Despite a hike in interest rates in the United States (US), mounting global trade tensions, and economic stress in some Caribbean countries, Fortress Fund Managers recorded a rise in investments so far this year.
However, the Barbados-based investment manager has warned local investors to save extra for retirement because much of the nation’s debt is tied up in the National Insurance Scheme (NIS).
According to its quarterly report for June 2018, which focussed on the Caribbean Growth Fund, the Caribbean High Interest Fund and the Caribbean Pension Fund, Fortress was “still in positive territory when compared to the same period in 2017”.
The report also addressed Government’s bond restructuring announcement in June that it would shrink the public debt burden by correspondingly reducing the value of investors’ bond holdings. Noting that Fortress was “encouraged by the open and clear approach being taken by the Government so far”, the report reminded investors that its funds had little or no exposure to Barbados Government bonds in recent years because the risks were too high.
Net assets of the Caribbean Growth Fund were $460 million at June 30, up from $440 million this time last year. While this fund had recent gains in Jamaica, fiscal stress in Barbados and Trinidad meant it ended the quarter with mixed results. The fund was also affected by rising US interest rates.
The Caribbean High Interest Fund was similarly affected by the interest rate rise in the US, but with minimal losses for the quarter, this did not have an overall negative effect on the fund. The net asset value of the fund’s accumulation share finished June 30 at $1.9571, while the distribution share finished at $0.9946. Net assets were $133 million, up from $125 million this time last year. The report projects that the rising rates will continue to increase expected returns in the future.
The three classes of shares in the Caribbean Pension Fund are up by 0.9 per cent to 4.7 per cent over the past year. The report assured investors that Barbados’ debt restructuring programme would not adversely affect this fund, but re-emphasised the need for investors to save for retirement, warning that much of the country’s debt is held by the NIS.
“Each of us is either receiving a pension from the NIS or hopes to at some point in the future,” the report noted. “To the extent that value is extracted from the NIS during the bond restructuring exercise to reduce Government’s debt burden, one of two things will need to happen: 1) the burden on future taxpayers to fund current NIS promises will rise; or 2) the NIS promises will need to be reduced.
“Unfortunately, there is not a happy way around this one. Today’s stresses mean NIS will almost certainly have a harder time keeping its current promises and that’s something we should all bear in mind in planning for the future,” the report cautioned.