Fortress funds post “healthy returns” in second quarter of 2021

The funds managed by Fortress Fund Managers (FFM) have posted “healthy returns” in the second quarter of this year. This adds to “even healthier year-to-date gains” in most of its equity portfolios.

The good news from the leading fund manager comes as it updated investors recently in its June 2021 Quarterly Report.

The report’s introduction said that one-year returns were even stronger, ranging from 28% for the Caribbean Growth Fund, to 47% for the US dollar Emerging Markets Fund. “These returns do not reflect any genius whatsoever on our part- they mostly have to do with how unusually weak financial markets were this time last year, and the natural tendency of share prices to eventually move back into line with underlying company fundamentals like earnings.”

The report also noted that with last year’s market recovery, global stocks had returned to their pre-2020 trajectory as though the COVID-19 pandemic never happened. “The same is true for company earnings, which in the U.S., and elsewhere have easily surpassed pre-pandemic levels, and look set to grow this year, and again the year after.”

The quarterly report updated investors on FFM’s 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.

Growth Fund gains 6.4% in second quarter

The Caribbean Growth Fund gained 6.4% in the second quarter and was up 28.1% over the past year. During the quarter the Caribbean “held its own” as the Jamaican index gained 8% and Trinidad was up 4% while Barbados holdings were “flat”.

Internationally, recovery in global economic activity continued even as the spread of COVID-19 variants dampened the pace of recovery in some places where vaccination rates were lower. “After a year or more of recovery in stock markets, we see stretched valuations and rising risks in some areas. Thankfully, not all stocks are created equal. There is still very good value to be found in the Caribbean region and around the world, and our long-term outlook for the kinds of high-quality, well-valued shares in which the Fund invests remains distinctly positive,” the report noted.

The Caribbean Growth Fund’s net asset value (NAV) per share as of June 25 was $7.1521. Net assets were $587 million, up from $462 million this time last year and its annual compound rate of return since inception in 1996 is 8.4% per year. The Fund remains well diversified by security, geography and currency.

High Interest Fund up 4.5% over the past year

The Caribbean High Interest Fund was up 1.1% during the quarter and 4.5% over the past year. The rise in global bond prices came “after a period where investors had been preoccupied with surging commodity prices – relative to last year’s depressed levels – and the likely impact on inflation. The yield on the U.S. 10-year Treasury note declined from 1.74% to 1.47%. This pushed bond prices higher, positively impacting the Fund’s performance.”

During the quarter, Fortress also added additional holdings in 7-year U.S. Treasuries where interest rate risk was moderate relative to expected returns and made marginal increases in its allocation to emerging market bonds. “We also added selectively to U.S. corporate bonds.”

Closer to home, within Barbados, activity remained sporadic in the bond market as the Government of Barbados had yet to resume substantial bond issuance and there were no considerable corporate bond deals. “The Fund rolled over some of its domestic corporate bond positions as they matured and established one new high-quality domestic bond holding in the five-year term yielding 4.25%. Our existing corporate positions continued to perform well even with the general economic stress from the pandemic.”

The NAV of the Fund’s Accumulation share as of June 25 was $2.1173, while the Distribution share finished at $1.0108. The Fund’s net assets were $140 million, up from $134 million this time last year. Its annual compound rate of return since inception in 2002 is 4.0% per year and its portfolio remains as diversified as possible across various issuers, industries, geographies and terms to maturity.

The Fund’s gross yield was 3.1%, down slightly from 3.3% in the last quarter. “This is a good estimate of the medium-term return potential,” the report on the Caribbean High Interest Fund concluded. 

Caribbean Pension Fund continues to make gains

The three classes of shares of the Pension Fund gained between 2.1% and 6.2% in the second quarter. And they were up between 7.8% and 23.3% over the past year. Equity investments continued to perform well and bond prices stabilised.

While reminding investors that to best prepare for retirement was to follow good financial advice such as: “Spend a lot less than you earn, and invest the rest sensibly for the long-term, over as many years as possible”, the pension report added that it was important to prepare for the “other parts” of retirement. Some questions to ask: “What are two to three things that make you feel really useful to others? If you were to go back to school, what would you like to learn? If you were to do some part-time work just for the fun of it, what would it be? And, of course, what would you do with a chunk of free time?” 

The quarterly report concluded: “As always, we aim to own shares in well-run,

profitable, growing businesses that are trading at reasonable prices. Thankfully, there are still many of these around the world and we remain extremely constructive on the long-term return prospects for our portfolios. Every year just won’t be like last year – we hope.”

Fortress Fund Managers manages approximately $700 million across 11 different funds with regional and global investments.

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