The US$ Fortress World Funds made gains in the first quarter of 2023 while still showing declines over the past year.
This update was shared with investors recently in the March 2023 quarterly report for the Fortress World Growth Fund and the Fortress World Fixed Income Fund. Both funds provide direct access to international equity and debt securities markets for investors with U.S. dollars.
World Growth Fund up 4.3% in first quarter
The Fortress World Growth Fund gained 4.3% in the first quarter and was down 7.1% over the past year. This in an environment where global equities started the year on a strong note but came under pressure in February as “stubbornly high inflation data revived fears that more rate hikes could be needed to bring inflation down.”
In March, the insolvency and failure of Silicon Valley Bank and Signature Bank initially caused markets to sell off but they stabilised relatively quickly. Bonds rallied sharply because of expectations the U.S. Federal Reserve (Fed) and other central banks would be forced by the failures to pursue friendlier policy.
“Stocks also gained, rallying after initial fears of wider banking problems were addressed. U.S. stocks finished the quarter with meaningful gains, especially among large-cap technology shares. International shares gained even more as currencies rallied against the U.S. dollar, while energy shares and financials were some of the weakest performers,” the report explained.
The World Growth Fund’s U.S., International and Emerging equity allocations gained 4%, 6% and 3% respectively during the quarter, with investments in Europe delivering “some of the best returns this quarter while still trading at reasonable valuations.”
The report concluded by saying that “on a look-through basis the Fund’s global equity investments now have an average price/earnings ratio of 12.4x and dividend yield of 2.9%. Around the world, there are still many high-quality, well-valued shares to own, and we remain constructive on their long-term prospects.”
The Fund’s net asset value (NAV) or price per share as of March 31 was US $1.0235. Its assets were US $7.5 million, up from US $6.9 million this time last year with an annual compound rate of return since inception in January 2021 of 1.1% per year. The portfolio is invested in high-quality, well-valued shares in U.S., international and emerging markets.
World Fixed Income Fund gains 3.5% in Q1 2023
The Fortress World Fixed Income Fund was up 3.5% in the first quarter and down 2.2% over the past year as bonds recovered from an unusually negative period in 2022.
“Banking issues arose in the U.S. in mid-March and suggested that the U.S. Federal Reserve (Fed) and other central banks may have hit the limit of how far they can hike rates without causing unwelcome damage to key institutions,” the report noted.
During the quarter, Fortress added incrementally to long-dated U.S. Treasury exposure in the portfolio as risk-reward prospects improved around the bank failures. “The Fund’s corporate holdings remain focused among the highest quality issuers at healthy yields of 4% and higher and include floating as well as fixed rate notes. We expect these to also prove resilient to future economic weakness if it develops. The average term to maturity of the Fund’s portfolio is now 6.8 years and the average yield is 4.5%, a good estimate of its medium-term return potential.”
The Fund’s NAV as of March 31 was US $0.9183. Net assets were US $5.7 million, up from US $4.9 million this time last year. The Fund’s annual compound rate of return since inception in January 2021 was -3.9% per year. It is invested in a diversified portfolio of primarily high-quality US$ bonds.
Fortress manages over Bds $800 million (US $400 million) in assets across 12 funds with investments in regional, US, international and emerging markets.