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Barita’s new real estate fund stands out in weakening unit trusts market

While the performance of some two-thirds of advertised unit trust funds is flat or recorded declines since January as well as over the past 12 months, one fund, offered by Barita Investments – its new real estate-backed fund – is showing outlier gains, growing more than 600 per cent, published market data to August 30 indicate.

The fund’s uneven market leadership among a large number of other mutual funds-type collective investment schemes, is explained in part by its recent arrival on the market, with Barita having announced its bringing to market of the new real estate fund in its April to June second-quarter results. The fund is backed by a sizeable property portfolio comprising 1,900 acres, which Barita has built up through its special-purpose vehicle MJR Limited, with a land acquisition investment of $10 billion between March 2021 and June this year.

Rising interest rates have negatively affected the equities market on which some of these unit trust funds are based, but real estate portfolios have generally continued to appreciate, particularly since the pandemic.

At the end of August, the top performing unit trust fund, as published recently in the Financial Gleaner, was Barita Real Estate, showing a 617.3 per cent gain year-to-date and 602.4 per cent over the past 12 months. With net asset value of $3,802, it was the highest listed buying or selling price of the 60 named funds and is comprised of real estate and fixed income investments.

The Barita investment is followed by Sagicor Real Growth fixed-income fund, which was up 22 per cent over the past year and grew by just less than 12 per cent year-to-date. NCB Capital Markets’ equities fund also appreciated 8.5 per cent year-to-date and 8.7 per cent over the past 12 months.

Few funds are in positive territory year-to-date, regardless of their asset composition. Forty of the 60 quoted unit trust funds offered by seven wealth management firms have not grown between January and August 30, according to the published data. Specifically, 29 funds have declined in value year-to-date and 11 funds grew less than one per cent over the period.

Barita operates six of the listed unit trust funds. Three saw appreciation in value and two declined. The performance of its income fund was not listed. Barita officials declined to comment on the funds’ performance.

Officials at NCB Capital Markets Limited, in response to Financial Gleaner queries, said that since the start of the year, stocks and bonds have been adversely impacted by the prevailing high inflation and interest rates environment, as well as the associated uncertainty.

“This, in turn, has been reflected in the unit trust performance,” the company stated.

On the bond side, global bond prices have fallen year-to-date, primarily due to the impact of global geopolitical tensions and their effects on supply of commodities and world prices, which sent inflation spiralling and incited an aggressive monetary policy response from central banks, the NCB Capital Markets response said.

“The rising interest rates, and now added fears of a recession, have caused volatility in the bond market and subdued demand for existing bonds that do not compensate for the elevated risks. This has resulted in a fall-off in bond prices, which has naturally caused a decline in unit trust portfolio performances, as their assets under management have reduced in value,” according to NCB Capital Markets.

The inflationary pressure has also impacted several bond issuers with some bonds now being considered low-yielding, given the current high-interest-rate environment, the investment house added. The local stock market has also softened, as the high inflation and interest rate environments have negatively impacted stock valuations and the relative attractiveness of new issuances of fixed-income securities and money market securities, it said.

A unit trust is an investment product marketed to small and large investors. It is a pool of assets, usually stocks, fixed income or real estate, which are placed in a common fund.

“The unit trust provides a great level of diversification to a portfolio, where the investor has instant holdings in several different companies and asset classes, giving a level of stability to your investment,” information on Barita’s website explained.

Unit trusts are also attractive as investment products, in that they allow investors to buy into sectors and industries without direct exposure to individual stocks or companies.

“Many persons are still not comfortable with the risks associated with equities and may have no clue as to how to choose the right stock. It is for that very reason why collective investment schemes have become so popular,” the Barita website information added.

Up to the end of August, the annual performance of the stock market reflected a decline for all the major Jamaica Stock Exchange, JSE, indices except for the JSE junior market index. The main JSE index declined 10.2 per cent after starting the year at 400,320 points and closing at 359,294 points on August 31. The combined index declined 7.8 per cent, having starting the year at 405,244 points and closing at 373,425 points on August 31. The junior index grew 20 per cent, starting the year at 3,454 points and closing at 4,168 points on August 31.

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