Jupiter European Opportunities reports its annual results for the year ended 31 May 2015. Over the year its net asset value rose by 21.1% and the share price by 19.8%, a superb results when compared to the FTSE World European ex UK Index which rose by 4.7%. There is a dividend of 3.8p. The performance was good enough to trigger a performance fee for he manager, this is already reflected in the returns above. The good performance also helped attract new investors to the fund and c£58m worth of shares were issued during the year.
In October 2014 Jupiter European Opportunities renewed its £75m flexible loan agreement with Scotiabank Europe PLC which will again be extended for the current financial year in a few weeks’ time. Gearing is used strategically by the portfolio manager in order to enhance the Company’s returns when markets are expected to rise. As at 31 May 2015, £35.9m was drawn down under the facility. The proportionate level of gearing had fallen from 10% to % of Total Assets during the year under review.
Alexander Darwall’s manager’s statement says that amongst the biggest positive contributors to performance, were a collection of companies that can be described as ‘alternative financials’. These included Provident Financial (non-standard lending), Leonteq (structured products), Deutsche Börse (stock exchange services) and Grenkeleasing (small ticket leasing). They are beneficiaries of the new regulatory and market challenges faced by the mainstream banks. Capital constraints, higher regulatory costs and antiquated cost bases are some of the problems faced by the mainstream banks. Yet demand for financial services – basic lending, for instance – remains. This represents a considerable opportunity for newer companies which are unencumbered by these legacy burdens.
A second group, Wirecard, Ingenico and Inmarsat are all, in different ways, ‘winners’ from digital opportunities. The first two are leaders in digital payments where there is a great deal of innovation and new solutions including mobile payments. Inmarsat is a world leader in mobile satellite services, providing data and voice connectivity. This company should benefit from increasing maritime connectivity.
Other companies that contributed positively to performance were global winners: Fresenius (healthcare including dialysis), Novo Nordisk (diabetes treatment), Reed Elsevier (publisher and information provider) and Luxottica (manufacturer and retailer of eyewear). These businesses were tested by tougher conditions in emerging markets, notably China and Brazil, and yet they flourished. This contrasts with the experience of companies in other sectors such as luxury goods and pharmaceuticals operating in China, where conditions became much more challenging.
On the negative side, the biggest single detractor to performance was Gemalto, a leader in the provision of security software and systems to manage data and secure transactions. They sold this position as the technology threats to this business are hard to predict with certainty. Another disappointing performer was Edenred, the vouchers business. A much tougher market in Brazil, its largest market, has stymied near term growth. They have also sold this position partly because the recent change in management is likely to lead to some hesitancy in executing the strategy.
JEO : Jupiter European Opportunities manager gets well deserved performance fee