The US currency Fortress World Funds have registered gains over the past year ranging from 1 % to 8%.
The June 2023 quarterly report for the Fortress World Growth Fund and the Fortress World Fixed Income Fund shared this news with investors recently. The funds provide access to global equity and debt investments for investors with U.S. dollars.
World Growth Fund up 3.3% in second quarter
The Fortress World Growth Fund gained 3.3% in the second quarter and was up 7.7% over the past year. This came in the context of strengthening global equities during the quarter as inflation continued to moderate and central bank rate hikes slowed. “In May, U.S. consumer inflation was up 4% year-over-year, the slowest pace since March 2021. At the same time, measures of U.S. economic activity and employment continued to be robust. Other parts of the world saw slower inflation, too, but less economic strength,” the report noted.
It added that growth in European economies dropped into negative territory and that China disappointed after an initial post-pandemic recovery. “U.S. equities had strong performance, especially in the technology sector. Europe and Asia also gained despite the weaker economic reports. Japanese stocks were among the strongest in the world this quarter, gaining more than 10% in U.S. dollar terms, while emerging market stocks were little changed due to weakness in China. The Fund’s core allocations to U.S., international and emerging markets stocks gained between 2% and 4% during the quarter.”
Over the quarter, Fortress continued to see risks developing in the more speculative, highly valued areas of the U.S. stock market, especially as the economy moderated. “As companies refinance debt at higher interest rates, we are also likely to see more downward pressure on profits. There are still high-quality shares trading at reasonable valuations in the U.S., but we are finding many more of them in international and emerging markets, where cheaper currencies present an additional source of value.”
The net asset value (NAV) or price per share of the World Growth Fund at June 30 was US $1.0577. Net assets were US $7.9 million, up from $6.6 million for the same time last year. The Fund’s annual compound rate of return since inception in January 2021 was 2.3% per year. The portfolio remained invested in high-quality, well-valued shares in U.S., international and emerging markets.
World Fixed Income Fund declines 1.0% in Q2 while up 1.0% over past year
The Fortress World Fixed Income Fund declined 1.0% in the second quarter and was up 1.0% over the past year as corporate and emerging market bonds advanced and Treasuries declined.
At June 30 the NAV per share of the Fund was US $0.9089. Net assets were US $5.6 million, up from $4.8 million for the same period last year. The annual compound rate of return since inception in January 2021 was -3.9% per year. The portfolio remained invested in a diversified portfolio of primarily high-quality US$ bonds.
In the report for the World Fixed Income Fund, Fortress explained: “After a sharp move lower in March on fears surrounding the U.S. regional bank failures, bond yields rose again in the second quarter and prices fell. Most major central banks raised their target rates further, but the U.S. Federal Reserve (Fed) paused in June to leave its rate unchanged at 5% to 5.25%.”
The report also noted that “(a)s it became clear the March banking stress hadn’t completely undermined the economy, U.S. Treasury yields moved back up towards previous levels. The 10-year yield rose from 3.47% to 3.84% and the two-year moved from 4.03% to 4.90%. Credit spreads narrowed, and this helped investment grade and high yield corporates outperform Treasuries, along with emerging markets bonds.”
The Fund’s small allocations to high yield and emerging markets gained approximately 1% against the generally negative backdrop for bonds.
Fortress continued to focus the Fund’s holdings on the highest quality corporate credits while also extending the portfolio’s duration to benefit appropriately when yields would eventually stabilise and fall. The average term to maturity of the Fund’s portfolio was 7.3 years and the average yield was 4.8%, a good estimate of its medium-term return potential.
Both the Fortress World Growth Fund and the Fortress World Fixed Income Fund are open to all new subscriptions in U.S. dollars.
Fortress manages over Bds $800 million (US $400 million) in assets across 12 funds with investments in regional, US, international and emerging markets.
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