By NEIL HARTNELL
Tribune Business Editor
RoyalFidelity has no plans to create more international investment funds “in the near future”, with low domestic interest rates making it difficult to guarantee for Bahamian investors’ principal.
Joseph Euteneuer, the investment bank’s mutual fund manager, told Tribune Business that there were no plans “to add anything new” to its investment fund family, arguing that current options were sufficient.
RoyalFidelity has typically guaranteed that investors in its TIGRS international funds will at least recover 100 per cent of their principal by investing an equivalent sum in local, Bahamas-based investment instruments as a ‘hedge’.
However, Mr Euteneuer explained that with Bahamian bank deposit rates at record lows, due to a combination of the Central Bank’s December interest rate cut and system liquidity, investor monies would have to be “locked up” for an extended period of time to guarantee the principal.
This, he added, had reduced the attractiveness of international fund investments for Bahamian institutional and high net worth investors.
“The last one came to maturity,” Mr Euteneuer told Tribune Business of RoyalFidelity’s international funds, “and it’s unlikely we’ll introduce them in the near future.
“It’s unlikely in the near future that we’ll even consider them. We can’t guarantee the principal, so it’s not attractive.”
He explained: “With such low rates, in order to guarantee the principal, we’d have to go out so many years, and people are not willing to lock up their monies for a long period of time.
“We were doing it for five years, and that’s a reasonable period of time, but anything longer than that is not attractive.”
Mr Euteneuer emphasised that RoyalFidelity was “going to stick with what we’ve got” in terms of investment fund products for Bahamian investors, including its three-strong domestic fund family.
“I don’t see the need to add anything new to our portfolio at the moment. It’s enough for anyone. We have the right mix of product in the local market,” he said.
Despite the uncertainty created by the imminent general election, Mr Euteneuer disclosed that RoyalFidelity’s Bahamas-focused investment funds still had a combined $208 million in assets under management as at end-March 2017.
Its Prime Income Fund, which focused on fixed income securities, such as bank deposits, preference shares and government and corporate bonds, holds more than 50 per cent of the total at $107 million.
“It’s a very substantial number and it’s growing,” Mr Euteneuer said. “We’re seeing an increase in our pension business.”
RoyalFidelity’s Secure Balanced Fund, which is split 60/40 between fixed income and equity investments, has some $74 million in assets. The Targeted Equity Fund, which focuses on equity investments in listed companies, holds the balance at $27 million.
Mr Euteneuer said the investment bank expected “modest growth” in assets under management through to the end of 2017.
“We don’t expect a huge jump in assets,” he told Tribune Business, “but we do expect to see modest growth through the end of the year.
“There’s still a boatload of cash sitting out there with people facing declining bank deposit rates. Eventually people won’t be able to take the pain any longer, and will move outside their comfort zone and in invest in mutual funds. It’s not easy in this market.”