Jul 2009 Financial News

Slow growth for FUNDS THIS YEAR

Jul 22, 2009

While speaking to reporters following the handing out of the De La Rue scholarship at the Bank, Central Bank Governor Ewart Williams told the Business Express last week that given the situation in the international markets, a drop in rates was expected and should not cause alarm.

Some long-time investors have taken the advice of investment gurus who have warned that in times of doubt, investors should stick it out.

But newer investors have been shivering in their boots.

Last week one investor who had a stake in a money market fund, worried about the decline in returns.

"Look at the rates, I need to talk to my husband, " said the young woman who did not want to be named.

She was alarmed that return rates on her investments had moved down by almost one per cent since last year.

While mutual funds have generally been regarded as a safe investment for customers, the mutual funds industry has been growing at a significantly slower rate since the downturn began near the beginning of 2008.

The Central Bank report states: "The mutual funds industry continued to grow but at a much slower pace than in the previous year as total assets under management increased by 4.7 per cent compared with 8.5 per cent in 2007."

When asked during a brief interview at Scotiabank's Park St, Port of Spain branch if investors at Scotia had been holding back or postponing their decisions to put their extra bucks in mutual funds, Vedwatee Maharaj, investment field consultant said: "Yes, we did see a bit of a slowdown."

She said that during last month and this month there was an actual increase in sales.

Scotiabank's figures showed that for the first quarter of 2009 the value of the bank's money market mutual funds contracted significantly.

At the end of the first quarter in 2007 the total sum of the mutual funds assets under Scotia's management came up to an estimated US$41 million.

By the end of 2007 this had grown to an estimated US$61 million.

By the last quarter of 2008 when most of the world's major economies were in free-fall as a result of the contagion effects of the US financial market meltdown, Scotia's funds under management assets were at a low of approximately US$39 million, while figures for the quarter which ended in April this year, showed a further decline to about US$36 million.

The Central Bank Monetary Report indicated that this was an across the board phenomena affecting both stock market and money market instruments.

The Report stated: "As the stock market trended downwards in the second half of 2008, the value of mutual funds contracted by 1.8 per cent or $500 million."

The Bank attributed this contraction to a fall in the asset value of the local equity market and not because of money market instruments.

The total money market segment grew by 10.5 per cent over the period January to March 2009, indicating some recovery was on the horizon.

However, the slowed growth on the money market half of the mutual fund equation also played a hand in the figures.

Stockbrokers Bourse Securities Ltd said recently that while US Money Market Funds still offered investors one of the highest rates of return, "since the beginning of the year yields offered by financial institutions on average have declined significantly".

Executive director of the Unit Trust Corporation of Trinidad and Tobago, Marlon Holder said that investors were already seeing more positive signs however, as the market was on its way back up.

Last week the UTC said in a statement that its investment plans had made some $163 million dollars in returns for investors.

The release said: "While the financial markets continue to fluctuate, those investors with high risk tolerance are already reaping the benefits of the changes in the energy and North American markets."

UTC representatives said the positive changes in the market were reflected in the products pinned to the performance of these markets.

During a recent interview, Republic Bank managing director David Dulal-Whiteway advised that in this turbulent financial environment investors look at all their alternatives, instead of putting all their eggs in one type of fund basket, and stay diversified so even in the event that one of their investments fell off in terms of returns, they had other performing investments which could tide them over.

Source: Trinidad Express
http://www.trinidadexpress.com/index.pl/article_business_mag?id=161507441
Published: Wednesday, July 22nd 2009