Strong Performance for Fortress Funds in fourth quarter of 2020
Fortress Fund Managers posted one of its strongest-ever performances in the fourth quarter of 2020 as world equity markets continued their recovery from a turbulent year, reminding investors that a focus on the long-term and diversification remain essential.
The leading fund manager reported that its global equity investments led the way during the quarter, with bond portfolios also posting gains and finishing a strong 2020 for fixed income investments.
This assessment was shared recently with Fortress investors in its December 2020 quarterly report which focused on Fortress’ three Barbados dollar funds: the flagship Caribbean Growth Fund; the Caribbean High Interest Fund, which concentrates on income and capital preservation; and the Caribbean Pension Fund.
Double-digit gains for Growth Fund
The Caribbean Growth Fund gained 11.3% in the fourth quarter as the recovery in global equities strengthened after the U.S. elections and positive vaccine news in November. With these gains, the Fund was down 2.9% over the past year as Caribbean shares are yet to see a meaningful recovery.
“The Fund’s global investments had one of their strongest quarters ever, continuing to reclaim ground from early in the year and in some cases to set new highs. As fear and uncertainty around the outcome of the U.S. election passed, and more and more positive news on COVID-19 vaccines came out, stocks in the U.S. and in major markets around the world surged,” the report explained.
It added that this “rally was wide and inclusive, driving prices higher in areas that had been overlooked through much of the year. The Fund’s largest allocations benefited from this, particularly the Fortress Emerging Markets Fund (+26% in the quarter and reaching a new all-time high), Fortress International Equity Fund (+18%), Caledonia Investments (+24% benefiting also from a stronger British Pound) and the Templeton Asian Smaller Companies Fund (+21%).”
Looking to the future, Fortress continues to see “good prospects ahead for the diversified mix of high-quality, well-valued shares in which the Fund invests.” The Fund’s annual compound rate of return since inception in 1996 is 8.0% per year.
High Interest Fund up 4.4% over the past year
The Caribbean High Interest Fund gained 2.3% in the fourth quarter and was up 4.4% over the past year as global corporate and emerging markets bonds “continued to post gains on economic optimism and ongoing central bank support.”
“Government bond yields rose slightly, with U.S. Treasury 10-year yields moving from 0.7% to 0.9%. Yields are still exceptionally low by historic standards and remain below the more “normal” 1.9% levels that prevailed before the pandemic and the huge monetary policy support it elicited from the U.S. Federal Reserve (Fed). This Fed support remains largely in place,” the report explained.
Closer to home, in Barbados the fund manager “continued to chip away at longer-term Government of Barbados (GOB) bonds in the secondary market where they are trading at double-digit yields. These purchases kept the Fund’s GOB weighting (12% of total) relatively steady as the GOB Series F bonds we acquired shortly after the restructuring continue to make scheduled principal repayments each month.”
The Fund’s annual compound rate of return since inception in 2002 is 4.1% per year.
Caribbean Pension Fund makes gains of up to 10%
The three classes of shares of the Pension Fund gained between 3.8% and 10.1% in the fourth quarter and showed returns of between -0.6% and +3.4% over the past year. The Aggressive Accumulator (AA) share returned 10.1%, the Conservative Consolidator (CC) share posted 8.5% and the Capital Secure (CS) share returned 3.8% for the quarter.
The report added that “global equities had a strong quarter as vaccine approvals and the U.S. elections raised hopes of a return to normal.” It ended by reminding investors of the simple mission in investing – ‘buy low and sell high‘ – and again urged them to stay the course despite what they may see and feel from the tides of current events.
“What is happening under the surface is the important part. This is where the hundreds of companies whose shares we own are quietly generating and growing their profits, month after month and year after year. This is where the companies and governments whose bonds we own are steadily paying interest each year. This is where returns in one area can offset temporary declines in others via diversification. Pensions are built to engineer steady, regular savings – a powerful tool for accumulating wealth. Pension investment portfolios, meanwhile, are broadly diversified and built to grow that wealth over the long-term,” the pension report concluded.
Fortress Fund Managers manages approximately $700 million across 11 different funds with regional and global investments.