MUTUAL FUND ASSOCIATION OF TRINIDAD AND TOBAGO - MFATT

Mutual Funds and the Christmas Season

Christmas is characterised by feelings of hope and joy, which are needed more so now due to the socio-economic impact of COVID-19 on families and households. The season is also marked by high levels of consumerism. This year’s preparation and observance of Christmas will require significant adjustment on the part of families because of the health and safety guidelines imposed and also due to the depressed spending capacity of consumers.

At this time, most consumers review their options for the financing of activities related to the season. Funds can possibly be derived from savings, investments, loans or mutual funds.

What is a Mutual Fund?

A mutual fund is a type of investment that is made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by investment professionals registered with the TTSEC, who manage the pool of funds/assets and attempt to produce capital gains or income for the fund's investors.

What is a Subscription and Redemption? Subscriptions occur when investors deposit money into their Mutual Fund account. Redemptions occur when investors withdraw money from their Mutual Fund accounts.

Click here to read the full article in PDF format.

Mutual Fund Managers

Many investors often turn to mutual funds, also known as Collective Investment Schemes (“CISs”), as a means to save money for a variety of reasons. The term “save” is normally used when you accumulate funds in a bank account or a credit union. However, when you place your money in a mutual fund/CIS you are actually, investing. Saving is usually for a short-term, in a financial institution (bank) where you can easily access your money, with very little risk. Investing on the other hand, involves your money being invested in stocks, bonds and mutual funds – with the expectation that your money will work for you, i.e., will bring you returns. Investments are usually held for the long-term, not as easily accessible and involves some level of risk. With investments, over time, you can either make a gain, suffer a loss or remain with what you put in. There is risk involved.

A mutual fund/CIS allows for the pooling of investor resources to create a more diversified portfolio and take advantage of the benefits of large-scale investment opportunities. Investors in mutual funds/CISs effectively own portions of the overall pool through units/shares, which are proportional to their investments/contributions. The mutual fund/CIS manager is responsible for managing the pool of resources. This is done by conducting market research and investing in securities which corroborate with the mutual fund/CIS’s investment strategy. For example, if the fund’s investment strategy is focused on energy products then the investments would be in assets aligned with the energy sector. This week’s article will focus on the CIS Manager, their responsibility and importance.

Click here to read the full article in PDF format.

Market Conduct - What is expected from Registrants?

We are already into the second month of the year, and persons may at this time be implementing their financial goals. One way to reach those financial goals may be through investing in equities, debt securities (such as bonds) and mutual funds. This week, we focus on the types of market conduct that any prospective investor should expect from persons who are conducting securities-related business in Trinidad and Tobago.

First, any person or entity that seeks to conduct securities-related business (investing) on your behalf must be registered (i.e. a registrant) with the Trinidad and Tobago Securities Exchange Commission (“TTSEC”) pursuant to section 51 of the Securities Act, 2012 as amended (“SA 2012”). For the purposes of this article, whenever we refer to a registrant it’s one registered under section 51(1) of the SA 2012. The prescribed registrant categories include:

Broker-Dealer;
Investment Adviser;
Underwriter;
Registered Representative;
Sponsored Broker-Dealer; and
Sponsored Investment Adviser.

A person seeking to invest will likely speak to a Broker-Dealer (a person who conducts securities transactions on behalf of others, primarily clients, or his own account) or an Investment Adviser (a person engaging in, or holding himself out as engaging in, the business of providing investment advice).

Click here to read the full article in PDF format.

Impact of COVID-19 on T&T’s Equity and Mutual Fund Markets

We have reached the end of a particularly challenging year. Most countries continue to grapple with the consequences of COVID-19 which crippled many industries, particularly in Travel and Tourism. Since the imposition of public health regulations and restrictions on movement (otherwise referred to as ‘lock down’ measures) to contain the spread of the virus, the Trinidad and Tobago Securities and Exchange Commission (TTSEC) began enhanced monitoring of the impacts of COVID-19 on Trinidad and Tobago’s Equity and Collective Investment Schemes (generally known as Mutual Funds) markets. This article seeks to highlight some of the markets’ performances observed for the year 2020.

