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The offices of Pan Caribbean rise to the skyline in this August 2006 Gleaner photo. The financial firm is said to dominate the $15 billion unit-trust sector in market share and returns on investment.

Sabrina N. Gordon, Business Reporter

Jamaica's unit-trust market is now valued at over $15 billion, but has been all but devoid of new business in the past two years, industry figures show.

The sector has failed to pull in new investors, fund managers acknowledge, even as returns on units climb higher to peak above 13 per cent for the top-performing instrument.

In September 2006, the sector's value was estimated at $15.1 billion.

A year later, September 2007, unit-trust investments were worth just under $15.5 billion, for year-to-year growth of 2.4 per cent, according to Alrice Palmer, securities analyst at the Financial Services Commission.

That performance was substantially weaker than the market's overall performance over the past three years, when the sector grew 24 per cent - from $12.49 billion in 2004 when the FSC first began collating data to this year's $15.48 billion.

But much of that vibrancy was in 2005 when funds under management rose to $15.29 billion, representing growth of 22.5 per cent in that year.

The market would lose ground in 2006, however, dropping back to $15.1 billion in a period when the stock market was depressed and returns on fixed-income investments and benchmark interest rates were in decline.

Sector has done well

Still, fund managers say the sector has done relatively well since, even in the face of competition from alternative schemes, to regain ground lost in 2006.

"Unit trust is a very hard sell," said Karl Lewin, managing director of Barita Investments Limited, in a Sunday Business interview.

"People are not really tuned in to it and, with the new investment schemes coming on the market, they have become very excited about the chance for great returns of 10 per cent per month."

Brian Fraser, unit trust manager at DB&G, in an endorsement of Lewin's analysis, said units were increasingly difficult to sell given competing investments.

"Now with increased rates on government instruments, the yield on unit trust has become less attractive," he said.

The market rate on government instruments now averages 13-14 per cent.

The highest yield reported from units to date is 13.2 per cent from Pan Caribbean's Sigma suite.

Pan Caribbean is currently the market leader, with approximately 41 per cent, by its estimate, with funds totalling over $6 billion.

"There is a lack of awareness and knowledge among people in relation to unit trusts, and they tend to gravitate more towards short-term instruments," said Karen Richards, unit trust manager at Pan Caribbean.

"Investors are also more interested in knowing how much return they will make in a month, as with th investment schemes. With unit trusts, however, there is uncertainty because of how the assets are invested, which makes it hard to predict the rate, for example, with the money-market instruments."

Barita's market share

Lewin estimates that Barita has about 15 per cent market share, which would put the value of its portfolio at about $2.3 billion.

Its capital growth and money-market funds have been performing at 14.45 per cent and 9.53 per cent yield as at December 14, 2007.

Th schemes, which are big competitors to investment houses, have done the sector one favour: made Jamaicans more curious about investing.

Fraser, as do other fund mana-gers, believes that with the opening of the market there is an opportunity to leverage products like unit trusts through education.

So, aside from attempting to dazzle potential investors with numbers - Barita, for instance, says its capital growth fund would have returned 113 per cent for a client invested since its inception 14 years ago - to grow the market, fund managers have been hitting the streets to entice would-be investors.

"We have gone into schools, offices and organisations to give talks and presentations on unit trusts," said Lewin.

One of the selling points is the vehicle's security.

If trust collapses

Investors, Lewin points out, will be able to retrieve their funds in the event that a trust company collapses, since the funds are held by a trustee and not the fund manager.

To drive business, Lewin adds, fund managers would have to concentrate on building clientele but said that remained a big challenge.

"The problem is to get the people to come in and understand that at the end of a period they can receive a reasonable sum of money if the discipline is maintained," said Lewin.

The investment dollar, he said, is more likely to be spent on stocks, government paper, the foreign currency market and other traditional investments, with the unit trust receiving the least amount of the flows.

Pan Caribbean's strategy is to target employees, according to Richards, who says her company has found that salary deductions tend to work as a method to keep individuals investing.

sabrina.gordon@gleanerjm.com