Juno Selection Fund: Q1 2018
Juno Selection Fund achieves Q1 return of close to 10%
- Underlying companies continue to perform well
- Total return since inception* of +257 %; well ahead of market indices and industry peers
- No rapid increase in interest rates expected, despite market turmoil.
Wassenaar – May 2018 – The Juno Selection Fund, specialized in investments in European small and medium-sized (family-owned) companies, ended the first quarter of 2018 with an excellent result and achieved a +9.7% return. The Euromoney Smaller Company Index decreased by -3.1%, while the Dutch AEX index fell by -2.4%.
The Juno Selection Fund celebrated its 10th anniversary on January 11 and achieved an CAGR of 13.3% per annum during that period. Due to the strong inflow of capital, as well as the good performance, assets under management have increased sharply over the past years. That is why the fund has been closed to new participants since June 2017.
Juno has a consistent investment strategy that adheres to a strict selection policy resulting in a highly concentrated portfolio of strongly managed predominantly family-owned companies. An important factor that is considered when deciding if a company can be part of the Juno portfolio is whether the company can grow its profits year on year in a reasonably predictable fashion. In addition, consistent application of the valuation method has also been indispensable for the performance. Juno aims for the underlying companies to increase aggregate earnings within a bandwidth of 10-15% per annum.
• Q1 2018 Performance: +9.7%
• Performance over past 5 years: 114%
• 10-year CAGR since inception: 13,3%
• AUM of the fund: circa 300 million euros**
In the past quarter, Juno added two new companies to the portfolio. In February Juno took position in Technogym, an Italian producer of premium fitness equipment. The company went public in 2016 whereby founder and CEO Nerio Alessandri held on to his shares and still owns a 51.7% stake in the company. The fitness equipment market is growing rapidly and additionally the company is expanding its market share in the United States.
Another new name is Paradox Interactive, developer and publisher of computer games. The Swedish company, founded in 1999, has been successful as a developer of strategy games with a historical perspective for use on the PC. Founder Frederik Wester still owns 33.4% of the shares. The games are known for their depth and challenge and are very popular within a niche of the gaming public. Well-known titles are, for example, Europa Universalis IV, where players take command of a country in early modern times and Hearts of Iron IV, where one can do the same in the time of the Second World War. Both games have sold in excess of a million copies.
“Continually low interest rates combined with our prudent expectations for future earnings growth keep us optimistic for both the short and longer term and we look forward to the next decade with great confidence.”
Outlook
Frans Jurgens, director and co-founder of Juno: “Despite periodic attention to rising interest rates, we currently see very little of it. The interest rates on government bonds remain around 0.5%. It is clear that interest rates will normalize over time. However, we believe that the current low levels can be sustained for a long time, despite initial signs of tightening of the labor market, often a good indication of rising inflation.”
Lennart Smits, director and co-founder of Juno: “Continually low interest rates combined with our prudent expectations for future earnings growth keep us optimistic for both the short and longer term and we look forward to the next decade with great confidence.”
The five largest portfolio companies in the Juno Selection Fund are* the following: SimCorp, Grenke, Sartorius, Brembo and Stratec.
* As per March 30, 2018
** In total, Juno Investment Partners manages approximately 450 million euros in this strategy, spread over the Juno Selection Fund and through direct mandates from institutional clients.
About Juno Investment Partners
Juno Investment Partners was established in 2007 as a fully independent fund manager and has an AIFM license (as referred to in Section 2:65 of the Wft), issued by the Dutch regulator AFM. Juno specializes in the selection of exceptional listed (family owned) companies in Europe. Companies that are able to achieve predictable and stable earnings growth year after year are considered for investment. The selection process focuses on the return on invested capital, a low debt ratio and free cash flows of a highly predictable nature. The analysts/portfolio managers compile a highly concentrated portfolio of approximately fifteen companies that they identify, analyze and visit regularly. Selected companies remain in the portfolio for a longer time period (usually more than five years). All analysts/portfolio managers have themselves invested in the Juno funds.
Juno offers three products: The Juno Selection Fund, which focuses on the selection of smaller and medium-sized listed companies, the Juno Continuation Fund for medium-sized companies and individual asset management using the same investment style, for larger clients through managed segregated accounts.
– The Juno Selection Fund was launched in 2008. This mutual fund invests in distinctive European small and medium-sized companies with an initial market capitalization of €250 million to €4 billion. In recent years, this investment style has resulted in above average investment returns for participants in the Juno Selection Fund. This fund has been hard closed for further (follow on) subscriptions since 2018.
– The same investment strategy is applied in the Juno Continuation Fund, which was launched on February 1, 2020. This fund focuses on unique, medium-sized European companies with a market value between €4 billion and €20 billion at the time of initial purchase. As is the case with the Selection Fund, the Continuation Fund also has a strong preference for investments in businesses that are family owned, or companies in which a family or management itself is also a shareholder.
