• For the 6-month period ending June 2021, Mayberry Investments reported a net profit of $288.93Mn (EPS: $0.24), which is a significant improvement over the net loss of $962.01Mn incurred in the prior year. This came on the back of a $1.74Bn rise in net operating income. 
• Although fees and commission, dividend income and net foreign exchange gains fell by 20.9%, 20.9% and 16.6%, respectively, the primary contributor of this increase in net operating income was an unrealized gain on investment of $508.72Mn, relative to a loss $1.19Bn in 2020. The gains reflect in the year on year rise in the prices of stocks held by the subsidiary company, Mayberry Jamaican Equities. Net interest income (68.3%) and net trading gains ($85.99Mn) also rose to support the bottom-line. 
• These increases in income were enough to offset the $61.27Mn (8.5%) expansion in operating expenses which was driven by higher expenditure, namely computer licensing fees, management fees, sales and marketing, donations, insurance and IT consulting fees. 
• Mayberry Investments’ operating performance should continue to improve in the coming quarters, as increases in private consumption, investor confidence and corporate earnings bolstered by more relaxed COVID-19 restriction measures, support improvements in equity prices and therefore unrealized gains from its equity investments. Nevertheless, the current rise in cases, which could lead to the reemergence of the restrictions poses a risk to the recovery, especially with the emergence of new strains of the virus. 
• Mayberry Investment’s stock price has depreciated by 5.8% since the start of the year to close at $5.65 on Thursday. It currently trades at a price to book of 0.76x, which is below the main market financial sector average of 1.92x.

(Source: Company Financials & NCBCM Research)

• The Guyanese economy will be a regional and global outperformer in the coming quarters as an energy boom and a recovery in the non-oil sector are expected to drive real GDP growth. 
• Fitch Solutions, has long highlighted its constructive outlook for Guyana as a nascent energy boom offers tailwinds to short- and long-term growth. In 2020, the economy grew 43.5% despite an estimated 7.3% decline in non-oil activity and the 3.4% global contraction due to the COVID-19 pandemic. 
• That being said, easing domestic risks from COVID-19 and a robust global growth recovery, which is forecasted at 6.7% in 2021 and 4.2% in 2022, will support Guyanese domestic demand and underpin stronger exports in the coming quarters. 
• Sustained export growth and higher public spending will underpin a longer-term expansion; particularly as foreign energy companies accelerate crude oil production in the offshore Stabroek block. 
• Fitch Solutions forecasts Guyanese real GDP growth of 21.1% in 2021 and 19.2% in 2022, from a 45.3% expansion in 2020.

(Source: Fitch Solutions)

• Efforts made in prior years to strengthen business fundamentals, including consolidating its dairy factories, increasing exports, and expanding its distribution footprint through the acquisition of the Facey Consumer business, supported Seprod’s robust earnings performance in 2020.
• Consequently, the company was able to increase revenues by 16.4% (or $5.37Bn) to $38.07Bn in FY2020, which more than compensated for the 6.1% (or $1.45Bn) and 24.3% (or $1.78Bn) rise in direct and indirect expenses, respectively. This influenced an 85.7% or $1.46Bn year over year growth in net profit from continuing operations to $3.17Bn (EPS: $4.32).
• Seprod realized a reduction in the demand for goods and services from the tourism sector (which accounts for a maximum of ~10% of direct revenues). However, this fall-off was more than offset by the sale of pharmaceutical products and basic food items such as flour, cornmeal, cooking oil, and margarines during the pandemic.
• After rising 27.3% in 2020, Seprod’s stock price has further increased by 4.2% since the start of 2021 and closed Tuesday’s trading session at $67.61 per share. At this price, the stock trades at a P/E of 15.7x, which is below the Main Market Distribution & Manufacturing sector average of 27.5x.

(Source: Seprod Financials)

• Chile’s consumer prices rose more than forecast on a jump in the cost of clothing and household goods, as the second round of early pension withdrawals juiced demand in one of Latin America’s richest nations.
• Consumer prices rose 0.3% in December from the month prior, more than the 0.2% median estimate from analysts in a Bloomberg survey. Annual inflation sped up to 3%, right on the official target, the national statistics agency reported on Friday.
• Chile’s consumer prices are steadying as the economy recovers from a sharp downturn caused by the coronavirus. The central bank has said there’s less of a risk for low inflation while falling unemployment and a new law allowing for more pension-savings withdrawals boost consumption. Still, recent virus restrictions in capital Santiago may crimp demand going forward.  

(Source: Bloomberg)

Alternative Investments have been creating quite a buzz in the financial market. This quickly emerging investment option has been making the rounds in recent times as investors contend with the effects of a global pandemic, geopolitical risks, and the resulting impact on the performance of traditional assets such as stocks and bonds. This rollercoaster experience in traditional asset prices caused by the aforementioned factors, is expected to become the new normal, but has negative implications for long term financial goals. As a result, the search for investments in assets in non-traditional spaces, which have exhibited relatively low correlation to stocks and bonds, have intensified. When additional benefits such as the potential returns, steady income stream, and inflation hedge are considered, alternative investments have become a staple for investors in this day and age. Historically reserved for institutional and high-net-worth investors, alternatives are now considered a core portfolio holding. 

