Tue | Sep 25, 2018

Growth & Jobs | At JN Fund Managers, Less is More

Published:Tuesday | September 11, 2018 | 12:00 AM
Allan Lewis, managing director, JN Fund Managers.

Allan Lewis, managing director of JN Fund Managers (JNFM), says that by charging the lowest fees among all unit trusts and mutual funds domiciled in Jamaica, JN Mutual Funds provide the best value for their investors.

"Total fees of 1.5 per cent are applied to all six of the mutual funds operated by JNFM," Lewis said. "And, by comparison, other funds registered in Jamaica charge fees up to twice as much.

"Investment management and other fees reduce the returns that clients receive on their investments," he further explained. "Over time, the value of their portfolios may be millions of dollars less, based on the higher fees charged by other firms."

Giving the hypothetical example of someone putting aside $30,000 per month for 20 years at a compound annual return of 18 per cent, without fees, he pointed out that an investor in a fund with an annual investment management fee of 1.5 per cent would have accumulated $7 million more than an investor in a fund with the same gross return, but with an annual investment management fee of 3.0 per cent.

 

FEE STRUCTURES

 

"Comparing the returns from different mutual funds, many investors forget to factor in the impact of different fee structures. There should to be a lot more focus on this," he advised. "The fee structure of a fund is one of its most critical elements that impacts the actual returns that investors in mutual funds and unit trusts obtain."

He also said, "Many investors are unaware of just how much is being paid in fees as the investment management fee, along with other operating expenses, are deducted automatically.

"Of course, the gross returns must be competitive for the funds to be attractive, and at least two of the JN Mutual Funds are at the top end of the market in this regard," he said, adding the clarification that the mutual funds and unit trusts are essentially identical products that provide investors with an opportunity to pool resources, benefit from investment management expertise, and tailor investment portfolios to their specific circumstances.

The JN Mutual Funds currently comprise six investment portfolios, allowing investors to align their personal financial strategies to their individual goals, appetite for risk, time horizons, and other personal preferences. These include investments in the local and overseas money markets, local and global fixed income, and local and global equities. JN Fund Managers also offers some funds denominated in Jamaica and US dollars so that investors can partially avoid currency risks.

"The equity fund gives investors the option to take a more aggressive long-term posture, while the money market offers a less risky alternative for investors," he explained. "For the local investor, global investments also offer a hedge against the possibility of a significant decline in value of the Jamaica dollar.

"The funds are also structured to serve individual lifestyles. Therefore, someone close to retirement could select the particular fund they find to be less risky and otherwise appropriate for their own portfolio needs," Lewis said.

 

REGULATORY FRAMEWORK

 

On the matter of the security of their investments, he indicated that recent regulations make the mutual funds and unit trusts collective investment schemes much more secure.

"Our regulatory framework is perhaps the best in the English-speaking Caribbean as recognised by the International Monetary Fund and other multilateral agencies," Lewis said. "Investors can be assured that the professionals at the Financial Services Commission and also at the Bank of Jamaica ensure the integrity of all registered mutual funds and other collective investment schemes in Jamaica."

He cautioned, "It is always recommended that investors in mutual funds consult with registered and qualified investment advisers - such as those at JN Fund Managers. Furthermore, investments in mutual funds and unit trusts are not guaranteed, and investors may experience declines in their investment capital. However, the longer the investment time horizon, the less likely [it is that] investors will experience a reduction in their investment portfolios relative to their original investments.

"A quiet revolution is taking place in our investment markets, with the 'repo' product being replaced by mutual funds and unit trusts for the benefit of investors," Lewis said. "Many funds are now available to the investing public so that they can more easily tailor their investment portfolios to their own circumstances."