Investment Director at Fortress Fund Managers, Roger Cave
BRIDGETOWN, Barbados, Friday February 8, 2019 – Barbados-based investment manager, Fortress Fund Managers, says it’s cautiously optimistic about the future of its investments even as economic uncertainty continues to affect markets in the Caribbean and internationally.
This optimism was articulated in the Fortress 2018 Annual Reports, which were recently made available to investors. The reports highlighted the performance of Fortress’ Barbados and US dollar mutual funds.
Speaking specifically to the Caribbean Growth Fund, the company’s primary equity fund, Investment Director Roger Cave noted that it was a positive year for the Fund, which recorded a 5.5 per cent return in the year ended September 30, 2018. There was also an increase in the net asset value from $5.7757 in the previous year to $6.0944 per share. Cave expects more positive results in Jamaica and Guyana where the equity markets were fully priced and where the economies are likely to be strongest.
However, he acknowledged that Barbados, Trinidad and some Organization of Eastern Caribbean States (OECS) countries were struggling with deficits and restructuring and that it was difficult to see any major gains from those equity markets in the coming year.
With regard to the international markets, the investment director pointed out that developed economies and by extension their stock markets had very different macro-economic fundamentals.
“The US has a strong economy with solid GDP growth, low unemployment, rising inflation and rising interest rates. The US stock market is expensive and we are into the tenth year of a bull market which together, history has shown, points to a likely period of low to negative returns from here.
“The rest of the world by contrast is varied and mixed in terms of rates of growth, generally lower interest rates, cheaper (in some cases much cheaper) valuations and better prospects for overall returns going forward. In the short-term, however, a correction in the US stock market or a recession in the US, or both, could result in weakness and declines across the world’s equity markets as stock markets tend to be highly correlated in periods of market weakness,” Cave stated.
The investment director also expressed concern about the political situation around the world including protectionist trade policies and tariffs in the United States, Brexit in the UK, and tensions in the Middle East. However, he advised that there was still room for investors to benefit.
“We are confident that the Fund is well positioned for solid returns over the long-term. We do expect increased volatility in the near term as the world adjusts to higher interest rates. We plan to continue to increase our investment exposure in periods of market weakness. We will also continue to manage the Fund with a long-term perspective, which will meet the objectives of pension funds and other patient, long-term investors,” he explained.
As it relates to the Caribbean High Interest Fund, the investment director noted that it registered a decline of 1.2 per cent for the year ended September 30, 2018. He explained that this rare negative result came against a backdrop of price declines in global bonds as interest rates rose and following the long-anticipated restructuring of Government of Barbados bonds.
Cave reiterated, however, that its objective was “the highest level of income consistent with the preservation of capital” and reassured investors that, given these challenges, Fortress Fund Managers were concentrating largely on the preservation of capital.
He also revealed that the company had expanded its range of Cayman Islands domiciled US dollar funds by launching the Fortress Fixed Income Fund over the past year. This brings to eight the company’s internationally invested US dollar funds. This Fixed Income Fund invests in high quality corporate and government bonds in the United States and offers investors an efficient way to access this type of conservative investment with an actively managed, well diversified portfolio.
Cave however advised that in spite of this and other attempts at diversification, the average gross yield in the Fund’s portfolio of 2.8 per cent, was a certain indicator that returns in the medium term will continue to be below historic norms.
“These are still not normal times for bond investors, but we do expect better days ahead especially as we are now on the other side of the long-anticipated government credit event in Barbados where the majority of the Fund’s capital is held. For global bonds, we expect rates to continue rising slowly in the US and potentially in other regions, too. This will limit returns in the short term but over time will set the stage for more normal returns going forward,” he reassured investors.
The investment director also paid tribute to Ken Emery, outgoing director, who retired last year. He noted that Emery, who joined Fortress first as a British Executive Overseas Consultant in 1997 and later as a member of the Board of Directors, had been instrumental in the progress and development of all Fortress funds.
“Undoubtedly, Fortress Fund Managers would not be where it is today without the time, care, guidance and expertise that Ken has contributed over the last two decades,” he stated.
Last year, Fortress Fund Managers also continued to invest in the development of its team and to improve the systems and procedures necessary to improve service to customers. Fortress manages more than $650 million across 11 different funds and investment products with regional and global investments.
Click here to receive news via email from Caribbean360. (View sample)