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Fortress shows solid gains despite market weakness

by Barbados Today Traffic
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Fortress Fund Managers (FFM) recorded mostly solid gains across its funds in the first quarter of 2022 despite weakness in global markets.

Fortress shared this news with investors in its March 2022 Quarterly Report. It highlighted Fortress’ three Barbados dollar funds  – the Caribbean Growth Fund, the Caribbean High Interest Fund, and the Caribbean Pension Fund.

The report’s summary noted that after a strong 2021, the new year started with volatility in financial markets in the form of higher inflation, rising interest rates and the effects of war in Ukraine. Fortress’ funds, however, were able to avoid much of the fallout and, mostly, held their own.

“Global stocks and bonds fell, and we naturally felt these headwinds. Thankfully, though, the weakness in stock markets has been centred in the kinds of technology shares we’ve largely avoided due to their high valuations. Prices of the steadily profitable, growing, reasonably valued shares where we invest held their ground well during the quarter, and some posted solid gains amidst the general market weakness,” the report explained.

The Caribbean Growth Fund gained 3.6 per cent in the first quarter and was up 16.5 per cent over the past year. While stocks around the world weakened, the Fund’s global and Caribbean holdings outperformed, especially in Guyana which contributed strong returns.

Globally, equities fell as high inflation readings, less supportive central banks, and increased geopolitical risks weighed on sentiment.

“Inflation headwinds intensified in January and initially sparked a decline in global equities. Russia’s invasion of Ukraine in late February prompted markets to lose further ground, with the greatest pressure in European and emerging markets. Commodity prices, on the other hand, strengthened and pushed inflation even higher,” the commentary explained.

Closer to home, equity performance was flat except for a few select holdings.

“The Barbados and Jamaica index were little changed while the Trinidad index fell 4 per cent. Over the quarter, Massy Holdings cross-listed in Jamaica and approved a 20:1 stock split. The stock gained 14 per cent in the quarter and reported positive underlying earnings growth. Also in Trinidad, Agostini advanced 40 per cent on thin volumes.

In Barbados, Goddard Enterprises added 4 per cent and earnings showed welcome signs of recovering post-pandemic.

The Fund also continued to see outsized gains from holdings in Guyana, where the energy buildout has been boosting economic growth. Our substantial positions in Banks DIH and Demerara Bank posted the largest gains,”
the report added.

The net asset value (NAV) per share was $7.7438 as of March 25. Net assets of the Fund were $652 million, up from $549 million this time last year.

The Fund’s annual compound rate of return since inception in 1996 is 8.5 per ent per year and its portfolio remained well diversified by security, geography, and currency in line with its aim of capital growth over the long term.

The Caribbean Growth Fund commentary ended with a positive outlook.

“Longer-term, we continue to see excellent potential for future returns from the kinds of high-quality, reasonably valued shares in which the Fund invests in the Caribbean and around the world.”

The Caribbean High Interest Fund declined 1.8 per cent in the first quarter and was down 0.2 per cent over the past year.

Global bonds fell during the quarter as yields rose around the world. “This occurred as central banks shifted their focus from supporting economic recovery via ultra-low rates to containing inflation, which has been well above normal in recent months,” the report noted.

In Barbados, activity in the corporate bond market remained limited. “Our positions continued to perform as expected, but their prices were marked lower along with global bonds of similar quality and terms.

We continued to add to holdings in Government of Barbados (GOB) Series B bonds as the final payments of Series F bonds draw nearer. GOB holdings are still approximately 12 per cent of the portfolio.”

The NAV of the Fund’s Accumulation share was $2.0913 as of March 25, while the Distribution share finished at $0.9985. Net assets of the Fund were $144 million, up from $136 million this time last year. The Fund’s annual compound rate of return since inception in 2002 is 3.8% per year. Its portfolio remained as diversified as possible across various issuers, industries, geographies, and terms to maturity.

Pension Fund shares mostly up

The Caribbean Pension Fund, which invests across stocks and bonds in different proportions, “mostly rose in the quarter” with its three classes of shares returning between -0.9 per cent and +2.5 per cent in the first quarter. They were up between 2.3 per cent and 13.1 per cent over the past year.

As with the other funds, financial markets grappling with high inflation, rising interest rates and geopolitical conflict impacted returns. The quarterly report concluded by reminding investors of questions to ponder during seasons of uncertainty.

“There is always something to worry about in the investment world. Today the worries are inflation, interest rates and geopolitical conflict. Yesterday the worry was the pandemic…. (But) as investors, the most important questions to ask are these: Can we invest today in reasonably priced securities, diversify appropriately, and expect a fair return from today’s starting prices?

For the Fortress portfolios, we think the answers to these questions today are all, still firmly, yes.” Fortress Fund Managers manages over Bds $800 million in assets across 12 funds with investments in regional, US, international and emerging markets. (PR)

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