Juno Selection Fund optimistic in spite of negative returns in 2018
Wassenaar – 28 January 2019 – The Juno Selection Fund returned -5.4% for the year 2018, mainly as a result of the negative sentiment in the last quarter when the return was strongly in the red.
Despite the negative return for the full year, Juno managed to stay ahead of the various indices in relative terms. The index of European small and medium-sized companies, the EMIX Smaller European Companies Index, decreased by -14.5% for the year. The Dutch AEX index (dividends reinvested) also lost more, with a decrease of -7.9%.
The past year was a story of opposites. Late August, the Juno Selection Fund achieved the highest net asset value in its history and the year appeared to be headed towards an attractive return. Moreover, the fund closed as per October 1st following strong inflow of clients’ follow-on investments. In hindsight, this turned out to be unfortunate timing, as stock markets showed a very strong correction in the three months that followed.
Among other things, this was a result of an expected slow-down in China’s economic growth following the trade war and the direct effect thereof on the earnings of businesses across Europe and the US. Furthermore, the ongoing uncertainty regarding the Brexit and the budgetary discussions between Italy and the EU did not offer any solace.
There have been several negative impulses lately, but in the end, lower earnings expectations are the main reason for such a correction. According to Frans Jurgens, portfolio manager and co-founder of the fund, however, this is exactly where the Juno Selection Fund’s strength lies: “We we select our companies based on their stable earnings growth, which is independent of economic cycles. We are in close contact with our portfolio companies and our recent discussions with them have given us a high level of trust in their continued ability to show above-average earnings growth. This earnings growth is after all the main engine behind future price appreciation.”
His colleague portfolio manager and co-founder Lennart Smits is therefore optimistic: “Not only are we confident in the earnings growth over 2018 and 2019, but also looking further ahead, we remain positive about the earnings expectations of the fifteen (family-owned) companies in the Juno Selection Fund. In the past, we have always seen that continued positive earnings growth translates into higher share prices over time. We therefore remain fully confident in the recovery of share prices and subsequent further share price appreciation of the companies in our portfolio.”
The portfolio of the fund currently has 15 participations of which Grenke, Simcorp and Technogym are the 3 largest.
About Juno Investment Partners and the Juno Selection Fund
Juno invests in unique European small- and mid-cap companies. For the most part, these are family-owned companies, or companies where a family or management is also a shareholder. Companies that can continue to achieve predictable and stable profit growth, year after year, are considered for investment. During this selection process, the emphasis lies on return on invested capital and free cash flows that are highly predictable in nature. Our analysts / asset managers put together a highly concentrated portfolio of companies that they themselves have identified, analysed and visit frequently. These companies often remain in the portfolio for a long period of time (on average more than three years). With this investment style, Juno has achieved consistent superior investment results for its clients during the past years. The Juno Selection Fund is managed by Juno Investment Partners. Juno Investment Partners has an AFM licence for discretionary asset management for direct mandates.
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