Ready to invest in mutual funds

QUESTION: I am a New Zealand citizen who wishes to invest in mutual or similar funds in Jamaica or neighbouring countries. I will prefer ones in equities and denominated in the local currency rather than USD or euro, etc. I can supply identification documents and have funds waiting in a leading European bank to invest. I am experienced in investing in mutual funds around the world.

PFA: There are several Jamaican financial institutions which sell mutual fund products but these are US and Canadian funds so they do not trade in the Jamaican currency. There are, however, four local unit trust companies which offer a range of capital growth and fixed-income products. As a non-resident, you can invest in our unit trusts but only with Jamaican dollars.

Barita Unit Trust manages a capital growth fund and a money market fund. The Capital Growth Fund invests in ordinary stock and fixed-income securities - the former for capital growth and the latter for income and security of principal. Although it does not put a ceiling on the proportion of funds that can be invested in equities or ordinary stock, it caps the portion of the Fund that can be held in fixed- income securities at 50 per cent so that gains on these units can be tax-free.

The Money Market Fund invests in short-term and long-term interest-bearing securities.

Capital & Credit Fund Managers offers three funds. The Income and Growth Fund invests primarily in equities but in fixed income securities as well. The Optimum Capital Fund invests in equities, commercial real estate, and fixed-income securities. The Gilt Edge Fund invests in long-term and short-term Government of Jamaica interest-bearing securities.

PanCaribbean Financial Services offers the widest range of funds. Sigma Optima invests in ordinary stock and Sigma Venture Fund invests in stock and 'quasi-equity structures'. It invests in both quoted and unquoted securities in the local, regional, and international markets and has a preference for emerging, high-growth companies.

PanCaribbean's other offerings include the Sigma Solution Fund which invests in government interest-bearing securities, and the Sigma Liberty Fund which invests in Jamaican-dollar and US dollar-denominated debt instruments issued by the Government of Jamaica.

Maturity

Sigma Vision facilitates investing in the Solutions, Optima, and Liberty Funds by salary deduction, the minimum allowed being five thousand Jamaican dollars per month. The investment must be held for a minimum of 180 days or incur an early encashment penalty of two to four per cent.

Scotia Investments, through Scotia Asset Management, operates the Premium Growth Fund which invests in equities, real estate, and money market securities. It is marketed as a balanced fund. There is an early encashment fee.

Scotia also markets the Scotia Premium Fixed-income Fund which invests in Government of Jamaica securities, certificates of deposit, and commercial paper issued by Jamaican and foreign institutions. The Scotia Premium Money Market Fund invests in interest-bearing securities and income can either be re-invested by buying additional units in the Fund or deposited to a Scotia account. There are no charges or early withdrawal penalties.

Offering circulars for the various unit trusts can be found on their websites. These Circulars give a wealth of information on the unit trusts.

They describe the investment policy of the unit trust, give information on the buying and selling of units, charges and minimum holding periods, remuneration of managers, tax concessions, price quotations, where the trust deed is located, and who are the managers, trustees, bankers, brokers, and auditors. Application forms are also available online.

There are more unit trusts that invest in interest-bearing instruments than those that invest for growth, but there is sufficient variety to give investors a choice.

There are variations in the minimum holding period and the penalties that apply when units are sold before the expiration of, that time, but that ought not to be a great concern because investing in unit trusts should be more for the long term than for the short term.

Overall, though, Jamaican unit trusts have performed creditably over the years. Funds that invest in interest-bearing securities have generally kept in step with or surpassed the yields on fixed-income securities, and those having a capital growth objective have often outperformed the stock market.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of "The Handbook of Personal Financial Planning", offers free counsel and advice on personal financial planning. Email finviser.jm@gmail.com