• But RF investments chief still targeting 2024 growth
• Predicts main equity fund to expand ‘above $140m’
• Shifts from growth to dividend stocks as GDP slows

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian investment bank plans to be “a little more defensive” in 2024 with its stock picks as it targets close to $20m annual asset growth in its main equities investment fund.

David Slatter, RF Bank & Trust (Bahamas) vice-president of investments, told Tribune Business that expectations of slower Bahamian economic growth as the post-COVID revival peters out means he will focus more on “solid dividend payers” and stocks that “can weather an economic downturn” when he makes equity investments for its fund family this year.

The Targeted Equity Fund, which is its Bahamian dollar-denominated fund most weighted towards equity investments in stocks and shares, saw its net asset value (NAV) increase by 5 percent last year with further improvement - albeit slight - anticipated in 2024.

Mr Slatter told this newspaper that the Targeted Equity Fund had enjoyed a “slow start” to the year, with its NAV up by just 1.36 percent for the first quarter, but he pointed out that maintaining this growth rate over the next three quarters will translate into an approximate 5.4 percent increase for the full year.

That, RF’s investment chief added, would be “a little bit better than last year but not the same growth as previous years” with the Targeted Equity Fund having averaged annual 10.6 percent NAV growth over the past nine years. Mr Slatter is hoping to move closer to that average in 2024, forecasting up to 7 percent growth for an investment fund that presently has $121m in assets under administration.

“That’s growing nicely,” he told Tribune Business. “It’s primarily Bahamian exposure. We have a small amount of international exposure, 5 percent, and 95 percent local. We do have a private equity position of around 8 percent of the portfolio. That means if 13 percent of the portfolio is in private equity and US dollars, 87 percent is in Bahamian dollars.”

Revealing that he plans to reduce the weighting of the Targeted Equity Fund’s largest Bahamian holdings, Mr Slatter added: “The largest positions, and they’ve come down materially over time, is Fidelity Bank (Bahamas) at 14 percent of the portfolio and Doctors Hospital at 14 percent. My objective is to get those positions below 10 percent of the portfolio, not by by selling but by growing the portfolio.”

The Targeted Equity Fund’s other major Bahamian equities holdings include Finance Corporation of The Bahamas (FINCO), which accounts for 8 percent of its portfolio, while FOCOL Holdings and Colina Holdings (Bahamas) each have a 7 percent weighting and Cable Bahamas some 6.5 percent.

“We have all of the main equities in BISX in the fund to some extent,” Mr Slatter said. “We get diversification across industries, diversification across growth potential and we get diversification of dividend streams.

“We expect the performance [of the Targeted Equity Fund] to be below the long-term average but somewhere in that 5-7 percent range. It’s not terrible, it’s not exceptional. We’ll have the NAV, assets under administration, grow by appreciation of the share price and through dividend income.”

He estimated that 6 percent growth, and an improving performance, will add some $7m to the Targeted Equity Fund’s assets under administration by year-end with further expansion driven by dividend earnings and new subscriptions. “My expectation is we can get above $140m this year as far as assets under administration,” Mr Slatter told Tribune Business.

“That’s this combination of returns on the existing portfolio and new inflows from subscriptions.” RF Bank & Trust’s Secure Balanced Fund, which features a mix of equity and fixed income investments for the more cautious investor, is also expected to generate improved returns albeit again below its historical average.

“Historically over the last nine years it has averaged over 7 percent per annum,” Mr Slatter added, “7.2 percent for the last nine years. Last year it was up 4-5 percent. My expectation here would be close to 5-6 percent this year. I think what you’ll see is that, as the fixed income portfolio’s performance improves, that will help bring the Secure Balanced Fund’s performance closer to the Targeted Equity Fund’s.

“We’ll be looking at 5-7 percent by virtue of the fixed income portfolio for the Secure Balanced Fund improving, and the difference between the Secure Balanced Fund and the Targeted Equity Fund being less. It’s over $150m in assets under administration. In total, if you consider the other funds, we have in excess of $800m in assets under administration.

“We expect a good year. Not quite historic averages but still much better than having money sitting in fixed deposits in the bank earning nothing. I think investors will get good returns; not the great results of the last nine years but good returns. We’ll continue to track the portfolio to squeeze out as much returns as possible.”

With The Bahamas having regained the economic output lost to COVID, its economic growth rate is forecast to dip to 2.3 percent in 2024 - a level slightly higher than historical averages but nowhere near the 14-plus percent seen in the pandemic’s aftermath.

Noting that slower economic growth may impact equity earnings, Mr Slatter added: “I’m really going to be looking for solid dividend plays in the equities market, and a little more defensive in nature; investments that can weather an economic downturn. I will be looking less at growth stocks and more at dividend players and industries that have historically been durable during slowing growth. Industries not susceptible to a slowing economy like growth stocks.”