Eye on recovery . . . Fortress Fund working to ensure clients benefit from expected improvements in financial markets

A leading fund manager has reminded investors that it continues working to ensure that its clients benefit from the recovery in financial markets that will inevitably come after the unpredictability brought about by the COVID-19 pandemic.

This from Fortress Fund Managers in its March 2020 quarterly report, which was released recently to investors. Describing the last few months as “extraordinary for all of us”, Fortress reminded clients that now was the time for “steady behaviour”.

To this end, Fortress added to its funds’ investments in stocks and bonds during the weakness in March, noting that “the portfolios are not substantially different today from what they were three months ago. They remain positioned as always in well-valued, high-quality securities where the return potential from real underlying profitability outweighs the likely risks. And they are broadly diversified.”

The March quarterly report focused in particular on three of Fortress’ funds: the flagship Caribbean Growth Fund, the Caribbean High Interest Fund which focuses on income and capital preservation, and the Caribbean Pension Fund.

Caribbean and global investments experience sharp declines

The Caribbean Growth Fund declined 20.5 per cent in the first quarter and is down 13.6 per cent over the past year. Caribbean and global investments experienced sharp declines as economic shutdowns spread around the world. “The natural question after such a jarring move is: ‘What’s next?’ In the short-term, no one knows. But in the long-term, where historical trends matter more than daily headlines, we can know that the investment world will one day resume its typical upward path,” the report said.

It went on to add that lower prices suggested higher future returns. The net asset value (NAV) per share finished March 27 at $5.1915. Net assets of the Fund were $427 million, down from S471 million this time last year. The Fund’s annual compound rate of return since inception in 1996 is 7.3 per cent per year. Its portfolio remains well diversified by security, geography and currency.

Caribbean High Interest Fund declines 3.4 per cent

With regard to the Caribbean High Interest Fund, it declined 3.4 per cent in the first quarter and is down 0.7 per cent over the past year. “The turmoil in the market pressured bond prices, but the healing seems to have begun,” the report noted. The Fund’s gross yield is now over 4 per cent.

The net asset value (NAV) of the Fund’s Accumulation share finished at $1.9447, while the Distribution share finished at $0.9739. Net assets of the Fund were $128 million, down from $136 million this time last year. The Fund’s annual compound rate of return since inception in 2002 is 3.8 per cent per year. Its portfolio remains as diversified as possible across various issuers, industries, geographies and terms to maturity.

The report went on to state that “as most bond prices in the portfolio declined, the Fund experienced a rare period of negative return. The portfolio is a mix of Barbados dollar bonds and global issues held both directly and via the Fortress Fixed Income Fund and specialist managers.

“As global markets came under pressure, Barbados was also affected. With the Government of Barbados (GOB) currently rated “B-” the system here is far from risk-free. We therefore expect that the value of all bonds in Barbados declined at least somewhat during the turmoil of the quarter, even if market prices were not always observable.”

Caribbean Pension Fund: lower asset prices today mean monthly savings go further

The three classes of shares that make up the Caribbean Pension Fund declined between 6.0 per cent and 16.6 per cent in the first quarter and were down between 2.8 per cent and 10.2 per cent over the past year. “The drop in financial markets from the coronavirus led to weakness in both stocks and bonds,” the report stated.

It went on to add that “periods of negative returns are never pleasant, but they are a part of the long-term project of saving and investing for the future. Over the course of your working life, there will likely be more than a few such times. Wealth still accumulates over the years and decades, though, by owning long-term assets: shares of businesses whose profits and dividends are on balance growing and improving each year, and creditworthy bonds that pay steady interest.”

The report on the Caribbean Pension Fund concluded by saying that “lower asset prices today mean your monthly savings are going further. As your pension contributions are put to work at lower prices you get more for your money. Steady savers benefit from times like these that occur during their working lives.”

Fortress Fund Managers manages approximately $700 million across 11 different funds with regional and global investments. (PR)