As Barbados continues the exercise to restructure its economy, the locally-based investment firm Fortress Fund Managers says it is cautiously optimistic about the future of its investments.
In the company’s 2018 annual report, which were recently made available to investors, Investment Director Roger Cave acknowledged that Barbados, Trinidad and some Eastern Caribbean countries were struggling with deficits and restructuring issues, and that it was difficult to see any major gains from those equity markets in the coming year.
However, Cave expects more positive results in Jamaica and Guyana where the equity markets were fully-priced and where the economies are likely to be strongest.
He also pointed to international developments, saying the company was cautiously optimistic about the future of its investments generally, “as economic uncertainty continues to affect markets both in the Caribbean and internationally”.
However, he said in comparison to the Caribbean, the rest of the world was “varied and mixed in terms of rates of growth, generally lower interest rates, cheaper valuations and better prospects for overall returns going forward”.
“In the short-term, however, a correction in the US stock market or a recession in the US, or both, could result in weakness and declines across the world’s equity markets as stock markets tend to be highly correlated in periods of market weakness,” said Cave.
The reports highlighted the performance of Fortress’ Barbados and US dollar mutual funds.
Speaking specifically to the Caribbean Growth Fund, the company’s primary equity fund, Cave noted that it was a positive year for the Fund, which recorded a 5.5 per cent return in the year ended September 30, 2018.
There was also an increase in the net asset value from $5.7757 in the previous year to $6.0944 per share.
As it relates to the Caribbean High Interest Fund, the investment director noted that it registered a decline of 1.2 per cent for the year ended September 30, 2018. He explained that this rare negative result came against a backdrop of price declines in global bonds as interest rates rose, and following the restructuring of Government of Barbados bonds.
He also revealed that the company had expanded its range of Cayman Islands-domiciled US dollar funds by launching the Fortress Fixed Income Fund over the past year. This brings to eight the company’s internationally invested US dollar funds. This Fixed Income Fund invests in high quality corporate and government bonds in the US and offers investors an efficient way to access this type of conservative investment, he said.
Cave advised, however, that in spite of this and other attempts at diversification, the average gross yield in the Fund’s portfolio of 2.8 per cent, was a certain indicator that returns in the medium-term would continue to be below historic norms.
“These are still not normal times for bond investors, but we do expect better days ahead especially as we are now on the other side of the long-anticipated government credit event in Barbados where the majority of the Fund’s capital is held,” said Cave.
“For global bonds, we expect rates to continue rising slowly in the US and potentially in other regions, too. This will limit returns in the short-term but over time will set the stage for more normal returns going forward,” he assured investors, as he paid tribute to Ken Emery, outgoing director, who retired last year.
Though insisting that there was still room for investors to benefit, he also expressed concern about international political developments including trade policies in the US, Brexit in the UK and tensions in the Middle East.
“We are confident that the Fund is well-positioned for solid returns over the long-term. We do expect increased volatility in the near term as the world adjusts to higher interest rates. We plan to continue to increase our investment exposure in periods of market weakness. We will also continue to manage the Fund with a long-term perspective, which will meet the objectives of pension funds and other patient, long-term investors”, he explained.
Fortress Fund Managers manages more than $650 million across 11 different funds and investment products with regional and global investments.