The Juno Selection Fund, focused on investing in small- and mid-cap family-owned companies, achieved a strong performance in 2014 with a return of 18.6%. The start of this year has been similarly robust with a 15.2% return as of the end of March.

Juno is particularly focussed on a specific niche in the European equity market, family-owned or management-owned companies. In its selection process, Juno emphasizes returns on capital employed and predictable free cash flows. The fund´s analysts and portfolio managers run a very highly concentrated portfolio consisting of companies that the Juno team identifies, analyzes and regularly visits. Often companies remain in the portfolio for a long period of time, with the average holding period exceeding three years.

Juno selects investments based on stability and predictability of annual earnings with high margins. The fund currently consists of a concentrated portfolio of fourteen companies.

In previous periods of steeply rising equity prices in the market, it has been difficult for Juno to keep up with these moves. During these times, our growing, predictable, and often defensive companies tend to be less in fashion. In Q1, Juno was able to keep in line with the increase of the AEX (+15.8%) and the Euromoney Smaller European Companies Index (+17.3%).  

With an average annual return since inception in 2008 of 14.2%, we are satisfied with the fund’s performance. Over the total period, our performance has been strong relative to indices and other funds in our market segment.    

• 2014 return: +18.6%
• Q1 2015 return: +15.2%
• Cumulative five-year return: +107.1%
• Assets under management increased to more than €85 mln

Outlook: positive

For several quarters now, one theme in the equity market has remained a constant positive: extremely low interest rates. This year the European Central Bank commenced a bond purchasing program, causing interest rates to decline even further. In certain countries, the interest rate has even turned negative.

Interest rates have a significant influence on company valuations. Lower interest rates increase the present value of future cash flows for investors. This causes an increase in the prices that investors are prepared to pay for companies, even if the earnings growth does not justify such an increase. In that case, price-to-earnings ratios increase. One of the frequently asked questions is whether share prices have increased too much. Looking at how interest rates have declined, we believe this is not the case. Moreover, profits from European companies benefit from the weak euro and low oil price. The share price increases do not appear excessive in our view, even though they have been steep.

These dynamics also apply to the companies in Juno’s portfolio with one important exception: earnings growth. For years, companies in the Juno Selection Fund have experienced earnings growth of about 15% per annum. This means that the average P/E ratio has hardly changed during the last seven years: the share price increases have almost matched the earnings growth. Juno expects continued positive earnings growth from the companies in the portfolio and is confident about the fund’s future prospects for increased value.

About Juno Investment Partners

Juno Investment Partners is an independent asset manager based in The Hague. Juno invests in concentrated portfolios of high-quality European listed companies, often family-owned businesses or companies in which founders and directors are shareholders. The selection process emphasises predictable earnings growth, a high return on invested capital, low debt levels, strong margins and free cash flow, and a sustainable competitive advantage.

Launched in January 2008, the Juno Selection Fund focuses on small- and mid-cap European companies. The portfolio typically consists of around fifteen companies. Each is analysed intensively, and regular contact is maintained with management. The investment horizon is long, generally well over five years. Juno’s analysts, portfolio managers and employees also invest their personal capital in the JSF.

In addition to the JSF, Juno offers individually managed accounts through separate mandates, using the same investment approach. Juno holds an AIFM licence issued by the Dutch Authority for the Financial Markets (AFM).