Welcome to the JUNO Market Update.
In this video, JUNO CEO + Founder Mike Taylor talks to Chief Operating Officer Anna Sullivan about volatility in markets and within the JUNO funds, and answers questions sent in by investors.
• What has caused the global markets to fall?
• How long before we return to a more stable market?
• Why have the JUNO funds fallen more than competitors recently?
• What is the investment team doing to help returns?
• Investors who joined in the last six to 12 months may log in and see negative returns. What assurances are there?
We have also provided a transcript below:
Thanks for watching.
JUNO Market update February 2022 from JUNO Funds on Vimeo.
Anna Sullivan: Hi everyone, and welcome to our latest market update for the JUNO KiwiSaver Scheme. I’m Anna Sullivan, the Chief Operating Officer at JUNO, and today with me I have JUNO’s CEO and Founder, Mike Taylor. Hello to everyone tuning in today and hi Mike.
Mike Taylor: Hi Anna, hi everyone.
AS: We know there's been a lot of volatility in the markets recently, both here and overseas. So we really wanted to take the opportunity to provide some more information about what's causing the volatility, and also provide some assurances that share markets moving up and down is normal. Here at JUNO, our staff and shareholders are invested in the funds alongside you. So we completely understand the anxiety that you're probably feeling right now. No one likes seeing their investment portfolio value go down, even the most experienced investors. We're obviously here to support you, so please do continue sending in your questions. Our email address is [email protected] or you can telephone us during business hours on 0800 JUNO KS.
Mike, the first question we’ve got today is from Amy. Amy has asked what has caused the global markets to fall? And how long before we return to a more stable market?
MT: Yeah great question there from Amy, thank you for that. Look firstly I just want to re-emphasise what Anna has said is that we've got KiwiSaver accounts here. I'm invested in the JUNO Growth Fund, and we definitely eat our own cooking. So if you're one of those people out there, you're saving for your first home, or you’re really close to retirement, we feel your pain and it's not nice seeing your KiwiSaver account go down.
I think there's five key reasons why the market has fallen. The first reason is that you will be noticing at the moment that we've got inflation out there. And when we've got inflation it means that the Reserve Bank or central banks around the world have got to put up interest rates. And because inflation is proving to be quite stubborn and quite high, it means that those interest rates are going to rise faster than expected. Even as recently as late last year. The second point is that in Europe, we're actually on the brink of war. We've got Putin amassing troops at the Ukraine border and it's looking pretty dangerous. So the markets don't like the uncertainty around that. The third reason is, as we all know, Omicron. So Covid-19 is back again in a different variant. And what that’s doing around the world is disrupting workforces. Companies we're hearing reporting as much as 15% of the workforce is off, often at one time given that they’re sick. Also the shift online… so while that change has been permanent, what we are noticing is that a lot of the purchases that were made are actually one-off and so the markets can picked up on a changing trend with those online purchases. And five, really, the reason I come up with is, it was time. Markets have almost gone up in a straight line with low volatility since we entered the first lockdown in April 2020. And normally markets have corrections quite regularly. So to have gone as long as we have without one was a bit surprising.
The second part of your question, which was when will markets stabilise? Well, they've stabilised a little bit in the last couple of days after the selling, so it obviously gives us a chance to breathe a sigh of relief. But some of those things that I mentioned just before aren't actually resolved. And so we don't know how they're going to play out. So I would say that there's probably going to be a little bit more volatility around for the rest of 2022.
AS: Great, thanks Mike. The next question we have is from Rebecca, who has asked why have the JUNO funds fallen more than competitors recently?
MT: Yep, another good question. So at JUNO, the way we manage our growth fund is we invest in global companies or international. Some other key service providers might stick to domestic stocks, but we prefer to give our members a global investment portfolio. And we focus on growth companies, and many of those growth companies happen to be tech businesses. So after Covid-19, we all probably know that there was a big shift to online. And that meant that a lot of the technology that we've been using was adopted much more rapidly. And so those tech firms really benefited from Covid-19. That saw their stock prices go up a lot. And if you've been a JUNO member for a while, you'll know that the first three years, our performance was really impressive. Now around about sort of the middle to the latter part of 2021, we saw some of those technology companies…the prices start to come under a bit of pressure. And probably in the last sort of three to six months, even some big household names have actually fallen quite a lot. Netflix is a great example of a household name, the stock fell about 50% at one point. Just to give you an example of some of the high growth names that we hold… they’re companies in the JUNO Growth Fund portfolio, and we believe they are still really good businesses, and nothing's changed except the price. So for us, we continue to hold those companies and we still think they’re great businesses on a long-term basis.
To put this in a bit of context, many of you will have heard of the poster child of tech investing in the US investing in the US called Cathie Wood. She runs a fund called the Ark Innovation Fund. Now that fund had a stellar performance after the onset of Covid-19. But actually the fund is down over 50% since its 2021 highs.
AS: Great thanks Mike. We have another question here from Rob. Rob has asked, what is the JUNO investment team doing to help returns?
MT: Another good question. So what are we doing to improve performance? Well when we go through times like this, what we want to do is we really want to use the sell-off to revisit what we think are the best quality growth companies around the world. So we're going to re-hone what I call that core list of companies. And from there we want to see if there's any that are on the list, which we don't currently own, which maybe the sell-off has given us the opportunity to enter these great businesses at a much better price than they have been trading at only a couple of months ago. So an example of that might be with a company that’s on our core watch list, Airbnb. We've been looking at it for a while, and the sell-off has given us a bit of opportunity to take a closer look at that business. Which brings me to another theme that we're looking at is travel. So we think that finally this year, after many false starts, might be the reopening of global travel again, which would give companies like Airbnb and others in the travel sector an opportunity to really shine. I think the way that money flows around in markets, we could see those companies perform particularly well if this thesis plays out.
I also believe that we're sort of entering a bit of an energy crisis at the moment. And whilst we don't invest in fossil fuels at JUNO, there are other opportunities for us to try and find sectors that will benefit from higher energy prices. And lastly, of course, we look at our cash balance within the fund. And we also look at hedging to see whether we should be hedging the market to protect against market falls.
AS: Thanks, Mike. Another question that's come up quite a lot, is for some of our investors who have joined in the last six to 12 months, they might be logging on to their portal to see a negative balance. That can obviously seem a bit alarming and a bit concerning. So what would you say to our newest investors to give them some assurances?
MT: Sure, look, if you joined JUNO in the past or three or four months, you won't have had the benefit of the performance we had in our first three years of operation. So you've joined us and you might have just seen negative returns, and nobody likes to see negative returns in their portfolio. But I guess I'd say, remember the reason why you came to JUNO in the first place, and you probably liked our flat fee or you liked our active style of investment management, you know, and that hasn't changed.
So look, I've been through the September 11 attacks, the GFC, through Covid-19… heaps of market events, and sell-offs are really painful but they're just part of investing. So my advice to anyone out there is just try and learn as much as you can from this market correction, because that's going to help you next time it rolls around. And always remember that every correction is an opportunity to try and find a company that you haven't discovered before and that could be your next great investment.
AS: Great, thank you, Mike, so much for those very useful insights. Thanks everyone for tuning into this market update today. If you've got any further questions about what's happening in markets at the moment or in relation to anything we've spoken about today, please do give us a call, 0800 JUNO KS, or you can email us your queries. The email address again is [email protected] Thanks everyone for joining. We'll see you again soon.
Information correct as at February 2022. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junofunds.co.nz. All content is correct at time of publication date, unless otherwise indicated. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.