low-voltage cabling, and other mission-critical components that sit directly in AI's physical supply chain. |
| GREEN.ST | A few companies' performance particularly disappointed this year: Green Landscaping, Nibe and NCAB's share prices declined on average by 26%. These companies have been among the fund's smaller positions, in total accounting for 7.7% of the fund. Green Landscaping reported weaker earnings in its core markets, Sweden and Norway, during the year. In Sweden, higher competition for projects impacted earnings. At the same time, Norway had a mild winter that affected its snow-dependent companies in the beginning of the year, as well as specific project-related write-downs. Management has addressed the issues by introducing greater control and cost management across the group, as well as winding down unprofitable units. These actions are expected to positively impact earnings in the coming year. Green Landscaping trades at an EV/EBITA valuation of 8.7 times based on consensus estimates for the coming year, and, over the long term, we remain optimistic about its growth prospects in a highly fragmented European market. Our buy decisions have, on average, appreciated by 40% since we first initiated a position, including the exceptions to the positive returns by Röko and Green Landscaping. |
| HEI | Our portfolio company HEICO has a brilliant way of putting it: "We are not merely an aerospace company, but rather a vehicle that generates strong cash flow through aerospace parts and technology." This sheds light on something important. In the end, excellence may win admiration, awards, and headlines, but it is reinvestment of cash flow at scale that tends to create enduring value. From Constellation Software's 375× and Heico's 1,100× return under the Mendelson family's ownership, to Sweden's Bergman & Beving (and its spin-offs) compounding over 7,500× —"The Compounders" unveils a profound truth: if you build the right organizational structure and stay the course, time becomes your greatest superpower. |
| HLMA.L | Within this category, Halma and Diploma (together representing roughly 9% of the fund) delivered strong, broad-based performance, supported by multiple businesses benefiting from the build-out of high-performance computing and data center infrastructure. Their exposure spans sensing, photonics, low-voltage cabling, and other mission-critical components that sit directly in AI's physical supply chain. |
| IMCD.AS | Judges Scientific and IMCD have both faced challenges during 2025 due to policy uncertainty (university funding for Judges Scientific) and trade-related tariffs (IMCD) under the Trump administration. IMCD is a global leader in the distribution of specialty chemicals. It has experienced macroeconomic pressure due to tariffs over the last year. The current environment is viewed as fundamentally different from past market cycles, characterized by "shock waves" such as the tariff discussions rather than a normal market cycle. The underlying results have been weaker than usual over the last two years. In the first nine months of 2025, operating EBITA decreased 2% compared to the same period of 2024. Since listing in 2014, EPS is up 28% annually, free cash flow per share is up 21% annually and dividend per share is up 27% annually. IMCD maintains a strategy of growing through small bolt-on acquisitions. The company completed six acquisitions and signed two additional transactions in the first nine months of 2025. IMCD's diversification across geographies and end-markets offers resilience. IMCD's business model offers high incremental margins. As volumes return, we expect high operational leverage and strong earnings and cash flow growth. |
| INDU-A.ST | Most active acquirers during the year include Atlas Copco (29 acquisitions announced), Lifco (16), Indutrade (13), Addnode (10), and Lagercrantz (10). Johnny Alvarsson, former CEO of Indutrade, once explained it by saying: "The products should not be bigger than a horse." The four largest Swedish acquisition-driven compounders —Addtech, Indutrade, Lagercrantz, and Lifco —were valued at approximately 16x forward-looking EV/EBITA ten years ago. At the time, these valuations were often perceived as demanding relative to the broader market. However, supported by sustained returns on capital of around 20% and consistent earnings growth, these companies compounded value over the subsequent decade. As a result, they generated an average total shareholder return of approximately 775% over the period with average EBITA growth of 394%, significantly outperforming the Stockholm Index, which delivered a total return of 197% including reinvested dividends. |
