Despite reporting overall positive returns for the quarter ending June 30, 2017, Fortress Fund Managers says the recent increase in taxes by the Freundel Stuart administration has cast some doubt over the future performance of its Caribbean Growth Fund.
In its June 2017 quarterly report released to investors recently, the leading mutual fund manager said it recorded positive returns in its funds up to the end of that month.
It outlined returns for three of its funds – the Caribbean Growth Fund, the Caribbean High Interest Fund, and the Caribbean Pension Fund. The returns were led by a strong performance in holdings in the Fortress Global Funds, a suite of funds which generate earnings from global markets.
However, the company said “the outlook for share markets in Barbados and Trinidad was uncertain”.
“This is partly because trading across regional stock markets had been affected by a lack of currency to settle trades across boarders within the region, and partly because corporate earnings were likely to come under pressure from tax increases,” it told investors.
There have been reports that Trinidad and Tobago has been experiencing foreign exchange woes.
Meanwhile, in Barbados, Minister of Finance Chris Sinckler announced a 400 per cent increase in the National Social Responsibility Levy (NSRL), from two per cent to ten per cent.
He also announced an increase in the excise tax on fuels and a new two per cent tax on all foreign exchange transactions in his May 30 Budget, which have since led to widespread public outcry and protest marches.
The Caribbean Growth Fund, which is designed to achieve capital growth over the long term, gained 2.1 per cent during the quarter and was therefore up 12.9 per cent over the past year. The net asset value per share stood at $5.5622, with net assets of the fund at $440 million. That was up from $375 million at June 30, 2016. The growth fund’s annual compound rate of return since its inception in 1996 is now 8.7 per cent per year.
The High Interest Fund, which seeks income and capital preservation over the medium term, returned 0.6 per cent for the quarter and is up 3.3 per cent over the past year. Its annual compound rate of return since inception stands at 4.5 per cent per year.
The report also noted in its commentary about the High Interest Fund that the Caribbean government debt situation had worsened during the quarter, with credit rating downgrades for the Trinidad government, the Barbados government’s announcement of new and increased taxes, and a selective restructuring of debt held by the National Insurance Scheme and the Central Bank of Barbados.
The company said its return on the Caribbean Pension Fund was up 4.2 per cent to reach 10.9 per cent over the past year, with equity returns remaining strong.
Looking forward, Fortress emphasized that it would continue to apply its “consistent, disciplined process to investment here in the region and around the world, focusing the funds’ portfolios where the risks are appropriate and potential rewards are best”.