Many investors in the growing pool of equity-linked managed Funds are losing out on good returns being enjoyed by others in the Unit Trust industry because they fail to focus regularly eyes on their investment and compare the performance of their investment against others.
Investors wanting to enjoy stock market-like gains with reduced risk have several options, but paying attention to past performance can make a big difference between ordinary or excellent returns.
Investors should review the performance of their investment regularly at least once per year to see how well theirs stack up with similar forms of investment. This applies to stocks, Unit Trusts, money market instruments or any other forms of investment.
A good example is the long-term top unit trust performer Barita’s Capital Growth Fund that gained the most for the year to September, with an increase of 43.15 percent, outperforming by far the 23.69 percent posted in the corresponding period in 2018. The Fund’s twelve-month growth was an attractive 52.67 percent, the highest of all the local equity Funds.
New kid on the block JN Mutual Funds Global Equity Fund holds the number 2 spot with growth of 35.91 percent to October 2 and gained just over 31 percent for the last twelve months, followed by 
Sagicor Investments’ Sigma Equity Fund with, growth of 31.31 percent and sits at number 3 for 2019 to date but that is lower than the 36.47 percent at the similar point in 2018. VM’s Wealth Classic Equity Growth portfolio is the fourth-best performing Fund in 2019 with a gain of 29.78 percent and is significantly up on the 16.42 percent increase in the 2018 period. NCB’s E Fund is next with 29.26 percent for 2019, a huge turnaround compared to last year’s mere 2.96 percent gain.
Barita’s Capital Growth Fund that led the pack with growth for the twelve-month period is followed by Sagicor’s Sigma Equity Fund with 39.84 percent and in third place, VMWealth Classic Equity with 33.96 percent.
Scotia Premium Growth Fund delivered a 23.14 percent growth while JMMB Income & Growth Fund had gains of 22.64 percent for the nine months to September. Sigma Global Venture Equity Fund delivered gains of 18.22 percent for the year to September and 17.60 percent for the 12 months.
The bottom three performing equity Funds for the year to September are JN Global Diversified Income with 11.26 percent growth and a twelve-month growth of 9.10 percent as of October 2, JMMB Optimum Capital generated just 15.7 percent gains for the nine months, and 11.44 percent for the past 12 months.
The three best performing Funds, Sagicor’s Sigma Equity, Scotia’s Premium Growth and Barita’s Capital Growth, have been and continue to outperform the other players in the market over the long term, despite encountering periodic blips in their performance due to local and external economic conditions.
For the past 5 years to the end of 2018, the three best performing Funds were Sagicor’s Sigma Equity, Scotia’s Premium Growth and Barita’s Capital Growth, and for the 10 years to 2018, the same three Funds have been the top performers.
Sagicor funds unmasked
The best way to make money in the stock market or to minimise losses is to understand what is being invested in an avoid overpriced stocks. Investors have bought heavily into the concept of tourism industry being a winner in Jamaica but they need to know that it is highly seasonal with the bulk of the income earned in the period from Christmas Eve to somewhere in April and again between July and August.
Entities involved in the hotel traded will note that earnings slump sharply for the rest of the year but cost fall much more slowly. Against this factor is not surprising to see the Sagicor Real Estate Fund’s highly inflated first quarter profit, gave way to more realistic results in the company’s second quarter, with profit of 8 cents per share in the June quarter down from 11 cents in the June 2014 quarter. Buoyed by an abnormal first quarter results, earnings ended at 46 cents per share to June versus 27 cents for the six months to June last year. As the year progresses earnings per share should fall, with the lower tourism inflows for the remainder of the year.
The fund acquired the Hilton Rose Hall in January 2015, adding 489 hotel rooms directly under its ownership. The acquisition helped the fund to report $570 million in profit after tax for the March quarter. Not disclosed to investors, is the fact that the expenses reflected in the March interim results were not the normal amount one would expect from the level of business attained. While the income in both the June and the 
March quarters were virtually the same, operating expenses were nearly $200 million more in the June quarter than in March. Why is this so? In all probability the former operators of the hotel would have spent on marketing and refurbishing that would have helped to generate the income without some of the attendance cost, not so in the June quarter. While profit before taxation in the first quarter was $293 million from revenues of $1.19 billion, the net position in the June quarter was only $72 million from just $37 million less income from the hotel.
What can be expected is that revenues could be down by about 30-40 percent while expenses won’t fall much, resulting in large losses for the rest of the year. With the rate of exchange of the local dollar stabilizing, appreciation from the units held in the Sagicor Unit Trust is unlikely to show much gain. What now exist is a company whose earnings, at best may have peaked and at worse, could end up being lower than the 46 cents per share reported to date, then there is 2016 when the hotel expenses will reflect a full year’s expenditure and profits from it won’t be as robust as in the March quarter. Where will the profits come from to justify the high stock price? These are questions that investor should be asking themselves and management.
The FSC and the Stock Exchange need to ask themselves if allowing companies to leave inadequate information in the market place is the best way to protect investors and the integrity of the capital market?
