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 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.