Fortress fund pares back on Jamaica as equities sink

FORTRESS FUND Managers, operators of the Caribbean Growth Fund based in Barbados, earned negative returns on its Jamaican investments for a year now, which formerly led the gains in the fund.

But: “On the flip side, we found that Trinidad equities were not moving and were offering more value,” said Peter Arender, chief investment officer.

The Caribbean Growth Fund was the primary method by which Fortress Fund Managers invested in Jamaica. It also operates the Caribbean High Interest Fund and Caribbean Pension Fund. Its property funds were acquired by Jamaican company Eppley Limited last year.

Fortress started increasing its position in Jamaica five years ago. Its local holdings are concentrated in value stocks listed on the JSE Main Market as opposed to growth stocks which populate the JSE Junior Market.

Over time, as the valuations of local equities moved from being one of the world’s cheapest towards being more fully priced, Fortress has been paring back its position in Jamaica – in mid-2019 and then again in January, Arender said.

Jamaica’s stock market, which since 2015 was twice estimated as the world’s top performing, is currently in bear market territory, and is still down 26 per cent year-to-date.

The rebalancing has also seen a near doubling of its portfolio allocation for Trinidad & Tobago stock market investments.

LARGEST INVESTMENTS

Overall, the Caribbean Growth Fund recorded negative returns of 20.5 per cent over three months ending March 2020. Within the fund, the Jamaica portfolio declined by 31 per cent, the global equities portfolio shrank 22 per cent, Trinidad declined by 9.5 per cent, while Barbados was down 0.5 per cent.

Its largest investments in Trinidad are Massy Holdings Limited and Guardian Holdings.

Among its Jamaican holdings, NCB Financial Group, GraceKennedy and PanJam Investment were each down 25 to 30 per cent year-on-year; Trinidad-based Massy Holdings and Guardian Holdings declined more than 25 per cent; and Sagicor Financial of Barbados dropped 35 per cent, said Fortress.

The overall fund returns have been in negative territory for a year now, and was down 13 per cent as at March 2020; the Jamaica portfolio is down 14 per cent; and global equities 11 per cent.

Comparatively, over three years, the company benefited from exposure in Jamaica with gains of 15 per cent; followed by Barbados at 3.3 per cent; Trinidad, 2.4 per cent; and 2.0 per cent for global equities.

Beyond March, there have been signs of recovery.

“June quarter will show improvement,” said Arender, who noted that the fund value currently stands at BDS$469 million. “Part of that is due to the recovery and part of it was the equity prices were lower, and it led to clients adding money. So we had net subscriptions.”

In March, the great sell-off of equities arising from the COVID-19 pandemic shaved off BDS$44 million (US$22 million) from the fund’s net assets over the course of one year, cutting it down to BDS$427 million from BDS$471 million.

“Recovery may take time, of course, especially in the less resilient Caribbean, but we must remember that global financial markets will heal and recover well before the real world does,” said the fund managers in their March-quarter financial report.

Fortress also explained that nearly twothirds of its assets of the Caribbean Growth Fund are invested outside the region in global entities.

“As prices went on sale in March, we added steadily to the fund’s high-quality global investments,” Fortress said.

Geographically, the fund’s portfolio is split 61 per cent in global equities, down from 67 per cent a year earlier; 18 per cent in Barbados, up from 17 per cent; nine per cent in Trinidad, up from five per cent; and six per cent for Other Caribbean markets, up from five per cent. Jamaica was stable at six per cent year-on-year to March, but experienced a dip from seven per cent since December.

Fortress was founded and is managed by financial adviser and accountant Roger Cave. It’s been in operation since December 1996 and boasts a compounded return of 8.5 per cent

since inception.