Investment firm Fortress Fund Managers says it remains hopeful that Government will remove the “double taxation” on retirement savings.
The company expressed this hope as it reported “consistently strong results” for the first quarter of 2019.
The March quarterly report focused on three funds – the flagship Caribbean Growth Fund, the Caribbean High Interest Fund which focuses on income and capital preservation, and the Caribbean Pension Fund.
While Caribbean stocks saw mixed returns during the quarter with Jamaica and Trinidad strengthening slightly as shares in Barbados weakened, global equities rallied to start the year, helped by a more friendly interest rate and global trade backdrop than had obtained through most of 2018.
“The fund benefited from its substantial investments in the US, international and emerging markets equities via the Fortress Global Funds, with solid returns in these areas driving the fund’s overall return for the quarter,” the report said.
With regard to Barbados, the report noted that the government’s “fiscal reforms and the aftermath of the domestic bond restructuring” are likely to keep a lid on economic growth in the short-term.
However, Fortress said it remains hopeful that the steps taken would yield better prospects in the long-term to the benefit of businesses in the island.
Fortress said despite its expressed wish to see some changes on the taxation front, the recent Barbados budget did not announce a correction to the current double taxation on pensions.
“We remain hopeful that one will be coming soon because the machinery of pensions everywhere is predicated on at least minimal tax efficiency and/or outright incentives,” said the company, whose Pension Fund concentrates on capital growth, income and security over the long-term.
It was in June 2015 that the then Freundel Stuart administration removed tax allowances for retirement savings for Barbadians, which had resulted in an outcry from a number of companies managing pension plans.
While the Mia Mottley led administration did not announce a change to this arrangement, Government recently lowered the corporation tax rate to between one and 5.5 per cent, while adjusting the personal income tax rates and introducing a compensatory income credit for individuals in a certain income range.
In its report, Fortress also reminded investors that it seeks and continues to find attractively-valued areas of global and Caribbean stock markets in which to invest at prices that imply substantial future returns.
“There will always be ups and downs but we are cautiously optimistic on the outlook from here,” the report concluded.
The Caribbean Growth Fund gained 5.7 per cent in the first quarter and was up 1.1 per cent over the past year as global stocks recovered strongly from the weakness of last year.
The Net Asset Value (NAV), which is the total value of the securities the fund owns divided by the number of fund shares outstanding, finished March 29 at $6.0082. The fund’s annual compound rate of return since its inception in 1996 has increased to 8.4 per cent per year.
The Caribbean High Interest Fund achieved a return of 1.5 per cent for the first quarter though it is down 0.5 per cent over the past year. Its annual compound rate of return since inception in 2002 is now 4.1 per cent per year.
The NAV of the fund’s accumulation share finished March 29 at $1.9575, while the distribution share finished at $0.9984. Net assets of the Fund were $136 million, up from $131 million this time last year.
Fortress, which manages more than $650 million across 11 different funds with regional and global investments, said it is hopeful that the recent quieting of international trade frictions will allow global economic growth to resume its prior upward trend after last year’s interruption.
“If this happens, interest rate increases may eventually re-enter the picture. The average term to maturity of the fund’s portfolio remains relatively short to limit its sensitivity to interest rate changes,” the company said in its statement on Friday.
With the fund having had only “minimal exposure” to the Government of Barbados bonds prior to the default, there is consequently the potential to add exposure selectively now that the risk/reward proposition has shifted, it noted.
The three classes of shares under the umbrella of the Caribbean Pension Fund rose between 1.6 per cent and 5.1 per cent in the first quarter of the year. This constitutes a return of between -0.6 per cent and 1.6 per cent over the past year. The fund manager reiterated: “Proper portfolio diversification is an essential ingredient especially for very long-term pension investing, and this diversification is a significant strength of the Fortress funds.”