This week we hear from Roger Cave, founder and Managing Director of Fortress Fund Managers Limited
1. What are you investing in these days? What looks good to you?
We’re professional investors with responsibilities to our clients. Our investment decisions are always driven by models seeking the best values available at any point in time across the equity markets locally, regionally and internationally. Our portfolios are re-balanced periodically as the prices of securities change as well as the underlying fundamentals. Two-thirds of our total investments in our Caribbean Growth Fund are now in international assets, outside of the Caribbean.
Currently we’re seeing the best investment values in emerging markets and international markets and these are the largest holdings in our Caribbean Growth Fund. Equity market indexes are not currently priced for high returns, but under the surface we are still finding some great opportunities and our portfolios reflect that.
Since most of our investing is for pension funds, we must cater for people who want to cash in soon as well as for others who are savings for decades and the three different share classes in our Caribbean Pension Fund allows us to position those portfolios to meet the varying needs accordingly.
2. What keeps you awake at night?
There is no shortage of major issues in the news, and this is always the case. One of the most concerning things in Barbados is that we’re saving far too little as a country for our collective future. Incentives for pension funds have been removed, bank interest is extremely low, the stock exchange is shrinking and so where do we invest our client funds?
Our mutual funds are temporarily closed to new lump sum investments at a time when billions are sitting idle in commercial banks earning negative inflation-adjusted returns.
In addition, we can’t convert Barbados dollars freely to US currency, which severely limits the opportunities both to reduce risks and increase returns for our portfolios. Plus the demographic shift, where we’re all getting older and medical costs are absorbing a larger portion of our incomes. It’s a ticking time-bomb that we in Barbados must discuss and start to address.
3. When will property values come back to their former levels?
Well, in Barbados they are currently 20% to 50% down from the peaks before the financial crisis, depending on where you look. This is a worry when you consider that many places in the world have recovered from the financial crisis and their real estate values are now at all-time highs. But real estate requires confidence, and over the last few years we’ve lost that, hopefully only temporarily but it has hurt us quite badly.
Of course the values will come back, but it’s a long curve to recovery and structurally, we don’t make it easy. There are exchange controls, cost of transactions, a lot of red tape and other obstacles. Even so, if we could address these issues Barbados is a beautiful country and an extremely powerful brand.
Selected properties like Royal Westmoreland and the Crane have done well, and generally Barbados has held its own with investors who fell in love with the place and bought here in spite of everything else. But we can’t rely on that anymore; there are too many good alternatives emerging these days and we have to up our game.
Extra time: Is retail dead in the region?
Not at all. It will continue. But the old models must be replaced. Most regional governments have always had policies of high duties on imported goods as a source of revenue and to protect foreign exchange and local production. But online shopping and the wider use of credit cards make traditional regional retail increasingly uncompetitive.
Retail must re-invent itself as an experience to be enjoyed and not endured, and locally this is urgent. Overseas, we see experiments taking place, including price-matching, buy online and pick up in-store and so on. We need to see what we can learn and do.
Food is now a big driver, and so is entertainment; people will always shop, but they shop differently. My concern is that our capital Bridgetown is not receiving the innovation or investment it desperately needs and deserves. This is a multi-faceted issue, where vision, taxes, finances, infrastructure and commitment are all needed for a renaissance, and we’re not seeing that in a formal and actioned way yet.