Thu | Sep 21, 2017

VM Wealth enters unit trust market

Published:Wednesday | June 29, 2016 | 6:00 AMNeville Graham
Devon Barrett, general manager of VM Wealth Management Limited.

VM Wealth Management is rolling out five unit trust products this week, marking a soft entry into a new market segment for the brokerage.

"Yes I can confirm that we'll be selling the unit trust instruments as of Friday," said general manager Devon Barrett. "We are opting for a low-key launch at this time," he said.

Four of the unit trusts products are backed by fixed-income securities, one of which is denominated in US dollars. The fifth is equity linked, Barrett said.

The JMD instruments will be priced at $1 per unit with a minimum investment of $5,000, while the foreign currency units start at US$1. The minimum investment is US$500.

Jamaica's unit trust market currently has five players; VM Wealth becomes the sixth. The latest industry statistics to December 2015, released by regulator Financial Services Commission, valued the unit trust market at $142 billion in funds under management.

Sagicor Investments dominates with 52 per cent of the market, followed by Scotia Asset Management, 21.3 per cent, NCB Capital Markets, 16 per cent; Barita Unit Trust Management, six per cent; and JMMB Fund Managers, five per cent.

Fixed-income securities are the favoured asset type, accounting for around 72 per cent of portfolios overseen by fund managers. Real estate makes up 17 per cent and equities nine per cent. Less than one per cent is held in cash.

VM Wealth is coming into the market at a time when FSC data indicates a slowdown. In the December 2014 quarter, the value of units sold to investors totalled $15.7 billion. Half a year later, demand dipped then recovered a bit to more than $12.7 billion in the June 2015 quarter. But by December 2015, quarterly unit sales had fallen to $7.1 billion, or less than half the levels seen one year before.

Within that same one year span, redemptions doubled from $3 billion at the December 2014 quarter to $6.3 billion in the comparative period at December 2015.

Barrett declined to say how much VM Wealth has invested to roll out its five products.

"The money we've invested is a show of commitment on our part that we believe in these instruments. We are confident that they will give a good return and so when we make money our clients make money," he said.

This is the first time that VM Wealth is coming to market with a pooled investment scheme. Barrett says the timing of the offering is a response to requests for higher yields, especially since the repo market had shifted.

"When we looked at repos for example, interest rates were hovering at around two per cent and our clients were asking for more, and we had to respond. We sought the necessary regulatory approval, and this puts us in a good position to satisfy clients' needs at this time," Barrett said.

He says the VM Wealth products are designed to cater to small investors.

"We checked on all the management fees in the market, and I can confidently say that ours is the lowest being charged," Barrett asserted.

neville.graham@gleanerjm.com