Experts say economic growth is good for financial markets

Fortress Fund Managers hailed Barbados’ 11.8% economic growth in the first three months of this year as an encouraging sign for financial markets.

However, company officials say continued economic growth will be key as they reported reduced risk from holding government bonds which Fortress has continued to add to its holdings.

During a lunchtime meeting on Wednesday, Fortress Fund Managers Chief Investment Officer Peter Arender said the recently released first quarter results for the Barbados economy were promising, although he recognized a path difficult to navigate in the short term due to rising inflation and other global challenges.

“GDP growth in the first quarter was just under 12% on an annualized basis, which is encouraging. We always come out of a pretty deep hole that happened [due to] the drop in tourism due to the pandemic closures, but it’s definitely going in the right direction,” he said.

Arender said that with the tourism sector not yet operating at pre-COVID-19 levels and the global economy continuing to recover as central banks tightened monetary policies and inflation rose, it was essential for Barbados to maintain its growth rate, which he said was essential for investment. .

For the first three months of this year, Fortress posted mixed results, but mostly solid gains in its three Barbadian dollar funds – the Caribbean Growth Fund, the Caribbean High Interest Fund and the Caribbean Pension Fund.

The Caribbean Growth Fund was up 3.6% for the quarter and up 16.5% from a year ago. The Caribbean High Interest Fund was down 1.8% over the review period and therefore down 0.2% over the past year.

Meanwhile, the Caribbean Pension Fund, which invests in stocks and bonds in different proportions across three equity classes, returned between -0.9% and 2.5% in the first three months. They have increased between 2.3% and 13.1% over the past year.

Approximately 12% of the Caribbean High Interest Fund’s portfolio is made up of Barbados government bonds.

Chief investment officer at Fortress Fund Managers, Roger Cave, revealed that the company bought some of the $125 million in government-issued treasury bills last November, three years after completing its debt restructuring program .

Cave said that before the restructuring, Fortress’ exposure was “very low”, adding that he wished there were “more bond opportunities” in Barbados.

“There is not a wide range or supply of corporate bonds. We wish there was a wider spread of those,” he said, adding that he expected interest rates on bonds to recover in the coming months.

Cave explained that several risk factors are considered when underwriting government bonds, including fiscal performance and debt levels.

“…Going forward, we expect that now that COVID is largely behind us and the economy is picking up, we will get back on track to reduce our debt levels and put order in our deficits. So that’s what we expect to see and hope that’s what happens,” he said.

Clarifying that bonds were only a small part of a “broadly diversified fixed income portfolio”, Arender added that the decision to invest in government bonds was also based on potential risks.

Stressing the importance of economic growth from the restructuring process, he said, “Without economic growth, all the assumptions made about restructuring, etc., just don’t hold up. So really, I would strongly suggest that we don’t take our eyes off this ball. The ball is growth and we need to collectively make sure we generate that somehow.

Arender said Fortress continues to see steady savings among investors.

He also reported that some people were able to increase their investment despite continuing difficulties resulting from rising inflation.

“We see continued interest. Yields on bank accounts are very low, so people are naturally looking for alternatives, and the long-term value proposition for investing in good quality assets for many years remains just as important and necessary as it used to be. a year ago, five years ago … and as we expect, it will be five or ten years from now,” the senior Fortress official said..
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