Royal Fidelity’s TIGRS performing well for Barbadian Investors – Silver Lining from recent Stormy Weather
This past Friday while challenging for most Bajans did have a silver lining in all that cloudy weather, one example was Royal Fidelity’s TIGRS A Mutual Fund marked its first anniversary since closing last October. TIGRS, an acronym for Total Index-Linked Global Returns Securities (TIGRS) are Royal Fidelity’s principal protected mutual funds of which two have already been issued in the Barbados market.
So far both issues are performing well. The first, TIGRS A invested 25% in each of the following four indices (1) MSCI Emerging Markets Index (2) S&P 500 (3) Dow Jones EuroStoxx 50 (4) Nikkei 225. The average increase in the indices over the last year is in excess of 10%. The second, TIGRS A1, which was issued in March this year, was invested 33.33% in each Gold, Copper and Nickel indices. The increase in these indices is over 7% since then.
Royal Fidelity will bring its third TIGRS to Barbados in November, this time with a focus on emerging markets where the company sees the greatest opportunity for returns. TIGRS A2 which closes on November 26 will be invested 60% in the MSCI Emerging Markets Index, 20% in the, S&P 500 and 20% in the MSCI EAFE Index ( Europe, Australasia, Far East). “Emerging markets will drive the global recovery over the next decade and the companies in these indices are the key drivers of this growth,” Charles Chambers, Managing Director of Royal Fidelity said.
“For Barbadians, the opportunity presented by the TIGRS products here are unparalleled. Nowhere else in the world could an investor get a principal protected product, which gives 100% principal protection, 100% of the upside, sold in local currency but invested in US dollars, plus a tax rebate,” Chambers went on to say.
The TIGRS series which is unique in Barbados, offers investors a tax rebate on their 5 year investment and at the end, the investor gets back his original investment plus the return generated from the investment in the overseas securities which back the investment. The TIGRS structure, which the firm has been providing to its Bahamian clients since 2007, gives investors the best of both worlds as it is designed to provide all the benefits of owning the underlying securities directly (ie. If the price goes up then the investor gets 100% of the upside) without any of the drawbacks from that outright ownership (ie. if the price goes down the investor still gets all his money back).
When asked how Royal Fidelity achieves such a seemingly impossible result, Managing Director of the company Charles Chambers said “It’s a relatively simple structure where 80% of the funds raised are invested in Government of Barbados Bonds for 5 years at the end of which those funds plus interest accumulated over the time give back 100% of the amount invested. This is where you get the principal protection. The remaining 20% is used to buy 5 year options which give the 100% participation in any increase in the underlying indices. This is where you get the upside.”
Royal Fidelity expects that there will be significant demand for the upcoming series given client expectations for the performance of the emerging markets indices, and a heightened level of institutional and retail interest in the issue ahead of it opening on November 15.