Fortress: Markets still volatile

The actions of the United States Federal Reserve are impacting one of the largest funds operated by the locally based Fortress Fund Managers.

In its latest quarterly report on the performance of the three funds in its portfolio for the period ending September 30, 2022, Fortress said its Caribbean Growth Fund registered an 8.6 per cent decline for the third quarter when compared to the same period in 2021.

The net assets of the fund stood at $565 million for the period, down from the $629 million for this time last year, while the compound rate of return since the fund’s inception in 1996, stood at 7.6 per cent per year.

Indicating that though the portfolio of the Caribbean Growth Fund remained diversified by currency, geography and security, the fund ended with a sharp selloff, as inflation rose and central banks around the world took action including the US Federal Reserve, which raised interest rates twice.

“While these moves were largely expected, the Fed’s harsh tone regarding future increases put renewed pressure on bonds and stocks and increased the risks of recession. At the same time, several major companies reported drops in earnings and cuts or hiring freezes,” Fortress told investors.

The fund managers disclosed that uncertainties created by the war in Ukraine which impacted commodity prices, as well as reported drops in earnings of several major corporations, also impacted the performance of the mutual fund.

In the update to investors, Fortress stated: “[The] forced selling from leveraged United Kingdom pension funds, put yet more stress on financial markets. The Fund’s core allocations to U.S., international, and emerging markets are outperforming the broad markets but still saw declines of between six per cent and 14 per cent in the quarter. In the Caribbean, shares were also mostly lower. Jamaica and Trinidad were down six per cent and three per cent respectively, while Barbados was flat.”

According to Fortress, the financial markets were likely to remain volatile as central banks continue to respond to  inflation by raising interest rates. In addition, the fund managers said it was likely that parts of the world were already in economic recession, and so, they expected that company profits will decline, at least in the short-term, while share prices have already fallen on these expectations.

In a caution to investors, the local fund stated: “It’s the long-term that matters and no one knows how long the current headwinds will last. We do know that equity prices today are much lower than even a few months ago and the kinds of profitable, high-quality shares where the Fund invests are trading at decidedly attractive levels. Unfortunately, you don’t get good prices without bad news – we are very constructive on future return prospects from here.” (IMC1)