All of the Barbados dollar funds managed by Fortress Fund Managers (FFM) performed strongly in the financial year ending September 30, 2023, making gains of up to 6.9%.
This good end-of-year news was shared by Roger Cave, Chairman and Peter Arender, CEO & Chief Investment Officer in the leading fund manager’s 2023 Annual Reports for its three Barbados dollar funds – the Fortress Caribbean High Interest Fund, the Fortress Caribbean Growth Fund, and the Fortress Caribbean Pension Fund. The reports, for the financial year ended September 30, 2023, were sent to investors recently and highlighted the funds’ performance and outlook.
Caribbean Pension Fund posts gains across all share classes, up to 6.9%
Leading the way, the Fortress Caribbean Pension Fund posted gains in its three classes of shares for the year ended September 30, 2023. The Aggressive Accumulator share returned 6.9%, the Conservative Consolidator share rose 6.3% and the Capital Secure share advanced 3.2%, reflecting the differing asset allocations of the classes of share. This was as “stocks and bonds recovered meaningfully from a low point this time last year as inflation moderated and fears of a recession eased.”
More positive news was that the Fund’s total assets increased from $374 million to $402 million during the year, surpassing the $400 million mark for the first time.
The report explained that the equity allocations of the Pension Fund were primarily made up of investments in the Fortress Caribbean Growth Fund; the fixed income allocations were primarily made up of investments in the Fortress Caribbean High Interest Fund; and the small allocations to real estate were typically made through the Eppley Caribbean Property Fund SCC (formerly Fortress Caribbean Property Fund SCC). “The returns of the three shares in the Pension Fund are therefore primarily a blend of the performance returns of these underlying funds.”
Caribbean Growth Fund gains 6.7% for the financial year
The Fortress Caribbean Growth Fund gained 6.7% for the financial year, recouping most of the 2022 decline from widespread selloff in global markets. The report noted that broad global diversification in the Fund “once again” reaped benefits as “stock market returns varied widely around the world with weakness in the Caribbean and strength overseas.” The Fund’s core allocations to the Fortress US Equity, International Equity and Emerging Markets funds performed well, returning 14%, 20% and 11% respectively.
During the year, interest rates continued to occupy investors globally as the fight against post-pandemic inflation continued. “The U.S. Federal Reserve (Fed) raised its target rate steadily from a range of 3-3.25% to 5.25- 5.5%, the highest it has been in 20 years. Bond yields also rose, with the 10-year U.S. Treasury yield moving up from 3.83% to 4.57% during the year. Inflation rates eased around the world as supply chains normalised further and higher interest rates reduced demand.”
In the Caribbean, the report noted that share prices mostly declined during the year. “Holdings in Guyana corrected significantly from the highs of last year, bringing valuations down to more reasonable levels alongside exceptionally strong economic growth. The Fund’s investment in Guardian Holdings in Trinidad came under pressure following a change to the new IFRS 17 financial reporting requirements.
The Caribbean Growth Fund’s portfolio remained diversified within the Caribbean region and globally, across a range of industries, countries, and individual holdings. Approximately a third of the portfolio is invested in the Caribbean region and two thirds in U.S., international and emerging markets. This mix offers Barbados-based investors access to “exceptional global diversification. The focus as always is on owning shares in good, profitable companies at reasonable prices,” the report emphasised.
The Fund’s net asset value (NAV), or price per share, increased to $7.0238 from $6.5803 and net assets were $605 million compared to $565 million a year ago. Its annual compound rate of return since inception in 1996 was 7.6%.
Looking ahead, Fortress concluded that “the kinds of high quality, well-valued shares that make up the Fund’s global portfolio are still priced for meaningful future returns.”
High Interest Fund returns 3.2%
The Fortress Caribbean High Interest Fund also performed well for the financial year, returning 3.2%. This was as global central banks tightened policy and government bond prices fell.
“One helpful dynamic was that corporate bonds recovered from the stress they were under this time last year, as did emerging markets bonds. The main index of U.S. high-quality bonds, which includes both corporates and governments, was up 0.6% for the year. The Fund’s core allocation to U.S. bonds via the US$ Fortress Fixed Income Fund outperformed with a gain of 2.2% during the year, and our select allocations to emerging and corporate bonds saw gains of up to 9% during the year. Domestic Barbados holdings performed in line with expectations but opportunities for further investment remained severely limited,” Fortress explained.
The Fund’s investment portfolio continued to be as diversified as possible across regional and international holdings. These included Barbados dollar bank deposits, corporate and government bonds, U.S. dollar government and corporate bonds, and specialised funds investing globally in income-producing assets.
The High Interest Fund’s NAV of its Accumulation shares increased to $2.1026 as of September 30, 2023, up from $2.0383 last year while its Distribution shares rose to $1.0040 from $0.9730. Total assets were $140 million compared to $143 million last year. The Fund’s compound annual return since inception in 2002 was 3.5% per year, net of all fees and expenses. Its investment objective continued to be the highest level of income consistent with the preservation of capital.
Highlighting the Fund’s future outlook, the report noted that its U.S. dollar bond investments having an average yield over 5%, was “in our view the best estimate for future return potential. It has been painful getting to this point, as bond markets over the past two years have had unusually sharp declines. But now we are here, and bonds once again offer meaningful return potential, perhaps the best in two decades.”
The 2023 Annual Reports concluded with thanks to investors and a reminder of major developments during the year. These included Roger Cave becoming Chairman of Fortress Fund Managers Limited and taking over from John Williams as Chief Executive Officer of Fortress’ parent company, Cave Shepherd & Co. Ltd., following Mr. Williams’ retirement. “We are grateful to Mr. Williams for his service as previous Chairman of the Funds and are delighted he will remain as a director to help guide the Funds in the years ahead.” Arender, who took over the leadership role at FFM, continues to work closely with Cave on the management of the business and Fortress’ range of funds.
Fortress manages over Bds $800 million in assets across 12 funds with investments in regional, US, international and emerging markets.