ALL five equity-based unit trust funds offered last year beat the Jamaica Stock Exchange (JSE) main index, in terms of appreciation, but only two bettered the All Jamaica and the JSE Select indices.

Capital and Credit Fund Manager’s (CCFM’s) Income and Growth fund grew by 22 per cent while Scotia DBG’s Premium Growth grew by 17 per cent, but the other three offerings fell short of the 14.5 per cent growth in the All Jamaica Index and the 16.3 per cent growth in the JSE Select.

According to Capital and Credit Securities Limited general manager, Chris Walker, last year’s success was based on good buys earlier in the year and participation in the listings that took place on the JSE Junior Market.

“One such buy was National Commercial Bank (NCB),” Walker told the Business Observer. “The JDX (the Government debt swap which resulted in considerably lowered interest rates on government securities) did not have the detrimental impact on the banks that was anticipated. NCB at the time was considered to be undervalued, while the trading pattern over the years and (our) expectations that the company would rally towards the end of the year (made it a good buy).”

NCB’s share price grew by 21 per cent last year, while initial public offerings (IPOs) in which CCFM participated, such as Jamaica Teas, Blue Power, and Dolphin Cove, respectively closed 2010, 18.7 per cent, 20.8 per cent and 50.7 per cent higher than the price at which they listed.

Walker said the Income and Growth fund also participated in the Lasco listings, although in “Manufacturing and Distribution to a greater extent than Lasco Financial”.

Lasco Manufacturing closed 2010, 130 per cent higher than it listed while Lasco Distribution closed 40 per cent higher. Lasco Financial was marginally up at the end of the year, or 3.6 per cent higher than listed price.

Even while, Pan Caribbean Financial Services’ (PCFS’) Sigma Optima grew by 14.1 per cent last year, the CCFM’s other mixed portfolio unit trust offering grew by only seven per cent while Barita Investments’ Capital Growth grew by only 5.6 per cent.

Walker said that the Optimum Capital portfolio only had 25 per cent invested in equity, while 25 per cent was placed in real estate and the largest portion — 40 per cent — in fixed income.

He says the fund is still holding on to more marketable properties — in terms of cost– while he expects “real estate will move towards the upside towards the end of the year”.

Barita’s general manager, Ian McNaughton, said the “relatively luke warm performance of the equities market contributed to this, but this was mainly due to the excellent growth performance of the fund prior year, which showed the fund growth as being one of the highest”.

McNaughton added that the long-term strategies of efficiently managing the fund included the continuous review of the assets of the fund, which identifies non-performing assets that are typically disposed of, but he did not rule out the possibility of adding new products to the fund this year.

“That is a possibility, however we would have to examine the feasibility of any such addition or change to the fund,” he told the Business Observer.

Interestingly, the growth performance of the equity-based unit trust funds last year appeared to be correlated with the front-end load that is used by the funds.

The front-end load refers to the difference between the unit price that an investor pays to buy into the fund and the price they get when they are selling units, which is usually lower than the price they buy at a particular point in time.

For example, CCFM’s Income and Growth — the highest grower in 2010 — carried a front-end load of 2.1 per cent, or in other words, the price one buys the unit for is two per cent higher than the price the fund will pay to buy back the unit at that time.

Sigma Optima and Scotia DBG’s Premium Growth had front-end loads of four per cent, while Barita’s Capital Growth had a front-end load of 5.5 per cent.

Those front-end loads can also determine how quickly an investor can withdraw his or her funds. For instance, someone buying a unit in any of the equity-based trust funds on January 4, would lose if they came out today, excepting for CCFM Income and Growth, which has already grown by more than the front-end load.