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Unit trust managers expect another good year following bumper 2015

Published:Friday | January 15, 2016 | 1:00 AMCamilo Thame

Unit trust fund managers expect another good year following windfall gains from the stock market in 2015, albeit not as steep.

Reduced interest rates, low inflation and a huge injection of cash into the market, as proceeds from the sale of Red Stripe is paid out to shareholders and the Government repays its first NDX bond should all factor in.

"We anticipate that the local stock market will continue to show positive returns in 2016, though at a slower pace than last year," Scotia Group Jamaica's vice-president of investment services, Marie James, told the Financial Gleaner. She expects relatively good results to be produced by several listed companies on the Jamaica Stock Exchange (JSE) following on strong earnings growth last year.

In 2015, all but two stocks closed the year at a price higher or at least the same as they were at the start of the year. The JSE index more than doubled, while the junior market index climbed by 62 per cent. As a result, equity-based unit trust saw high returns, especially when compared with gains ranging from one to eight per cent for fixed income funds.

For Scotia, its Premium Growth Fund, which is a mix of equity and fixed income, grew by 64 per cent, the second-highest gain across unit trust funds last year.

"This return is predominantly attributable to significant price increases in stocks held in the portfolio, combined with dividend income received during the year," said James. "The combined effect contributed to considerable growth in the Fund's net asset value (NAV) with its NAV per share advancing from $36.843 to $60.305 over the 12-month period."

"The stocks held by the fund saw price increases during the year ranging from 15 per cent to 510 per cent," she added.

The upper limit of the range she provided speaks to gains made on Red Stripe shares, which means that the fund will have to find a home for its portion of a US$195-million ($23-billion) payout from Heineken this month.

Next month, the Govern-ment is also scheduled to repay a $62-billion NDX bond.

"All of that cash coming into the first quarter will need somewhere to invest," said Sagicor Investment Jamaica CEO Rohan Miller. "The companies are doing better from a profit-performance basis, so people will go back into equity.

"The expectation is that the stock market will be even more attractive during the first half of the year due to increased liquidity and stronger performance of the underlying companies."

Sagicor's Sigma Optima, which mainly comprises local stocks, topped the 33 unit trust funds in terms of performance in 2015 when it recorded 90 per cent gain on its price. Sigma Venture, which includes preference shares and corporate bonds, returned a 32 per cent gain along with Sigma Diversified Investor.

Barita Investments' Capital Growth was the third-highest performer with 52 per cent growth in 2015, followed by JMMB's Income and Growth, 39 per cent. Both of those funds have fixed-income components.

NCB Capital Market's E Fund, which is entirely made up by stocks, grew by 32 per cent.

camilo.thame@gleanerjm.com