Investment opportunities lacking
THE FINANCIAL STEWARDS of a $117 million fund based here are crying out for “suitable” investment opportunities in Barbados and the region.
Fortress Fund Managers, a firm which manages several portfolios including the Caribbean High Interest Fund, said that facility was holding on to its cash largely because there were insufficient investment options in regional government securities and Barbados corporate bonds.
In a report covering the second quarter ended June 30, Fortress said: “Low global interest rates and credit stress among Caribbean governments continued to limit the fund’s return in the second quarter.
“We remain conservatively positioned especially with respect to Caribbean government debt, focusing squarely on capital preservation.”
The firm added that while corporate bonds are a viable alternative to low yielding governments’, the problem was that “yields in that area are moving lower too”.
“The fund’s corporate investments performed well during the quarter, earning income and some incremental capital gains as prices increased.
“We continued to add selectively to corporate bond positions during the quarter, in Barbados and in global markets,” it said.
“The lack of suitable corporate bonds available in Barbados continues to limit investment options here, and as a result the Fund’s cash balance remains higher than normal.”
Fortress said the high interest fund was established with a mission to “achieve the highest level of income compatible with the preservation of capital, by investing in medium to high grade debt securities issued by corporate and government entities with a short to medium term maturity profile principally in the Caribbean”.
“Net assets of the Fund were $117 million.
“The fund’s annual compound rate of return since inception in 2002 is now 4.6 per cent per year.
“It remains as diversified as possible by issuer, geography and currency, with approximately 53 per cent invested in Barbados and 47 per cent invested globally,” the report noted.
“The average term of the fund’s portfolio is a relatively conservative 2.5 years, and the average gross yield is 3.6 per cent.”
It added: “If and when the Caribbean government debt situation becomes more sustainable and the current risk of restructuring abates, we will be in a position to add substantial holdings in this area, reducing the cash drag in the portfolio and positioning once again for higher returns.
“Until then, the fund’s returns will likely continue to be lower than average.” (SC)