The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RoyalFidelity believes its latest mutual fund will attract “double digit millions” from Bahamian investors through its promise to pay them a 4 per cent annual dividend.

Joseph Euteneuer, vice-president of mutual funds and business development, said the Prime Income Plus Fund was the investment bank’s first fund product for 15-20 years to pledge an annual capital return to participants.

He explained that the new fund was designed to meet Bahamian investor demands for higher returns than are currently available via bank deposits, with the Prime Income Plus Fund set to pay out dividends twice-yearly.

Mr Euteneuer told Tribune Business that the fund had already attracted “substantial interest” from the Bahamian capital markets following its formal launch last week.

The Prime Income Plus Fund started taking investor subscriptions at the beginning of December and will launch at the start of the New Year, acting as a “series” or sub-fund of RoyalFidelity’s existing Prime Income Fund. It will be focused on the same fixed income investments and portfolios.

“We’re one week in here, and already there’s substantial interest in it,” Mr Euteneuer said of the Prime Income Plus Fund.

“The initial reaction has been extremely favourable. We always felt before we came out with this thing that it would be received favourably, given the low interest rate, low deposit rate environment, on top of the lack of securities to buy in the local market.”

Asked how much investor capital RoyalFidelity hoped to attract via the Prime Income Plus Fund, Mr Euteneuer told Tribune Business: “It’s very, very difficult to say, but I’ll say we fully expect double digit millions.

“Whether it’s $15 million, $20 million, $50 million, it’s hard to say. I just think the time is right for this particular product, and I will not be surprised if it went up that far.”

The Prime Income Plus Fund will pay a bi-annual dividend of 2 per cent, in June and December, every year to make-up the full year’s 4 per cent investor return.

Mr Euteneuer said the dividend rate would be reviewed annually, with the Prime Income Plus Fund set to begin making investments come January 1, 2015.

“None of our funds pay out a dividend, and people are fed up with rock bottom interest rates,” he told Tribune Business.

“We feel we have a robust enough fixed income portfolio to allow us to do this.”

Bahamian investment funds focused on the domestic market have traditionally retained all the profits they make, reinvesting these earnings in other securities and instruments.

This ensures fund net asset values (NAV) continue to appreciate, with investors/subscribers only ‘monetising’ their investments when they redeem them.

Mr Euteneuer said the ‘trade-off’ for the Prime Income Plus Fund’s bi-annual dividends would be a slower increase in NAVs (the value of its shares’).

But he added: “There are a lot of people out there looking for income, and looking for better rates than they can get with fixed deposits, and this will help them out.

“We just see a need in the market for this thing, have what is needed to put in place, and have just structured this fund to meet that need.”

RoyalFidelity’s flagship investment fund, the Growth and Income Fund, did pay a dividend when it launched some 15-20 years ago.

Yet, since that practice was stopped, none of the investment bank’s investment/mutual funds have paid any kind of dividend.

Mr Euteneuer explained that investors who bought in before January 1 would get the benefit of a June 2015 dividend covering the entire first six months, whereas those subscribing afterwards would be ‘pro-rated’ according to the time when they invested.