During the first quarter of this year, the Barbados dollar funds managed by Fortress Fund Managers all “saw healthy gains”, with positive returns for both stocks and bonds. This was despite the quarter having some “bad” news around inflation and the U.S. banking system.
News of the positive gains was shared with investors in the leading fund manager’s March 2023 quarterly report for the Fortress Caribbean Growth Fund, the Fortress Caribbean High Interest Fund, and the Fortress Caribbean Pension Fund.
The report highlighted the funds’ performance and outlook, with a reminder to investors that sensible long-term investing wasn’t about waiting for when the news was good but “investing steadily in good assets when they were available at good prices”.
Caribbean Growth Fund gains 3.1% in first quarter
The Fortress Caribbean Growth Fund gained 3.1% in the first quarter and was down 6.1% over the past year.
During the quarter, global equities posted gains even as stresses appeared at U.S. banks and high inflation data revived fears that more rate hikes could be needed to bring inflation down. The Fund’s investments in Europe and Asia had some of the strongest returns.
On the Caribbean side, shares declined amid global pressure on financial institutions such as banks and insurance companies. Among the Fund’s Caribbean holdings, Sagicor Financial and Guardian Holdings declined and there were gains in Banks DIH in Guyana, while other holdings in Guyana were unchanged.
Looking to the future, the report noted that the anticipated U.S. economic slowdown had likely begun. “This could mean weaker company earnings in the months ahead, but it could also mean an end to interest rate hikes. It may also leave room for other geographies such as Europe and Asia to see better equity returns than the U.S., to the benefit of globally diversified investors – a development we would welcome.”
The net asset value (NAV) or price of each share as of March 31 was $7.2683. Net assets of the Fund were $620 million, down from $652 million this time last year. The Fund’s annual compound rate of return since inception in 1996 was 7.9% per year.
Caribbean High Interest Fund up 1.9%
The Fortress Caribbean High Interest Fund gained 1.9% in the first quarter and was up 1.1% over the past year. And while the quarter was volatile for global bonds it “ended with gains across the board.”
The report noted that banking issues arose in mid-March which, while initially disruptive, eventually suggested that the U.S. Federal Reserve (Fed) and other central banks had hit the limit of how far they could hike rates without causing unwelcome damage to key institutions.
“The damage this quarter was brought on by large deposit withdrawals at Silicon Valley Bank and Signature Bank, causing them to sell down their treasury bond portfolios at a loss and making them insolvent. The Fed and other agencies supported the market immediately. They provided relief to uninsured depositors at the troubled banks and liquidity to other banks facing similar issues,” the report explained.
Sensing the implied softening in the Fed stance, the U.S. 10-year Treasury yield fell to 3.5% from 3.9% during the quarter, while the two-year yield fell from a high of 4.8% to 4.0%. “These are still meaningful yields and are among the highest in the last decade,” the report continued.
Locally, the bond market in Barbados was quiet during the quarter. The Fund’s positions in domestic corporate and government bonds performed as expected, generating steadily positive returns. “Cash in the portfolio declined from 23% to 19% as we placed new amounts in secured and unsecured deposits locally. Despite the still higher-than-desired cash, the gross yield on the Fund’s portfolio was still above 4%, a good indication of its medium-term return potential.”
The net asset value (NAV) of the Fund’s Accumulation share as of March 31 was $2.1138, while the Distribution share finished at $1.0090. Net assets of the Fund were $142 million, down from $144 million this time last year.
The Fund’s annual compound rate of return since inception in 2002 was 3.6% per year. Its portfolio remains as diversified as possible across various issuers, industries, geographies, and terms to maturity.
Caribbean Pension Fund returns up to 3.0% across its shares
The three classes of shares of the Fortress Caribbean Pension Fund returned between 1.9% and 3.0% in the first quarter and were down between 0.2% and 4.3% over the past year. Stocks and bonds rallied globally as an end to central bank tightening became more likely.
Fortress manages over Bds $800 million in assets across 12 funds with investments in regional, US, international and emerging markets.