Fortress Fund forging on

by Marlon Madden

Despite a dramatic rise in unemployment last year, Barbadians generally continued to steadily pump funds in various investment instruments, one leading fund manager is reporting.

At the same time, officials of Fortress Fund Managers said they expected pension schemes to be slightly impacted as a result of unemployment and layoffs due to the ongoing COVID-19 pandemic.

The issues were discussed recently as the company held its quarterly “lunch and learn” media briefing online.

Roger Cave, Investment Director of Fortress Fund Managers told reporters that while the company has seen some “ups and downs” in the markets over the years as it relates to investment, 2020 turned out to be a positive year despite the global health pandemic.

“Certainly, in the 2008 financial crisis we saw a lot of investors reduce their holdings. This time it has been quite different. More people added to their accounts. So it has been a great thing and they have been greatly rewarded for it as well,” said Cave.

Fortress, which is in its 25th year of operation, has in excess of 10, 000 investors, which consists of individuals and companies, and manages approximately $700 million across 11 different funds with regional and global investments.

Cave said: “Many more people added to their accounts and continued their monthly savings plans and very few have redeemed despite a significant fall in the funds back in March. So it has been very encouraging. The response has been better in this current crisis”.

Cave said he believed Fortress’ constant communication and encouragement to its investors to take a long-term view may have contributed to the higher levels of investment despite the pandemic.

Meanwhile, Peter Arender, Chief Investment Officer of Fortress Advisory & Investment Services, told reporters that individuals and businesses were still looking for investment options that could give them favourable returns.

“When you are staring at a zero interest rate on deposits somewhere it sparks some interest. So it is not happening in isolation. It is happening partly because of lower rates on alternatives,” said Arender.

“It is the most gratifying thing in our business to watch steady behaviour at work, to be able to unplug your actions from your emotions is one of the most constructive things you can do as an investor. That is why the monthly savings is just so powerful because it happens automatically.

“Aside from that, to be able to do something steadily in spite of what is going on around you that is a super valuable thing to do, and we saw that in spades through 2020. Not everywhere obviously, but we saw a lot of it,” said Arender.

The latest Central Bank report also showed that deposits in commercial banks rose by 5.4 per cent during 2020, reflecting increases in both domestic-and foreign-currency deposits.

Deposits of individuals, non-financial private corporations, state-owned enterprises, non-deposit-taking financial institutions and
depository corporations were the drivers of growth in domestic-currency deposits at commercial banks.

The growth in foreign-currency deposits was primarily due to activities of non-financial private sector, the Central Bank report for 2020 said.

In relation to the impact of the pandemic on private pension schemes, Cave said given the significant increase in unemployment and layoffs last year, he expected there would be a negligible falloff.

“There would be some impact on pension plans, but at the margin it is a very small impact and this is largely expected to be temporary,” said Cave.

He said more broadly, it was about time that government addressed challenges facing pension plans in Barbados.

“The tax problem on pensions is not an encouraging for new companies to start that. We do have the issue of the double taxation on contributions to pension schemes, so many companies are not looking to start new plans with that tax disincentive that is still not addressed,” he said.

“The other challenge for pensions locally is that we have so few listed companies and very few investment opportunities. You have a situations where being able to invest those savings for the long-term benefit of people retiring 10, 20, 30 or 40 years into the future is also a structural challenge that we have. So there are some headwinds that need to be addressed in the pension arena,” said Cave.