With­in the next year Unit Trust hold­ers could be free to de­cide on whether they want to in­crease their risks in an ef­fort to get bet­ter re­turns from the suite of mu­tu­al funds on of­fer by the cor­po­ra­tion.

This was re­vealed by the UTC’s Ex­ec­u­tive Di­rec­tor Nigel Ed­wards who, in a wide rang­ing in­ter­view with the Busi­ness Guardian, said while the rate of re­turn was sat­is­fac­to­ry for the UTC’s mu­tu­al funds there is an ac­knowl­edge­ment that some in­vestors may be less risk averse and may seek high­er earn­ings.

“What we will be do­ing is we will be giv­ing our unit hold­ers greater abil­i­ty to se­lect their risk/re­turn pro­files. Right now be­cause we have had prod­ucts that our unit hold­ers un­der­stand are very risk averse, we can­not go out and change the risk pro­file of those prod­ucts.”

Ed­wards said mu­tu­al fund hold­ers un­der­stand that the UTC’s bal­anced funds are per­form­ing well when bench­marked against sim­i­lar funds but some peo­ple may want to make oth­er in­vest­ment de­ci­sions.

“You do have oth­er peo­ple who say yes I know it is mix­ing eq­ui­ties with fixed in­come, but sup­pose all I want­ed was re­turns on eq­ui­ties? And I am pre­pared to take eq­ui­ty re­turns with eq­ui­ty risks, then they can do that and we are giv­ing them the abil­i­ty to do that.” Ed­wards told the Busi­ness Guardian.

To do that how­ev­er would re­quire Par­lia­men­tary ap­proval and while Ed­wards was quick to point out he does not con­trol the leg­isla­tive agen­da, the UTC’s ex­ec­u­tive di­rec­tor is hope­ful it will get done in the next 12 months.

Ed­wards not­ed; “We are in dis­cus­sions with the Min­istry of Fi­nance to make some changes in the Uni Trust Act that would mod­ernise the cor­po­ra­tion and would mod­ernise our abil­i­ty to in­vest in the type of se­cu­ri­ties that will en­hance Unit Hold­ers re­turns and those things we an­tic­i­pate will be in the not too dis­tant fu­ture.”

He ar­gued that it was cru­cial that the UTC un­der­stood the risk ap­petite of its unit hold­ers,

“If all our unit hold­ers had a risk ap­petite for the 9 per cent for the Growth and In­come Fund or the 11.79 per cent that the URF was of­fer­ing, that will be great, and they would all be smil­ing all the way to the bank, how­ev­er there are years, for a spe­cif­ic pe­ri­od of time, the year over year growth might be ze­ro.” Ed­wards re­mind­ed.

But to have greater re­turns to in­vestors would not just mean a change in the types of in­vest­ment but a growth strat­e­gy with an eye on mak­ing smart in­vest­ment de­ci­sions.

A case in point is the UTC’s plan to ex­pand in the re­gion by first tar­get­ing the Ja­maican mar­ket.

To make this hap­pen the cor­po­ra­tion has iden­ti­fied a part­ner in the North West­ern Caribbean is­land and is hop­ing to close the deal and be­gin op­er­at­ing in Ja­maica come next year.

“We have stat­ed pub­licly that our im­me­di­ate en­trance in­to the re­gion is go­ing to be via Ja­maica and that’s ad­vanc­ing rea­son­ably well. We’ve iden­ti­fied a part­ner, that’s how we in­tend to work in Ja­maica, it would be with a part­ner. We know the mu­tu­al fund busi­ness ex­treme­ly well and we think if we work to­geth­er with some­one who knows the Ja­maica mar­ket well that would be a good pair­ing and that would give us the abil­i­ty to do what we have done for T&T’s mu­tu­al fund mar­ket in Ja­maica,” said Ed­wards.

He said the UTC was in the process of get­ting all of the ap­provals in place that are need­ed with a view to “start­ing with a bang in 2022.

“We are well ad­vanced work­ing with the part­ner, of course there are non dis­clo­sure agree­ments (NDA) so I can’t dis­close who the part­ner is at this stage, and give de­tails of the agree­ment” not­ed Ed­wards.

But he ad­mit­ted it would mean the es­tab­lish­ment of a new en­ti­ty.

On the ques­tion of the risk of op­er­at­ing in for­eign mar­kets and the UTC’s pull out or the US mar­ket at the start of the pan­dem­ic in 2020, and then its re­turn, Ed­wards in­sist­ed that the de­ci­sion was nev­er to run from the mar­ket.

In ex­plain­ing the UTC’s in­vest­ment strat­e­gy Ed­wards said it was about strong re­turns from in­vest­ments in eq­ui­ties but at the same time it was not about deal­ing with the lev­el of volatil­i­ty that the mar­ket throws up at times.

Ed­wards added, “Our in­vest­ment strat­e­gy is a good mix of re­turns but with se­cu­ri­ty pack­aged to­geth­er.”

He posit­ed that broad­ly, the UTC of­fers two main types of ac­tive­ly man­aged funds “bal­anced funds” with a mix of eq­ui­ties and fixed in­come se­cu­ri­ties and “in­come funds” with fixed in­come se­cu­ri­ties.

Ar­gu­ing it is im­por­tant to sep­a­rate those be­cause they do dif­fer­ent things Ed­wards said the bal­anced funds give in­vestors an op­por­tu­ni­ty to en­joy broad­er eco­nom­ic growth, but they come with more risk as the net as­set val­ue can vary from day to day. On the oth­er hand, in­come funds as struc­tured, have sta­ble net as­set val­ues and in those funds the fo­cus is on earn­ing com­pet­i­tive, but sta­ble re­turns.

