Rezworth B. Burchenson
Editor's note: For those unit trusts which heavily invested in the equities market, 2005 was a brutal one, principally as a result of the eight per cent decline in the Jamaica Stock Exchange. However, those unit trusts funds that invested in the money market and real estate managed to escape relatively unscathed. In fact, many investors who came into the market last year, would have experienced a reduction in their portfolio by the end of the year.
This week, in its continuing series on investing in 2006, Sunday Business speaks with the vice-president at Pan Caribbean Financial Services Limited (PCFS) and general manager of Pan Caribbean Asset Management Limited (PCAM), Rezworth B. Burchenson about investing in unit trusts.
Sunday Business: Last year was a particularly challenging year for unit trusts - what exactly happened?
Rezworth Burchenson:2005 was primarily challenging with respect to the economic variables. The uncertainty of mid year negatively impacted the stock market. Also, investors were over-optimistic about possible returns on the local stock market. These expectations made the marketing of our flagship portfolio challenging. However, our Jamaican dollar and U.S. dollar the bond market performed well in an environment of declining interest rates.
SB: How satisfied are you with the performance of your various unit trust funds.
RB: Whilst our Sigma Solution performed as per expectations, we were disappointed in our Optima returns. However, 2005 taught the entire investment community valuable lessons, which we have noted at Pan Caribbean.
SB: What would you say to reassure an existing unit trust client who might be concerned about the fall in the value of his/her portfolio.
RB: To answer that question we have to look at the history. Since inception in 1994 our Sigma Optima portfolio has returned 1,300 per cent to our unit-holders as compared to 580 per cent for the main index of JSE stocks. Inflation over that period amounted to approximately 200 per cent, and the Jamaican dollar depreciated by less than 100 per cent.
All these factors points to how an investment in equities, in particular our Sigma Optima Portfolio creates and grows an individual's wealth over the LONG TERM. As such we encourage our investors to always think long term.
Similarly, what would you say to potential investors?
In addition, take these factors into consideration. Potential investors should:
Have a strong resolve towards wealth creation,Accept that wealth is created over the long term, Have a focus towards making a sacrifice and eliminating conspicuous consumption understanding the benefits that will be created in the future Be consistent in their investments. That is, make a commitment to saving a set minimum amount per month for say five or ten yearsThis is highlighted in the fact that an investor who invested ten thousand dollars every month in our Sigma Optima for the past ten years would now
be worth over $3.1m as at December end 2005.
SB: This is the second year that Sigma has outperformed its competitors. What sets you apart from the competition?
RB: Firstly we have a great team. From our investment representatives to our very knowledgable members of the Board of Directors and our chairman, Mr Colin Steele. We have found that our performance is related to the depth, quality and timeliness of our research and we have invested heavily in that unit. Also, our unitholders have exhibited confidence in our ability to create and grow their wealth over the long term and have stuck with us, even during the bear market of 2005.
SB: What plans, if any, do you have to drive the performance of the fund this year?
RB: We will continue to employ our current strategy with some adjustments, coupled with continuing to invest in our people, especially in research and portfolio management.
SB: What about foreign currency products?
RB: PCAM, along with the other unit trust managers have written to the minister of finance seeking approval to launch new portfolios. The minister has indicated that he is looking into this matter and will advise us shortly. We anxiously await a positive response. On the receipt of that response, PCAM intends to launch a number of new portfolios which we believe will be well received by investors.
UNIT TRUST PERFORMANCE
Unit Trusts Year to Date Return (%)
Fixed Income Portfolios
PCAM Sigma Solution 14.3
DB&G Money Market 13.9
Capital & Credit Giltedge Fund 12.9
Barita Money Market 11.6
Equity Portfolios
PCAM Sigma Optima -0.2
Barita Capital Growth Fund -0.3
Capital & Cr Capital Growth Fund -4.4
DB&G Premium Growth -5.2
Capital & Cr Income & Growth -12.5
PCAM Real Estate Portfolio 11.7
DATE: Dec. 31, 2004 to Dec. 30, 2005.