| JDG.L | Judges Scientific continues to face headwinds in its end markets. The company supplies scientific instruments to universities in the US, and recent reductions in federal research funding have affected short-term performance. However, we have witnessed similar challenges over the years, often followed by significant rebounds in activity and the share price. We do not believe the current soft environment is structural and remain optimistic about the company's long-term prospects. The Geotek division at Judges Scientific experienced a sharp one-off revenue "air pocket" when a key seismic vessel skipped an expedition, but that vessel has since resumed operations. China-related softness also weighed on demand, though signs point to a normalization rather than a structural reset. In the US, university purchasing has slowed due to uncertainty around future grant allocations — effectively a spending freeze, not actual cuts — creating a temporary vacuum in orders. Taken together, these pressures explain recent performance but do not point to a deterioration in the group's long-term model. Over the past 18 years, Judges has grown revenues at a compound annual rate of 20% (7% organic) and EBIT at 26% (9% organic), while increasing dividends by 22% annually. We continue to have confidence in its operating model and expect to see a recovery in the coming years. Separately — and unrelated to these short-term dynamics — Judges announced a long-planned leadership transition. The founder, David Cicurel, will step down as CEO in February 2026 and assume the role of Non-Executive Chair, ensuring continuity in the group's acquisition processes. He will be succeeded by Tim Prestidge, currently Group Business Development Director, who brings senior experience from Halma and Renishaw. The wider management team has also been strengthened to support ongoing operational execution and the group's disciplined M&A strategy. As David Cicurel, CEO of Judges Scientific, nicely puts it; "you can't measure the return on something that is, in essence, an accounting fiction —particularly when assets have been amortized." |
| LAGR-B.ST | Most active acquirers during the year include Atlas Copco (29 acquisitions announced), Lifco (16), Indutrade (13), Addnode (10), and Lagercrantz (10). Lagercrantz's Elpress is the leading supplier of cable shoes for electrical connections with high double-digit margins. The four largest Swedish acquisition-driven compounders —Addtech, Indutrade, Lagercrantz, and Lifco —were valued at approximately 16x forward-looking EV/EBITA ten years ago. At the time, these valuations were often perceived as demanding relative to the broader market. However, supported by sustained returns on capital of around 20% and consistent earnings growth, these companies compounded value over the subsequent decade. As a result, they generated an average total shareholder return of approximately 775% over the period with average EBITA growth of 394%, significantly outperforming the Stockholm Index, which delivered a total return of 197% including reinvested dividends. |
| LIFCO-B.ST | In the first chapter of the book, we dive into Lifco. In prior roles, we invested in Lifco at its IPO on the 21st of November 2014. Back then, the Systems Solutions segment was far from proven. Fast forward to today, and this segment delivers an EBITA margin of 24% and has grown its earnings by 16x. Back in 2014, despite the company generating healthy cash flow and the CEO, Fredrik Karlsson, having a strong track record, it was somewhat misunderstood due to its "unfocused" approach. Since its IPO, Lifco has delivered a total shareholder return of 19x, equivalent to a 31% CAGR. Most active acquirers during the year include Atlas Copco (29 acquisitions announced), Lifco (16), Indutrade (13), Addnode (10), and Lagercrantz (10). Lifco's Brokk dominates the global market for small, remotely controlled demolition robots, with approximately 70% market share and operating margins exceeding 30%. The four largest Swedish acquisition-driven compounders —Addtech, Indutrade, Lagercrantz, and Lifco —were valued at approximately 16x forward-looking EV/EBITA ten years ago. At the time, these valuations were often perceived as demanding relative to the broader market. However, supported by sustained returns on capital of around 20% and consistent earnings growth, these companies compounded value over the subsequent decade. As a result, they generated an average total shareholder return of approximately 775% over the period with average EBITA growth of 394%, significantly outperforming the Stockholm Index, which delivered a total return of 197% including reinvested dividends. Some businesses are built for the next quarter. Others are built for the next generation. We believe Röko, a Swedish acquirer of niche companies, clearly belongs in the second category. Röko was founded in 2019 by Fredrik Karlsson, the architect behind one of Sweden's most successful compounders, Lifco. With 31 profitable, entrepreneur-led companies across Europe, Röko is building what could become one of the next Nordic champions. We have been long-time shareholders in Lifco since its IPO and have closely followed how Karlsson delivered extraordinary shareholder value through a disciplined, decentralized, and non-bureaucratic model. |
