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NCB M Fund shines, but market unexcited by other two unit trust products

Published:Wednesday | February 11, 2015 | 12:00 AMNeville Graham
File Steven Gooden, CEO of NCB Capital Markets Limited.

NCB Capital Markets' unit trust M Fund, representing its JMD Money Market portfolio, had subscriptions totalling more than $8 billion in its first year, indicating strong market interest.

But two other NCB CapFunds products that were launched at the same time - the B Fund and the E Fund, representing the JMD High Yield and JMD Caribbean Equity portfolios, respectively - failed to excite investors, and had garnered just about $360 million combined at financial year ending September 2014.

Still, the units themselves across the three products have appreciated and are all trading above their debut price of $10 - yielding returns that ranged between four per cent and 7.3 per cent at September 2014.

In real terms however, with annual inflation tracking at 9 per cent in September, the NCB CapFunds, as well as other products trading on the unit trust market at that point were yielding negative returns.

A change in the trajectory of inflation data near the end of the calendar year has had a positive impact on real returns, with annual inflation falling to 6.4 per cent in December.

NCB Capital Markets Limited is the newest and fifth entrant in the unit trust market, starting out with three funds in November 2013. The M Fund and B Fund are invested in fixed income assets, while the E Fund is invested in equities.

By the end of the first financial year for the funds, spanning 11 months to yearend September 2014, NCB Cap Market had scored close to nine per cent of the market, according to data from the regulator of unit trusts, the Financial Services Commission.

Still, CEO of NCB Capital Markets Steven Gooden ack-nowledged that returns were anaemic, which he blamed on market conditions, but said he was bullish about the funds' prospects.

risk-averse stance

Gooden did not specifically address why the B and E funds had such little take-up, nor how they were performing relative to target, saying only that what the overall report on the scheme shows that investors were putting their money in a "safe" instrument, and that this was a function of the risk-averse stance of investors.

"The risk appetite of the high yield portfolio is greater than that of the money market fund. As such, the high yield portfolio invests in longer dated sovereign and corporate bonds that offer higher rates of return," he told Wednesday Business.

The NCB CapFunds portfolio has since grown to six funds with the addition of a US dollar portfolio in the fourth quarter of 2014, namely the xM Fund, xB Fund and iB Fund. The latter is a USD-indexed product.

"We have great expectations for our unit trust scheme," said Gooden. "We are currently at $14 billion in assets under management across six portfolios, making us the third largest in the industry. We are looking to add more portfolios over the medium term to provide our clients with options to further diversify and enhance their returns," he said.

But again, Gooden declined comment on which specific funds had received the additional $5 billion to $6 billion of subscriptions since last September. What it proves, he said, is that word about NCB CapFunds is getting around.

"Retail client subscriptions accounted for the large movement driven by continued growth in our Jamaican dollar-denominated portfolios along with significant interest in our new United States dollar-denominated offerings," said the NCB Capital Markets CEO.

Jamaica's unit trust market now comprises 26 funds managed by the five players. At last disclosure on February 9, the annual growth rate of those funds have ranged from 2.29 per cent up to 19.57 per cent.

"When you annualise the performance of our three unit trust portfolios and compare them to the respective benchmarks, they have all outperformed. Our two fixed portfolios outperformed the BOJ CD benchmark rate by 1.0 percentage point and 2.8 percentage points, while our equities portfolio outperformed the JSE Index by 10.9 percentage points," Gooden maintained.

Pressed about returns being negative for inflation, Gooden conceded that was a concern, but maintained that his product is a good bet for those who want to play it safe.

"From a local currency perspective, the returns are attractive on a risk-adjusted basis when compared to other options in the market. However, the inflation concern is real, and as such, we encourage investors to include hard currency options in their portfolio mix as a means of hedging against inflation," he said.

Jamaica's unit trust market was last valued at $96 billion of assets under management at September 2014 by the Financial Services Commission.

Sagicor Investments Jamaica Limited is the dominant player with 55.1 per cent of the market, followed by Scotia Asset Management Jamaica Limited with 27.1 per cent, NCB Capital Markets with 8.7 per cent; Barita Unit Trust, five per cent; and JMMB Fund Managers Limited with 4.1 per cent, according to the FSC.