“Year on year in­fla­tion­ary rate as at April 2021 was 1.1%. As at Ju­ly 31 2021, our bal­anced funds, the Growth and In­come Fund and Uni­ver­sal Re­tire­ment Fund de­liv­ered an an­nu­alised one year re­turn to unithold­er of 9.84% and 11.79% re­spec­tive­ly,” said Ed­wards.

He ex­plained that 15 to 25 per­cent of the UTC’s bal­anced fund port­fo­lio is based on in­vest­ments in the US so it is not in­signif­i­cant.

Ed­wards not­ed that when the UTC pulled out of the US mar­ket ini­tial­ly it was not for fear of a per­cep­tion of pos­si­ble con­ta­gion but rather the pos­si­bil­i­ty of a long term fall in stock prices.

Ed­wards said the UTC was not nec­es­sar­i­ly try­ing to repli­cate the re­sults of the US S&P be­cause it did not wish to have the lev­el of volatil­i­ty that one can some­times get in the mar­ket.

“What we are do­ing is we are man­ag­ing through a very volatile en­vi­ron­ment, giv­ing our unit hold­ers very pos­i­tive re­turns while at the same time not sub­ject­ing them to the mas­sive vari­abil­i­ty of the mar­ket. In the first quar­ter of 2020 the S&P was down in March just about 20 per­cent, of course there was max­i­mum un­cer­tain­ty around where the mar­ket would go that led us to be fair­ly con­ser­v­a­tive and pull back be­ing in­vestors in the mar­ket.

But even when we did that we were very de­lib­er­ate about the fact that we recog­nise that there were po­ten­tial op­por­tu­ni­ties and were were just keep­ing our eyes opened for when those op­por­tu­ni­ties re-pre­sent­ed.”

Ed­wards in­sist­ed that with­draw­ing from the mar­ket was not sim­ply run­ning for the hills and he felt the strat­e­gy was suc­cess­ful.

He not­ed that the UTC in a very struc­tured way re­turned to the mar­ket, from as ear­ly as late May to June 2020 and ben­e­fit­ed from the re­cov­ery. Ed­wards in­sist­ed that the UTC re­mained very fo­cused on the long term.

In its fi­nan­cial sta­bil­i­ty re­port the Cen­tral Bank of T&T raised the is­sue of the lev­el of sov­er­eign pa­per that both the banks and the UTC were hold­ing as se­cu­ri­ties. Ed­wards was asked if he was con­cerned that the UTC was hold­ing so much gov­ern­ment debt.

His re­sponse was that while the Cor­po­ra­tion would like to have more lo­cal in­vest­ment op­tions it had to be se­cured and trad­able.

“One of the chal­lenges in this mar­ket is that the Gov­ern­ment of T&T is the sin­gle largest is­suer of debt se­cu­ri­ties. There is no get­ting away from that and as a re­sult of that, any­body who is in­vest­ing in trad­able se­cu­ri­ties, by de­sign is go­ing to have the gov­ern­ment of T&T as one of the largest parts of their port­fo­lio.” Ed­wards in­sist­ed.

Say­ing the UTC is not un­com­fort­able with hold­ing sig­nif­i­cant gov­ern­ment pa­per, Ed­wards ex­plained that un­like banks that have oth­er means of in­vest­ing and lend­ing, the UTC does not have that lux­u­ry.

He said part of the chal­lenge is the lim­it the num­ber of pri­vate com­pa­nies of­fer­ing trad­able se­cu­ri­ties.

Ed­wards ac­knowl­edge that deep­en­ing the lo­cal stock ex­change with more pri­vate com­pa­nies seek­ing to raise eq­ui­ty rather than in­cur debt will help as well as pen­sion re­form which could lead to ad­di­tion­al cap­i­tal for­ma­tion.

The UTC’s ex­ec­u­tive di­rec­tor said the im­pact of COVID-19 had shown the Cor­po­ra­tion not on­ly how to sur­vive but how to thrive in a pan­dem­ic.

“As en­cour­aged as we are by these re­sults, the pan­dem­ic is forc­ing wide­spread change, and the cor­po­ra­tion is con­tin­u­ous­ly look­ing for new op­por­tu­ni­ties. The last eigh­teen months have taught us ma­jor lessons,” Ed­wards re­vealed.

Among those lessons is that sav­ing, and in­vest­ing is no longer an op­tion – it is crit­i­cal .

An­oth­er les­son Ed­wards said was those who stay the course with their in­vest­ment dis­ci­pline will be re­ward­ed.

The third point is one of tech­nol­o­gy and how do you de­ploy its use.

With this in mind the UTC team is work­ing to im­ple­ment our seam­less, cloud-based, da­ta-dri­ven, and al­ways-on tech­nol­o­gy plat­form in­clud­ing an up­grade of our on­line plat­forms.

This new tech­nol­o­gy al­lows for a pa­per­less en­vi­ron­ment, new ATM ser­vices and con­ve­nience, con­tact­less VISA deb­it cards, cus­tomer ser­vice via dig­i­tal chan­nels, aligned prod­uct of­fer­ings, re-en­gi­neered busi­ness process­es and rig­or­ous adop­tion of glob­al reg­u­la­to­ry prac­tices.

Its new EMV cards will al­so of­fer unithold­ers im­proved se­cu­ri­ty and a con­tact­less shop­ping ex­pe­ri­ence. And some of the ad­di­tion­al ben­e­fits of:In­creased se­cu­ri­ty through chip and pin tech­nol­o­gy, faster, safer check out with tap to pay (con­tact­less) ca­pa­bil­i­ty, on­line shop­ping lo­cal­ly (TT$ Visa Deb­it Card) and In­ter­na­tion­al­ly US$ Visa Deb­it Card).