‍A global trend of lowering interest rates could prove rewarding for Fortress Fund Managers’ (FFM) Barbados dollar funds.

This outlook was shared with investors in FFM’s June 2024 quarterly report for the Fortress Caribbean Growth Fund, the Fortress Caribbean High Interest Fund and the Fortress Caribbean Pension Fund.

For more than two years, there has been tight monetary policy in major economies. The introduction of the quarterly report indicates that during the second quarter, the first cuts in rates were recorded signaling the beginning of what is expected to be an easing cycle leading to lower interest rates around the world.

News of the rate cuts was welcomed as the second quarter was relatively quiet and there was little change in the Fortress funds. While the Caribbean High Interest Fund had a modestly positive return, the Caribbean Growth Fund declined marginally.

Caribbean Growth Fund declines  

The Caribbean Growth Fund declined 2.7% in the second quarter and was up 2.2% over the past year. Despite this decrease, its portfolio remains well diversified by security, geography and currency. The net asset value (NAV) of the Fund as of June 28 was $7.4158 per share, while net assets of the Fund were $645 million. The Fund’s annual compound rate of return since inception in 1996 is 7.6% per year.

Globally, there were positive quarterly returns in only a few sections of the market.

Caribbean equities had another weak quarter. The Jamaica and Trinidad indices fell 4% and 6% respectively, while the Barbados index declined 3%. NCB Financial Group (NCBFG), one of the region’s largest financial institutions, raised capital via an additional public offering of shares at a discounted price. This seemed to weigh not only on NCBFG’s shares but on others around the region.

During the second quarter, FFM disclosed, “we took profits on the Fund’s U.S. Regional Bank ETF position and switched into similarly valued positions with greater diversification. In the Caribbean, we added to CPFV and Goddard Enterprises at what we consider very good valuations. Our outlook for the Fund’s global investments remains positive, as the portfolio is positioned (as always) in high-quality shares trading at reasonable valuations. The outlook is less healthy, we believe, among highly priced shares in the U.S. where extreme optimism leaves little room for error as U.S. elections and possibly slower economic growth approach.”

High Interest Fund increases

FFM reported a 0.4% increase in the High Interest Fund in the second quarter which was up 3.4% over the past year. Higher income offset bond price declines as the U.S. did not yet follow other countries in cutting interest rates.

The net asset value (NAV) of the Fund’s Accumulation share as of June 28 was $2.1830, while the Distribution share finished at $1.0434.  Net assets of the Fund were $138 million.

The Fund’s annual compound rate of return since inception in 2002 is 3.6% per year.

Barbados’ local bond market continued to see the routine issuance of Barbados (GOB) Treasury Bills. The Fund’s local corporate holdings performed as expected, and some GOB positions were marked slightly higher. Cash in the Fund is now 11%, higher than desired but improving each quarter. The average term to maturity of the Fund’s portfolio is six years and the gross yield is up to 4.5%, a good estimate of its medium-term return potential.

Caribbean Pension Fund outperforms global pension funds

In the Caribbean Pension Fund, the CS share remained unchanged, while the AA and CC shares returned between -2% and -1.5% in the second quarter. Overall, the three classes of shares are up between 3.0% and 3.3% over the past year. Bond returns were positive while global and regional equities largely declined in the quarter.

FFM had a word of advice for investors with pension fund portfolios. “On our road towards retirement, we must always remember that we will be saving for the majority of our years. We should therefore not quarrel when the market quotation on our shares falls temporarily. Fluctuations are normal, and as net savers, discounts in the market are opportunities for us. Any chance to acquire more of a good thing, such as shares in your soundly run mutual fund, should bring excitement, not worry. We want to, in all ways, look to true value of these assets and think well beyond just today’s ups and downs in prices.”

Fortress manages over Bds $800 million (US $400 million) in assets across 12 funds with investments in regional, US, international and emerging markets.

Fortress Fund Managers