| LMN.TO | Our positions in Constellation Software (hereafter referred to as CSI), Lumine Group, Topicus, and Roper — together around 20% of the fund — have been a meaningful detractor to performance. Accordingly, we were comfortable with our VMS exposure prior to the drawdown and are even more comfortable today, which is why we have deployed capital opportunistically and have been net buyers of Constellation Software, Topicus, and Lumine throughout this period. Lumine focuses on a large hybrid vertical spanning telecom and media and tends to pursue larger transactions, including complex corporate carve-outs where a proven integration playbook is critical. Roughly half of its deals, both as a percentage and by quantum, consist of large corporate carve-outs, where being a preferred buyer —and ultimately success —depends heavily on being a trusted steward of mission-critical assets. As a result of pursuing larger acquisitions, Lumine serves larger customers and has more concentrated exposure. In sharp contrast to consumer markets — where adoption is rapid and switching costs are low — Lumine operates within a distinct VMS category serving large enterprises in telecom and media. These customers are deeply technical, tightly integrated, and extremely risk-averse, running systems where uptime and accuracy matter far more than novelty. Their software sits deep in the back office, inside the "can't-fail" zone, defined by high complexity, stringent compliance requirements, and rigorous audit standards. Even becoming an approved vendor can take up to three years, as clients are cautious about onboarding new providers due to data security and regulatory risks. As a result, winning new logos is structurally challenging in this market. Many of Lumine's offerings fall under what insiders refer to as "carrier-grade" standards — where systems are engineered for extremely high availability. In telecommunications, carrier-grade systems are typically designed to meet or exceed a 99.999% uptime benchmark, commonly known as five-nines availability. This translates to roughly five minutes of allowable downtime per year — a target reflecting expectations for mission-critical network functions. For Lumine and its extensive portfolio of telco and media assets, this level of reliability is only one side of the equation. On the security side, they must meet stringent regulatory requirements and undergo continuous compliance audits. In practice, this means it is extremely difficult for a new vendor to win a logo in these "can't-fail" environments — and once you are in, you tend to stay in, unless you make a major mistake. |
| MOMENT.ST | Additionally, on the back of 29% earnings growth in the first nine months of 2024, the fund's biggest position, Momentum Group, has only increased EBITA by 4% this year due to weaker organic growth, which stronger acquired growth could not fully offset. It has resulted in a negative share price performance of -13% this year. We believe the weaker earnings growth this year is temporary, and expect the company to grow profits in line with its financial targets of 15% over the longer term. We were also early investors in Momentum Group, initiating a position on the day it was spun off from Alligo. |
| NCAB.ST | A few companies' performance particularly disappointed this year: Green Landscaping, Nibe and NCAB's share prices declined on average by 26%. These companies have been among the fund's smaller positions, in total accounting for 7.7% of the fund. Thirdly, NCAB's earnings were negatively impacted at the beginning of the year by a negative gross margin contribution stemming from delayed price compensation, as well as uncertainty around tariffs. However, despite a sluggish European economy, order intake has gained momentum this year, and NCAB has won important deals in both the aerospace and defense sectors. During the third quarter, order intake improved by a strong 21%, of which 14% organic. With a positive book-to-bill and a less negative currency impact, NCAB is expected to grow its earnings in the coming year. |
