Unit Trust Cor­po­ra­tion ex­ec­u­tive di­rec­tor, Nigel Ed­wards ad­mits the head­line in the T&T Guardian one week ago “UTC’s net in­come de­clines 89.4 %” caused ques­tions among the cor­po­ra­tion’s hun­dreds of thou­sands of sub­scribers.

But in an in­ter­view with the Busi­ness Guardian on Mon­day, Ed­wards said the ques­tions were pre­dictable and the de­ci­sion to record the de­cline in net in­come for the first nine months of its fi­nan­cial year was de­lib­er­ate­ly tak­en by the Cor­po­ra­tion.

The Unit Trust Cor­po­ra­tion (UTC) last week re­port­ed net in­come of $5.46 mil­lion for the nine months end­ed Sep­tem­ber 30, 2024, which was a re­duc­tion of 89.4 per cent com­pared with the $51.68 mil­lion the mu­tu­al fund com­pa­ny earned for the same pe­ri­od in 2023.

The UTC’s ex­ec­u­tive di­rec­tor said the fi­nan­cial in­sti­tu­tion could eas­i­ly have in­creased its net in­come by re­duc­ing the amount of mon­ey it dis­trib­utes to its unithold­ers.

“That’s an easy fix and it’s not a dif­fi­cult thing for us to do. If we want­ed to do that, we would have de­clared $50 mil­lion less dis­tri­b­u­tion this year, and that would have en­sured that we were not re­port­ing a fall in net in­come,” said Ed­wards, adding that the UTC took “a de­lib­er­ate de­ci­sion that we were go­ing to in­crease our dis­tri­b­u­tion to unithold­ers.”

In to­tal, the UTC dis­trib­uted $335.38 mil­lion to its sub­scribers for the pe­ri­od Jan­u­ary 1 to Sep­tem­ber 30, 2024. That was $108.8 mil­lion, or 48 per cent, more than the $226.58 mil­lion the UTC dis­trib­uted to its unithold­ers for the same nine-month pe­ri­od in 2023.

And the $335.38 mil­lion the Cor­po­ra­tion dis­trib­uted for the first nine months of 2024, was $155.25 mil­lion, or 86.2 per cent, more than the $180.13 mil­lion it dis­trib­uted to sub­scribers in 2022.

For the first nine months of 2024, the UTC’s TT-dol­lar and US-dol­lar in­come funds re­ceived dis­tri­b­u­tions to­talling $260 mil­lion, which was 77 per cent of the Cor­po­ra­tion’s to­tal dis­tri­b­u­tion for the pe­ri­od. A to­tal of $184.36 mil­lion was dis­trib­uted to sub­scribers of the TT-dol­lar In­come Fund, re­sult­ing in an av­er­age pay­out yield of 1.65 per cent. The US-dol­lar In­come Fund sub­scribers re­ceived the US-dol­lar equiv­a­lent of $75.72 mil­lion, re­sult­ing in an av­er­age pay­out yield of 1.77 per cent.

Ed­wards said it was im­por­tant for the Cor­po­ra­tion to re­port the net in­come as it was be­cause, for its unithold­ers, the net in­come re­sult is less im­por­tant than the amount of mon­ey the UTC dis­trib­utes to its sub­scribers.

“Our pri­ma­ry con­cern is ac­tu­al­ly our unithold­ers. We are not owned by a spe­cial in­ter­est group, by a fam­i­ly or by any pri­vate in­ter­ests. Our own­ers are ac­tu­al­ly the peo­ple who own the units in the UTC. And so it’s im­por­tant to un­der­stand what we re­port, when we re­port, and why in Unit Trust we fo­cus less on that net in­come re­sult, and why we tend to fo­cus more on things like the dis­tri­b­u­tion of unithold­ers,” said the sea­soned fi­nan­cial ex­ec­u­tive.

One of the rea­sons for the de­cline in the per­for­mance of the UTC’s Growth and In­come Fund for the first nine months of 2024 was the per­for­mance of the un­der­ly­ing stocks in that mu­tu­al fund’s port­fo­lio.

He said 2024 is the third con­sec­u­tive year of de­cline for the T&T Stock Ex­change, in gen­er­al, and the All TT In­dex in par­tic­u­lar. That is im­por­tant be­cause most of the eq­ui­ty in­vest­ments in the Growth and In­come Fund are T&T com­pa­nies.

