Hope for improved investment performance – Sagicor

Despite a worrying trend of low economic growth, coupled with high unemployment and high inflation in Barbados and the rest of the region, officials of insurance powerhouse Sagicor Financial Corporation are reporting cautious optimism about investment returns for the remainder of this year.

This view was shared on Wednesday as officials reported continued growth in the Sagicor Bonds Fund and Sagicor Equity Fund, during an online media briefing.

Nicholas Neckles, Portfolio Manager at Sagicor Asset Management Inc. said the robust economic growth projected regionally and globally this year “bodes well for equity type investments”, adding that as economies improved, corporate earnings were also expected to improve.

However, declaring that “we remain cautiously optimistic” for the remainder of 2021, Neckles explained that in the medium to short-term Sagicor expected uncertainty in the markets to persist given the prevalence of the Delta variant of the coronavirus, geopolitical risks, disruptions and other issues related to supply chains and production shortages, as well as vaccine distribution bias.

“Fixed income could be weighed down by interest rate increases, driven by monetary policy to influence the rate of inflation,” he said.

“Regionally, stagflation is a worry. It is a real threat [along with] external market shocks. Stagflation is a situation where you see high unemployment, high inflation and a low economic growth situation,” he said.

But while expressing confidence in the local market, Neckles pointed to Barbados’ strong international reserves position of just over $2.9 billion or about eight months of import cover, adding that “we don’t foresee a situation where there will be a further restructuring to Government of Barbados debt”.

Additionally, he pointed out that “major central bank monetary policy is expected to remain accommodative through 2022. Huge global infrastructural spend is expected to drive the next generation of innovation – green technology, financial technology and health technology”.

Reporting on the 2020 performance of the Sagicor Bonds Fund, which he said was more suitable for those with a low tolerance for risk, Neckles noted that this investment option remained resilient despite the pandemic and associated external shocks.

The Sagicor Bonds Fund saw a return of 5.1 per cent last year, with net asset increasing by some $20.8 million. Net asset value stood at $28.60 at the end of December last year, up from $27.20 a year prior.

Total value of this fund was $456 million as at December 31, 2020, with total investment in bonds at 66 per cent, which are predominantly government bonds. About 57 per cent represents regional bond investments while seven per cent were allocated internationally.

Neckles said the largest regional exposures were Aruba, Barbados, Trinidad and Tobago and Bermuda.

“So approximately $258 million allocated to regional debt and approximately $31 million was allocated to international bonds. Local and regional debt valuation increased by two per cent while international valuation increased by 16.7 per cent, relative to 2019,” he reported.

In relation to the Sagicor Equity Fund, Neckles said it was suited for those with a higher tolerance for risk and a longer investment time horizon.

At the end of December last year, the total value of this fund was $619.1 million, with majority investment in equity (79 per cent), of which just over 58 per cent is invested internationally and the remaining 20 per cent in local and regional equities.

The Sagicor Equity Fund witnessed a return of 1.9 per cent for the year, while net assets declined by some $3.9 million. The net asset value increased to $65.9 as at the end of December last year, up from $64.7 a year prior.

The Sagicor Equity Fund is up some 10 per cent so far this year.

Neckles said despite the uncertain investment climate due to the economic fallout from the pandemic, the momentum and solid performance of this fund continued.

While company officials said they tried to diversify the portfolio where possible in an effort to mitigate against unexpected risks, they expressed concern that the investment options locally continued to be restrained. (MM)