By Dennise Williams, Staff ReporterSEEKING TO take full advantage of the bullish growth of the Jamaica Stock Exchange (JSE), investment bankers Dehring Bunting & Golding (DB&G), have modified their DB&G Premium Growth Unit Trust product.
The company has, since the last quarter of 2003, aggressively repositioned their holdings from 75 per cent equities and 25 per cent fixed income to 90 per cent equities and 10 per cent fixed income.
The result has been a 12-month growth rate of 70.13 per cent with the company stating that, "Based on current trends, a Premium Growth Fund growth rate of over 100 per cent for 12 months now seems very realistic."
BOOMED
"Essentially, we have repositioned our fund to be heavily weighted in stocks," said Clay Moodie, general manager of DB&G's unit trust division. "The JSE has boomed since the last quarter of 2003 because the Government has successfully sustained the lowering of interest rates. This has fueled investor confidence as people are now willing to take risks.
"We have seen that regional investors from Trinidad & Tobago and Barbados have taken an interest in the JSE and this has also fueled growth," he said. "Based on the performance of the JSE, our growth has skyrocketed."
The more heavily weighted a fund is in equities, the faster its growth when the stock market is advancing, he said. "We are now one of the best performing unit trust funds in the Caribbean."
And if low interest rates cannot be sustained, Mr. Moodie said it will be a simple matter of rebalancing the fund.
"Last year when fixed income rates moved up dramatically, we positioned the fund to take advantage of the high fixed income rates," he said. "If interest rates go up again, we will become more liquid. We will always want to have the liquidity to meet our clients encashment needs."
However, DB&G has an optimistic view of the direction of the economy and the corresponding growth of the JSE.
"Stock markets generally move in tandem with the level of economic confidence," he said. "With the recent positive developments announced by the Government, including the sale of a fourth cellular licence to AT&T, and the expansion in the bauxite alumina sector, the Jamaican economy is definitely on the recovery path."
STRATEGY
The company has embarked on a strategy to increase the number of investors who participate in the Premium Growth Fund. Mr. Moodie said staff incentives had been boosted. A commission paid to other brokers who sell the unit trust and independent sales brokers hired to sell the unit trust across the island.
"We want to widen our distribution channels, rather than just operate through the branch network," Mr. Moodie said.
'EMBRYONIC STAGE'
During this interview, Mr. Moodie sought to address published reports regarding the up and coming United States dollar mutual fund.
The institution is now in the 'embryonic stage' of bring its proposed US$ mutual fund product to market, he said. "We have just applied for the licence to sell the US$ fund and it will take about six months before we are in a position to provide more information."
In comparison to the Grace, Kennedy Financial Services and the Scotia Bank mutual funds that have a minimum investment balance of US$10,000 and US$5,000 respectively, he said the DB&G fund will target smaller investors.
Said Mr. Moodie, "There are many investors with funds sitting in commercial banks earning two to three per cent. We are targeting these investors and we anticipate that this mutual fund will be a major product for DB&G."
