Fortress reports positive financial year for Barbados dollar funds

The financial year ended September 30, 2024 was a positive one for the Barbados dollar funds managed by Fortress Fund Managers (FFM), with returns of up to 12.4 per cent.

This news was shared by Roger Cave, chairman and Peter Arender, CEO & chief investment officer in the leading fund manager’s 2024 Annual Reports for its three Barbados dollar funds – the Fortress Caribbean Growth Fund, the Fortress Caribbean High Interest Fund and the Fortress Caribbean Pension Fund. The reports, for the financial year ended September 30, 2024 highlighted funds’ performance and outlook.

Caribbean Growth Fund gains 12.4 per cent for financial year

In what was described as a “strong year”, the Fortress Caribbean Growth Fund gained 12.4 per cent and ended the period with an annual compound rate of return of 7.7 per cen since inception in 1996. The net asset value (NAV) or price per share of the Fund increased to $7.8973 from $7.0238 with net assets of $689 million compared to $605 million a year ago.

“Throughout the year, global stocks posted steady, modest gains, and a rally in September added meaningfully to the year’s performance,” Cave and Arender said.

They also noted that “the fund’s core allocations to the Fortress US Equity, Fortress International Equity and Fortress

Emerging Market funds performed well, returning 27 per cent, 23 per cent and 21 per cent respectively over the year.”

This contrasted with performance in the Caribbean. “The global index, tracking securities all over the world, was up 33 per cent while in the Caribbean, the Trinidad and Jamaica indices fell 13 per cent and five per cent respectively. The Barbados index posted a nine per cent gain, largely due to movement in shares of CIBC Caribbean on thin trading volumes.”

Highlighting the fund’s positioning, the annual report noted that a third of its portfolio was invested in the Caribbean and two-thirds in the US, international and emerging markets, offering Barbados-based investors access to exceptional global diversification.

“It is worth noting, however, that our ability to invest additional assets in local, regional and global equities continues to be constrained by exchange controls in Barbados and by relatively small, illiquid stock markets in the region,” Cave and Arender added.

Regarding the Growth Fund’s outlook, while the year was another strong one due to its global diversification, economic crosswinds “argue more than ever for wide diversification and to look for tomorrow’s returns where valuations are most compelling, and not necessarily where yesterday’s returns were strongest.”

The report noted that “the more expensive segments of the US market are vulnerable to price corrections”, but that there are still attractive valuations to be found, especially among emerging markets and developed international stocks. Fortress remains “constructive on the Fund’s high-quality, valueoriented global and Caribbean holdings.”

Caribbean High-Interest Fund returns 6.7 per cent for the financial year

The Fortress Caribbean High- Interest Fund also performed well, returning 6.7 per cent for the year due to “a combination of higher bond prices and healthy levels of coupon income locked in at higher rates.”

The fund’s annual report noted that globally, central banks eased monetary policy and bond yields fell during the year.
Corporate spreads also narrowed to reflect the perception of lower recession risk. The main index of US high-quality bonds, which included both corporates and governments, was up 12 per cent for the year.

The NAV of the Accumulation shares increased to $2.2443 at September 30, 2024, up from $2.1026 last year. The distribution shares rose to $1.0729 from $1.0040. Total assets were $144 million compared to $140 million last year. The fund’s compound annual return since inception in 2002 was 3.7 per cent per year, net of all fees and expenses.

The fund’s core allocation to U.S. bonds via the US$ Fortress Fixed Income Fund gained 10 per cent, and FFM’s allocation to emerging market bonds returned 19 per cent.

The fund also participated in the routine issuance of Government of Barbados (GOB) treasury bills and bonds and added incrementally to medium-term GOB notes, to replace maturing GOB Series B strips and keep overall GOB exposure steady throughout the year at 13 per cent of total assets.

“Some of the fund’s GOB holdings also saw better pricing during the year as final maturities naturally drew closer. Otherwise, domestic Barbados holdings performed as expected. A few new corporate issues were in progress this year but did not materialise and the opportunities for bond investment remained limited.”

Regarding potential risks that could impact the High-Interest Fund going forward, Cave and Arender noted: “We think it is unlikely central banks will begin tightening policy again. Rates are still quite high, and the risk is more probably a pause that keeps rates at current levels longer than the bond market currently expects. To counter this risk the fund’s portfolio still has positions in floating rate notes whose rates will only come down as shortterm rates do.”

Additional risks identified included the development and deepening of a global economic slowdown, affecting creditworthiness of corporate bonds and pushing their prices lower. In Barbados the risks remained the same: “A small market with trapped capital and dominated by the “B-” rated GOB as an issuer, does not have many opportunities for the combination of security and income that the fund requires.”

Caribbean Pension Fund performs strongly for financial year

The Fortress Caribbean Pension Fund had a strong financial year, with gains in all three classes of shares. The Aggressive Accumulator (AA) share returned 11.9 per cent, the Conservative Consolidator (CC) share rose by 10.8 per cent and the Capital Secure (CS) share advanced by 7.4 per cent.

Since inception in 2002, the annual compound returns for the Fund’s AA, CC and CS shares have been 5.6 per cent, 5.3 per cent and 3.4 per cent per year respectively. Total net assets of the Fund increased from $402 million to $434 million during the year.

“The equity allocations of the three classes of shares of the fund are primarily made up of investments in the Fortress Caribbean Growth Fund, the fixed income allocations are primarily made up of investments in the Fortress Caribbean High-Interest Fund, and the small allocations to real estate are typically made through the Eppley Caribbean Property Fund SCC (formerly Fortress Caribbean Property Fund SCC). The returns of the three shares in the Pension Fund are therefore a blend of the performance returns of these underlying holdings,” the fund’s annual report explained.

The report ended with thanks to former Pension Director, René Delmas who retired and a welcome for Senior Manager, Shomari Simpson-Sealy. “Together with the team he will continue the work of building and improving the Fortress pension offering, of which this fund is a key part, and helping our thousands of clients achieve financial security. We want everyone to be able to follow in René’s footsteps to a happy retirement.”

Fortress manages over Bds $800 million in assets across 12 funds with investments in regional, US, international and emerging markets. (PR)