“So when the stock mar­ket is in de­cline, the in­vest­ments that we have in the stock mar­ket ob­vi­ous­ly will be re­port­ed at a low­er val­ue. And those val­ues we do mark to mar­ket is a tech­ni­cal phrase, but we reval­ue them on an on­go­ing ba­sis. And so we had to reval­ue them and re­flect that in the fi­nan­cial state­ments, then it will re­flect a re­duc­tion in car­ry­ing val­ue, and in some in­stances, a re­duc­tion in our prof­it,” Ed­wards said.

Price guar­an­tee

A third el­e­ment is that the UTC pro­vides a price guar­an­tee to the in­vestors in the Growth and In­come Fund. The UTC ex­ec­u­tive di­rec­tor ex­plained that the way the price guar­an­tee works is that any sub­scriber in the Growth and In­come Fund is guar­an­teed to get the price they pur­chased at, if they hold the in­vest­ment for three years.

“What we do is, of course, we man­age every sin­gle unit that’s in is­sue. We mea­sure on a day-to-day ba­sis the dif­fer­ence be­tween the pur­chase price and the price that we would have to re­deem at. It is the change that gets re­flect­ed in our fi­nan­cial state­ments. And so the in­crease in the price guar­an­tee li­a­bil­i­ty is what is re­flect­ed as the oth­er ma­jor im­pact on our fi­nan­cials this quar­ter,” he said.

The price guar­an­tee charge for the first nine months of 2024 was $73.25 mil­lion, com­pared to $10.12 mil­lion for the same pe­ri­od in 2023.

Ed­wards ex­plained that the rea­son for the es­tab­lish­ment of the price guar­an­tee was to pro­vide in­vestors with a sense of se­cu­ri­ty and safe­ty. He said the framers of the Cor­po­ra­tion felt it would be im­por­tant to put this tem­po­rary se­cu­ri­ty blan­ket in place.

“That’s from an era when the Growth and In­come Fund was large­ly un­known, and it was in­tro­duced to give peo­ple a sense of se­cu­ri­ty be­cause the in­vest­ment mar­kets, like I said, can go up and they can go down. And be­cause when the Growth and In­come Fund was in­tro­duced back in 1982, this was not a very pop­u­lar or well-known in­vest­ment ve­hi­cle. This is a se­cu­ri­ty blan­ket that has been in place for more than 40 years now,” said Ed­wards

As it stands to­day, the Growth and In­come Fund has just over 300,000 sub­scribers. He said while the UTC thinks about the im­pact of the price guar­an­tee, ‘the re­al­i­ty is that the im­pact of price guar­an­tee, which is great for those 300,000, does af­fect all of our 550,000-mem­ber unithold­er base, as you can see from the im­pact on the net in­come.”

Self-ful­fill­ing

Asked if there was any­thing that the UTC could do to ad­dress the de­cline in the T&T stock mar­ket, Ed­wards said there is a rel­a­tive­ly lim­it­ed num­ber of buy­ers in the lo­cal stock mar­ket. The buy­ers of note have been the UTC, the Na­tion­al In­sur­ance Board, and the pen­sion plans of the in­sur­ance com­pa­nies. He al­so ob­served that the main in­sti­tu­tion­al in­vestors buy and hold lo­cal stocks.

Ed­wards said the UTC’s abil­i­ty to im­pact the lo­cal stock mar­ket, by pur­chas­ing shares, is lim­it­ed.

“And the rea­son that it’s lim­it­ed is there’s a de­gree of self-ful­fill­ing prophe­cy that’s hap­pen­ing. The on­ly fund through which we can have di­rect im­pact on the per­for­mance of the T&T Stock Ex­change is our Growth and In­come Fund and, to a less­er ex­tent, our Uni­ver­sal Re­tire­ment Fund, both those funds in­vest in TT, dol­lar, lo­cal eq­ui­ties.

“The on­ly chal­lenge is that when the lo­cal eq­ui­ty mar­ket is per­form­ing poor­ly, then peo­ple are less in­clined to in­vest in the Growth and In­come Fund. And when that hap­pens, then it be­comes a self-ful­fill­ing prophe­cy that we can­not in­vest and there­fore dri­ve the per­for­mance of the mar­ket. In oth­er words, the very thing that has the po­ten­tial to sup­port and to bring life to the mar­ket gets its fu­el cut off, as it would, be­cause peo­ple feel less en­cour­aged to place funds in a mar­ket in de­cline,” he said.