Equity Markets

Although the major indices suffered losses due to the pandemic, the markets, through their resilience, stymied further losses and remained stable for the latter half of 2020. Figure 1 shows that both the Trinidad and Tobago Stock Exchange (Stock Exchange) Composite1 and All T&T Indices2 suffered significant losses during the peak of the lock-down period (March 2020 – May 2020) with the Composite Index declining by 224.28 index points (15%) and the All T&T Index by 200.27 index points (10%). Figure 2 shows that during this same period, the Cross-Listed Index3 suffered losses of 33.87 index points (23%). However, the Stock Exchange’s Small Medium Enterprises (SME) Index4 suffered minimal losses during the period with an average loss of 3.43 index points (5%) throughout 2020. Table 1 outlines the performances of the four market indices from January to December 11th, 2020.

Click here to read the full article in PDF format.

Types of Mutual Funds

A Mutual Fund is a collective investment scheme that pools investors monies to form the source for investments in various securities depending upon the investment objective of the scheme eg. equities, bonds, money market instruments, other financial securities.

For investors who would like to invest in mutual funds, where do they start?

The number of funds is so large and investment programs so varied, that investors could become overwhelmed.

Generally speaking, there are four broad types of mutual funds; equity funds, fixed-income funds, money market funds and balanced or hybrid funds.

Every mutual fund is designed to spread around risk while capturing wider market gains. Some types of funds carry a higher amount of risk than others, but also higher potential rewards.

Here’s a more detailed look at the most common types of mutual funds, starting from the higher to the lower risk funds.

EQUITY OR GROWTH FUND

As the name suggests, this portfolio is mandated to invest mostly in common stocks. These funds are considered riskier than the other type of funds and are used for growing your investment as they usually provide a higher return.

This type of fund is more suited to the aggressive investor who is willing to accept a little more risk.

The younger investors should include equity funds in their portfolios as they have more time to weather inevitable ups and downs in market value.

FIXED INCOME OR BOND FUNDS

These funds invest in government and corporate debt. They are considered a safer investment than stocks. Fixed Income funds are less risky than growth funds, and suitable for investors in need of regular periodical income.

Investors nearing retirement should have more fixed income funds in their portfolio to protect their nest egg while earning a higher interest than traditional savings and fixed deposit accounts.

BALANCE OR HYBRID FUNDS

These investments are a combination of equity and fixed-income funds with a fixed ratio of investments, for example 60% stocks and 40% bonds.

This type of fund is best suited to the investors who is willing to assume some level of risk to achieve a growth in capital, but who also want to maintain a moderate level of current income.

These funds are popular with younger investors who usually have longer investment horizons and a relatively moderate appetite for risk.

MONEY MARKET FUNDS

Money Market funds are fixed-income mutual funds that invest in high-quality, short-term debt from governments, banks or corporations. Examples of assets held by these funds include Treasury Bills, Certificates of Deposit and Commercial Paper. They are considered one of the safest investments.

Money Market Funds are for conservative investors with a short-term horizon whether storing money for emergencies, short-term savings, or looking for a place to store cash from the sale of an investment. It aims at providing easy liquidity, preservation of capital and moderate income.

OTHER TYPE OF FUNDS

INDEX FUNDS

An index fund is a type of mutual fund whose holdings match or track a particular market index, such as the S&P 500. Index funds. The Fund is structured by purchasing small amounts of each stock of the index.

COUNTRY GENERIC

Some Mutual Funds are country generic, investing in a particular country or group of countries e.g. Asia, North America, South America, Europe etc.

SECTOR SPECIFIC

Mutual Funds are also sector specific. These funds choose to invest in a particular industry or segment of the market e.g. the energy sector. Sector funds are considered less diversified than most mutual funds, but they do offer diversification within a particular industry.

Looking at funds by objective s is part of the investor process.

What kind of investor are you

What is your risk profile – high, moderate or low?
What goals are you trying to achieve?
This would guide you in what type of funds to invest in.

INVESTMENT EDUCATION