The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RoyalFidelity Merchant Bank & Trust yesterday said investors had injected a collective $10 million into its three-strong domestic mutual fund family for the year to end-May 2014, aided by the low interest rate “perfect storm”.

Joseph Euteneuer, the investment bank’s vice-president of mutual funds and business development, told Tribune Business that the low bank deposit returns had “opened doors” for its investment funds as higher-yielding alternatives.

“The fund family is performing well, given that we had a little dip down in January,” Mr Euteneuer told Tribune Business.

“Just straight-up asset gains year-to-date through May, the Prime Income Fund is up $5.2 million. That’s simple asset gains; $5,.2 million more in the fund than we had at the beginning of January.

“There’s $4.02 million more in the Secure Balanced Fund than we had in January, and for our [Targeted] Equity Fund we’re up $1.16 million. That’s since the beginning of January. That’s good. It’s not bad.”

The figures disclosed by Mr Euteneuer show that a collective $10.38 million has been injected into RoyalFidlelity’s Bahamian dollar-denominated investment funds since 2014 began, an indication of renewed investor interest in both the capital markets and higher-yielding returns.

“I think there’s a couple of main things driving it, at least from my experience,” Mr Euteneuer said. “First, there is a strong realisation on the part of investors that they need to do something for their future and returns on bank deposits are not going to cut it.

“People in some ways complain about the low rates in banks, but for us in some ways it’s a good thing, as it convinces people to consider other options.

“The banks don’t want that money sitting there when they can’t lend it out the other side and not make their spread. So there’s this perfect storm of low rates and clients looking for alternatives.”

Mr Euteneuer added: “At least it starts the discussion with people. It’s not happening in the bank deposits, and that just opens the door for a conversation that takes Bahamians by the ‘Wow factor’ and ‘Oh my God’.”

Excess liquidity within the Bahamian commercial banking system, which stood at almost $1.3 billion at end-April 20-14, has depressed deposit and interest rates given the inability of institutions to find qualified borrowers. Effectively, money supply is exceeding demand.

RoyalFidelity’s Targeted Equity Fund, which focuses on equity investments in listed companies, has the lowest level of assets under administration of the three funds at “just over” $14 million.

Mr Euteneuer attributed this to the natural greater volatility in equity markets combining with the “very risk averse” nature of Bahamian investors.

In contrast, the Secure Balanced Fund, featuring a mixed equity/fixed income investment portfolio, currently has $30.54 million in assets under administration, and the Prime Income Fund leads the way with $52.12 million.

“The Secure Balanced Fund is extremely attractive to people,” Mr Euteneuer told Tribune Business. “When we rolled it out, we anticipated this would happen and it did.

“We rolled it out in November 2012, and $30.54 million is incredible growth.”

When it came to year-to-date returns, Mr Euteneuer said the Targeted Equity Fund had produced a positive 5.61 per cent to end-May, its upside “pretty much in line with what the Bahamas International Securities Exchange has done”.

Equities-based funds traditionally produce higher returns, but greater volatility, than funds with fixed income components, and RoyalFidelity’s family has maintained that trend.

The Secure Balanced Fund produced positive returns of 3.75 per cent for the year to end-May, while the Prime Income Fund generated 1.91 per cent - again on the positive side.

“They’re all falling into line the way they should, and you could predict,” Mr Euteneuer told Tribune Business. “I think investors will be pleased. It’s still clipping along.”