| NIBE-B.ST | A few companies' performance particularly disappointed this year: Green Landscaping, Nibe and NCAB's share prices declined on average by 26%. These companies have been among the fund's smaller positions, in total accounting for 7.7% of the fund. Secondly, Nibe has been a detractor to the fund during the year. The downturn in the heat pump market has persisted following the initial upcycle post Russia's invasion of Ukraine in 2022, which increased competition and contributed to overcapacity. Despite this backdrop, Nibe's operating earnings increased by nearly 40% during the year, although they remain approximately 30% below the record levels at the beginning of 2023. The combination of higher market expectations and a contraction in valuation multiples weighed negatively on the share price during the year. The recovery has taken considerably longer than expected, but we believe the company is progressing in the right direction, and management's confidence in restoring historical margins remains trustworthy. We are seeing early signs of improvement and believe that, over time, Nibe can grow profitably in a market with favorable long-term fundamentals. |
| ROKO.ST | During March, we made a significant investment as a cornerstone investor in the IPO of Swedish-based acquisition-driven compounder Röko AB. Our three most important considerations when considering new investments are track record, management, and growth prospects. We find Röko delivers strongly across all these aspects. The stock price since the IPO is down 19%, despite delivering a strong EBITA growth of 11% for the first 9 months of 2025. We believe the stock is down due to fewer than expected acquisitions since IPO. Röko is highly disciplined in the prices it pays for acquisitions, and we do not see a lack of deals as a negative in the short run. During the year, Röko announced three acquisitions and since 2019, it has acquired over 30 companies across Europe. Röko's financial position remains strong with interest-bearing net debt to EBITDA of only 0.3x (2.1x including minority debt), which allows for high capacity to grow the business through acquisitions going forward. Despite a 5% upward revision to 2026 EBITA estimates during the year and underlying EBITA growth of 11%, the company's share price has declined. As a result, the valuation has fallen to an even more attractive level, now trading at 20x EV/EBITA on 2026 consensus estimates. Market expectations remain modest, assuming EBITA growth of only about 5% in 2026. In our view, this reflects an overly cautious assessment of both the company's near-term earnings power and the durability of its business model. We believe the business possesses the characteristics required to compound capital at attractive rates, and we see a reasonable likelihood that it can achieve its long-stated ambition of growing intrinsic value by approximately 15% per year over the long run. Firstly, our investment in the Röko IPO in March has so far been a drag on performance. During 2025, we initiated two new positions and exited one. In March, we participated in Röko's IPO. Since listing, the share price has declined by 19% despite EBITA growing by 11%. Our buy decisions have, on average, appreciated by 40% since we first initiated a position, including the exceptions to the positive returns by Röko and Green Landscaping. Some businesses are built for the next quarter. Others are built for the next generation. We believe Röko, a Swedish acquirer of niche companies, clearly belongs in the second category. Röko was founded in 2019 by Fredrik Karlsson, the architect behind one of Sweden's most successful compounders, Lifco. With 31 profitable, entrepreneur-led companies across Europe, Röko is building what could become one of the next Nordic champions. We have been long-time shareholders in Lifco since its IPO and have closely followed how Karlsson delivered extraordinary shareholder value through a disciplined, decentralized, and non-bureaucratic model. Similarly, we have closely followed the development of Röko as a private company since its foundation in 2019. And when they announced an IPO in March 2025, we saw a long-awaited opportunity to invest alongside him again. Over the past decade, we've spent countless hours engaging with and analyzing acquisition-driven compounders. Throughout that journey, we've encountered many newly founded —and eventually listed —companies that looked compelling on paper but ultimately failed to deliver in practice. Whether due to an unsustainable acquisition pace, excessive leverage, poor capital allocation, limited operational expertise, or simply weak leadership, the outcome was often disappointing. Röko, in our view, stands apart from this. Although the company itself has only a six-year operating history, its management team boasts a depth of experience in operational excellence and a proven track record of creating shareholder value. The company has a unique combination of experienced managers and younger, high-performing individuals that few other newly established compounders can match. Succession planning has been planned since the foundation of the company in 2019 with Johan Bladh as deputy CEO. |
| ROP | Our positions in Constellation Software (hereafter referred to as CSI), Lumine Group, Topicus, and Roper — together around 20% of the fund — have been a meaningful detractor to performance. |
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