Positive returns for Fortress Funds in third quarter of 2020
Fortress Fund Managers has reported gains across all of its Barbados dollar funds for the third quarter of 2020. This was as “gradual healing” in global financial markets continued in the wake of the COVID-19 pandemic.
The leading fund manager made this announcement in its September 2020 quarterly report, recently shared with its investors. Fortress noted that its investments in the United States and international markets were responsible for “most of the heavy lifting (during the) quarter, contributing gains pretty much across the board.”
Regionally, stock markets did not perform as creditably. “The pressure on economies and companies tied to tourism, such as those in the Caribbean, did not abate and stock markets in the region remained under pressure as a result,” the report said.
The September quarterly report focused on Fortress’ three Barbados dollar funds: the flagship Caribbean Growth Fund; the Caribbean High Interest Fund, which focuses on income and capital preservation; and the Caribbean Pension Fund.
Growth Fund makes gains in third quarter
The Caribbean Growth Fund gained 2.1% in the third quarter. Global investments continued their recovery while regional holdings remained under pressure. Overall, it was down 6.5% over the past year.
The net asset value (NAV) per share finished October 2 at $5.6988. Net assets of the Fund were $468 million, down from $488 million this time last year. The Fund’s annual compound rate of return since inception in 1996 is 7.6% per year. Its portfolio remains diversified by security, geography, and currency.
“The Fund’s positive performance in the quarter was largely driven by its global investments which are about two thirds of the total portfolio. The MSCI World Index was up 8%, while the S&P 500 Index gained 9% in the quarter. Shares of the largest technology companies continued to outperform as the “stay at home” trend boosted investor sentiment towards online and digital services companies.”
Closer to home in the Caribbean, the quarter “brought more weakness in Caribbean shares as fundamentals within the region remained under pressure. The Jamaican index fell 1.9%, Barbados lost 5.7%, and Trinidad was approximately unchanged.”
The report added, however, that while “Caribbean economies may be under pandemic-related pressure for some time yet, we continue to see the potential for substantial future returns among well-valued global equities, and the Fund is positioned to keep benefitting from the diversification, profitability and growth of this subset of the market.”
Caribbean High Interest Fund up this quarter and over the past year
The Caribbean High Interest Fund gained 1.5% in the third quarter and was up 3.2% over the past year with the third quarter experiencing “continued recovery in global corporate bonds as credit spreads narrowed further.”
The net asset value (NAV) of the Fund’s Accumulation share finished October 2 at $2.0560, while the Distribution share finished at $1.0007 after declaring a dividend of $0.029 per share. Net assets of the Fund were $133 million, down from $137 million this time last year. The Fund’s annual compound rate of return since inception in 2002 is 4.0% per year. Its portfolio remains as diversified as possible across various issuers, industries, geographies and terms to maturity.
Fortress ended its assessment of the High Interest Fund by noting that it continued to “diversify as much as possible the steady sources of return in the Fund, among government and corporate bonds of various credit qualities and yields, as well as small positions in other assets with steady returns and low volatility. The Fund’s gross yield is approximately 3.5%, a good estimate of its medium-term return potential.”
Pension Fund shares make gains
The three classes of shares in the Caribbean Pension Fund gained between 1.2% and 1.5% in the third quarter with the continued recovery of global markets from the pandemic-related weakness seen early in the year. Over the past year the Fund showed returns of between -4.2% and +1.2%.
Fortress Fund Managers spent some time in its Pension Fund report discussing the notion of ‘risk’. “‘Risk‘ is a word often used when considering investments. It can sometimes refer to the ‘risk‘ of losing some of the value of your investment permanently, or it can refer to the ups and downs of prices when owning things like shares – the ‘risk’ that you will feel uncomfortable when prices temporarily fall.”
The fund manager added that, “Together, we can take on both of these risks for the sake of earning long-term returns. We can steadily reduce the first risk in our funds by constructing diversified portfolios of high-quality investments trading at reasonable prices. For your part, you can reduce the second risk by averting your eyes from the inevitable ups and downs of the financial markets. Over the course of many years these swings can hardly even be seen, let alone still felt.”
Fortress concluded that investors could “benefit significantly” from “taking enough ‘good investment risk’ and doing it steadily over many years. This applies equally to your pension and to all saving and investing for the years ahead.”
Fortress Fund Managers manages approximately $700 million across 11 different funds with regional and global investments.