Alternative investments represent a different or “alternative” option for investors to diversify their portfolios away from their longstanding reliance on traditional stocks, bonds, and cash. They may include hard assets such as commodities, currencies, infrastructure projects, vacant land and developed real estate/real estate investment trusts (REITs). They may also include a group of assets professionally managed in a non-traditional format. These investments can deliver returns from different drivers and in different patterns than traditional stocks and bonds. As a result, there are significant diversification benefits when included in a standard portfolio. Stronger diversification offers the benefits of potentially generating attractive returns, reducing volatility in a portfolio for a smoother and less-stressful investment experience, while preserving capital over a longer-term horizon. For investors with the appropriate risk tolerance, alternatives offer the potential to earn higher returns and act as an inflation hedge. The twenty-year average annualized returns of REITs and Gold were 9.9% and 7.7% versus 5.6% and 4.5% on stocks and bonds, respectively. Moreover, given that infrastructure and other physical assets such as real estate, once built, exist for generations, and the contracts underpinning the provision of infrastructure services tend to be long-term with predictable revenue streams, investors stand to benefit from this steady income stream. That said, these asset classes usually require high minimum investment and advanced technical competencies to assess their attractiveness. As such, they are primarily held by institutional investors such as pension funds and ultra-high net worth investors.

Global alternative assets under management reached nearly $US10.1 trillion in 2016 and are expected to grow to US$21.1 trillion in 2025, underpinning a fundamental shift towards alternatives by many sovereign and public pension funds. In April 2015 for instance, the world’s largest pension fund, the US$1.1 trillion Government Pension Investment Fund (GPIF) of Japan, announced a new strategic asset mix in a bid to achieve higher returns and address the needs of an ageing population. Significantly, GPIF’s new mandate allows for a 5% allocation to alternatives, representing a significant opportunity for alternative firms[1]. In North America, the Canadian Pension Plan for example, holds over 50% of its net investable assets in alternatives[2]. Although the trend has started with larger institutional investors in developed markets, alternatives will increasingly occupy a prominent allocation in the world’s economies, both established and emerging.

Having been traditionally a government fixed income instrument reliant investor base, declining interest rates brought a shift to the Jamaican investment landscape in the last decade as investors turned to the stock market in search of higher yielding assets. Up until two years ago, the Jamaica Stock Exchange (JSE) was riding on a high having copped “best performing stock market” by Bloomberg in two of the last five years. Fast forward to 2020, the year of the great pandemic, earthquakes, geopolitical tensions and elections (just to name a few), the tables turned once again and suddenly the JSE is being featured among the worst performers globally. While the general expectation is for a recovery in the stock market, we can agree that bouts and dips will become the new norm and as such, local investors must now consider other assets that will help them stay afloat even in uncertain times.

Markets are now more volatile than ever and investors need better ways to grow their wealth while effectively managing risk. Alternative investments can be key components in portfolios for all investor types, providing diversification benefits and reduced volatility helping investors achieve their goals. While the high minimum investment and difficulty in assessing these investments may prove challenging particularly for local retail investors, collective investment schemes such as mutual funds should be considered for these exposures. In addition to the lower minimum requirement relative to an outright purchase of the asset, mutual funds provide access to a wider range of assets that fit within a particular theme and management with the requisite skill set to assess the attractiveness of the individual investments. Given the benefits outlined, it is safe to say that mutual funds will be the vehicle that drives alternative investment assets in the retail investment mainstream in the not too distant future.

Simone Hudson

AVP Alternative Investments & Fund Management

NCB Capital Markets Limited

[1] PricewaterhouseCoopers

[2] MacKenzie Investments

• Despite an 11.1% (or $57.08Mn) increase in revenues, CAC 2000 Ltd reported an unaudited net loss of $21.53Mn (EPS: -17¢) for the six months ended June 30, 2020. This represents a seven-fold decline when compared to the $3.07Mn (EPS: 2¢) made in the same period last year.
• This performance was mainly driven by a 96.1% (or $45.28Mn) drop in other income and a 4.9% (or $10.10Mn) increase in administrative.
• The stock price has fallen 39.3% since the start of the calendar year and closed at $9.10 on Wednesday. At this price, the stock currently trades at a P/B of 3.40x, which is above the Junior Market Distribution Sector Average of 3.18x.

 (Source: CAC Financials)

• Mayberry Investment Limited (MIL) reported a net loss attributable to shareholders of $962.01Mn (EPS: -$0.80) for the six months ending June 30, 2020, which represents an almost nine-fold decline from the $107.03Mn (EPS: $0.09) profit reported for the corresponding period in 2019.
• Unrealised losses on investment revaluation of $1.19Bn were the primary contributing factor to the sharp decline in the company’s bottom line.
• The stock has declined 34.6% since the start of the year, and closed trading at $5.89 on Thursday July 23,2020. The stock currently trades at a P/B of 0.75x which is below the Main Market Financial sector average of 1.78x.

(Source: MIL Financials)

• Minister of State in the Ministry of Industry, Commerce, Agriculture and Fisheries, Hon. Floyd Green, says the National Compliance Regulatory Authority and the Consumer Affairs Commission will be increasing visits to supermarkets and to other entities within the distributive trade, to ensure that prices for goods are stable.
• “We are and will continue to monitor trade. We have a taskforce here and we will continue to keep track of the situation and increase our visits to supermarkets. We are going to pay keen attention to prices,” he said.
• “Right now, oil prices are falling, which we anticipate will have a positive impact on most of our companies and retailers in terms of pricing. Pricing has to be balanced. We will be keeping a check on what is happening and we will be providing regular updates to the country,” the State Minister said.
• “The Government, as well as members of the private sector, are taking the potential impact of COVID-19 seriously and are putting the necessary measures in place to protect the country’s food supplies,” he added. Emphasis will be placed on the priority sectors of manufacturing and agriculture/agribusiness as well as the emerging industries of medical cannabis, hemp and bamboo.

(Source: JIS)

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