Diversification key to future investment

With very few options available for high returns on investments, one of Barbados’ leading fund managers is highlighting the importance of having a well-diversified portfolio over a long-term.

At the same time, Chief Investment Officer of Fortress Fund Managers Peter Arender said it was critical to take on a level of measured risk despite the ongoing challenging economic environment.

Arender shared the advice during a virtual lunch and learn session on Tuesday with members of the media, where he reported “reasonably positive” returns for the company’s investment portfolios over the past two months.

He said following a 7.5 per cent gain in the Fortress Caribbean Growth Fund and a 4.2 per cent increase in the Caribbean High Interest Fund in the second quarter, gains have continued into the third quarter.

“We are up another three per cent in the Caribbean Growth Fund since June 30, which puts the fund down about 3 or 4 per cent since this time last year,” said Arender.

“Not a great result in terms of absolute return, but we think in the face of what is going on in the world and when you think about what is going to be absorbed in that portfolio, actually we are reasonably gratified with that holding of value,” he said.

He added that the Caribbean High Interest Fund was up another one per cent since June 30, putting it up approximately three per cent since this time last year.

“Both of those funds are diversified as they can be globally by issuer,” he said, while pointing out that there has been a lot of movement in financial assets over the last few months.

“So diversification has really mattered, and the Caribbean Growth Fund, which has invested more than two-thirds outside of the Caribbean, that aspect of diversification has really helped out investors there,” he said.

Pointing to the importance of taking on risks, the investment expert explained that in order to do that now the focus had to be on longer-term investments.

“No risk today equals no return. It certainly doesn’t imply therefore that you take risks randomly. What it means is that we need to be very sensible and selective in the kinds of risks we take,” said Arender.

“So now more than ever for individual investors, we would reiterate the idea that it is important to think about how much money do you need to have on hand for cash emergencies and certainly keep that liquid for the short-term. Then for long-term, think money that is there for five years, ten years, 20 years or more, a well-diversified portfolio of assets where risk is being taken sensibly. That is really where we are going to find returns in the future years,” he explained.

He said over the past few months Fortress managed to welcome some new investors as well as a combination of investors looking to get cash from their investments and many investors adding to their investments.

Citing the shrinking of the equity market in Barbados over the years, Arender said this highlighted the importance for investors in Barbados to achieve as much diversification as they can with their investments.

“Getting as much diversification in your portfolio as you can among well-valued asset really is the magic formula for long-term success in investing.

“We are big believers that while everybody recognises there are certainly limits to the amount of foreign exchange available in Barbados, structurally and consistently some small percentage of that should be allocated to long-term investment abroad, because that accrues to the benefit of all Barbadians,” Arender added.

He said while it was difficult to predict changes in investor behaviour for the coming months, it may be that some persons in Barbados who might otherwise been engaging in long-term saving and investing might not be in a position to, “and that is natural”.

He also pointed out that should interest rates remain low, those with excess capital to invest might be encouraged to look more at long-term alternatives other than keeping their money in the bank.

Arender hinted that Fortress could be introducing some new products soon, suggesting that once cleared with the regulators more information would be forthcoming.

“We are not at liberty to talk about it just yet, but we have got a couple of things we will be prepared to share with folks in the coming weeks. There have been some other areas that are interesting for us to explore and some things we would like to make available to our investors,” he said. (MM)