Room of Oran | More mutual funds, more opportunities for investors | Business

Mutual fund and mutual fund markets are growing. Earlier this month, Scotia Securities launched two new funds and JN Mutual Funds will also launch two.

Already, there are eight mutual fund operators, managing 63 funds; and a mutual fund company, JN Mutual Funds, which operates six funds.

These collective investment schemes offer investors, including very small ones, a good opportunity to participate in the securities market by investing in diversified portfolios. The main assets in which these funds invest are stocks, real estate, money market instruments and bonds.

Some funds invest primarily in one type of asset: stocks, bonds, real estate, for example. Others invest in a combination of assets such as real estate, stocks, and interest-bearing securities. Some funds invest in instruments in the Jamaican market, others in instruments in the global market and others in instruments in both the Jamaican market and the global market.

Sagicor Investments, through its Sigma Global Funds, has been able to combine instruments to offer investors a suite of 18 funds.

The advantage of these different types of funds is that they offer investors several options and the possibility of selecting the funds that best match their investment objectives. This is important as the funds are not tailored to the particular needs of an investor. Anyone who invests in a particular fund is exposed to the same risk and has the same objective achieved.

Fixed income funds, those that invest in interest-bearing instruments, dominate the local market. They present less risk and provide more regular returns, being subject to less volatility.

Funds leaning towards equities and real estate focus more on capital growth, and they are more volatile, sometimes giving good positive returns and negative returns at other times, but generally outperforming the more conservative ones in the long run. term.

Based on reports published in the financial gleaner as of December 31, 2021 – for December 30 in most cases, December 29 in two cases and December 28 in one case – five funds generated a negative return over the 12-month period, including three fixed income securities, a real estate and an equity fund.

The worst performing fixed income fund, which is denominated in US dollars, had a negative return of 2.38%, and the best fixed income fund return was 12.87%.

The best performing real estate fund returned 10.04% and the worst, negative 9.35%.

There were six funds – three in the same mutual fund – that saw their unit price growth increase by more than 10%, the highest being 14.87% for a global equity fund denominated in US dollars. Another global equity fund saw share price rise 14.08%. Both funds are part of the same unit trust.

Another US dollar-denominated equity fund returned 11.43%. The worst performing equity fund posted a negative return of 3.16%. Local equity funds did not perform well due to the poor performance of the main market of the Jamaica Stock Exchange in 2021. Returns for funds described as growth funds ranged from 3.70% (denominated in USD) at 10.51%.

JN Fund Managers and Scotia Securities are clearly responding to market needs by increasing their offerings in a very competitive and growing market.

Having many funds to choose from increases options for investors, but it can create a problem when selecting. Often it is not clear in which instruments the funds invest and what proportion is invested in various instruments.

Moreover, it is never easy to compare funds. It’s best to compare like with like, but even funds with similar names can be very different. The management philosophy and the instruments of choice can be quite different, but some investors choose to ignore these considerations, being more interested in the performance of the fund.

What investors should bear in mind is that they are not exposed to greater levels of risk than they would be willing to take if they invested directly in the instruments in which the funds invest. The challenge, however, is that they don’t always know some of the instruments.

For investors, it is therefore a question of trusting professional managers, not only to give good returns, but to make safe investments. Ultimately, investors should select funds whose investment objectives match their own.

– Oran A. Hall, author of ‘Understanding Investments’ and lead author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel.finviser.jm@gmail.com

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