Sagicor Select Funds Limited (SSFL) saw losses in its Class B and Class C shares for the third quarter as their corresponding indices both went down with the market softening as trade values and liquidity retreat from the stock market.

SSFL is a close-ended fund, which is separated by different classes of shares that track a specific index on the Jamaica Stock Exchange (JSE). The class B shares (SelectF) track the financial index of the JSE and contains financial companies while the class C shares (SelectMD) track the manufacturing and distribution index which in turn sees it hold a wide cross section of companies from the index. Based on the nature of SSFL, it will rebalance its portfolio to adjust the weightings to align more closely with the index it is tracking.

SelectF’s portfolio declined by $161.40 million as its holdings shrunk during the quarter (July to September), with its largest holding NCB Financial Group Limited (NCBFG) declining by 11 per cent. Its dividend income also decreased 27 per cent to $17.21 million as some companies, such as NCBFG, continued to reserve dividend payments while others decreased their payments. As a result, SelectF’s net loss amounted to $149.51 million for the quarter.

SelectF’s year-to-date loss is up from $127 million to $347.59 million as the JSE Financial Index declined 11 per cent from 98.05 points to 87.70 points. Dividend income was marginally up to $64.16 million while administrative expenses decreased 27 per cent to $24.83 million. SelectF didn’t rebalance during the financial year, but its holdings increased from 25 to 27.

“This reflected a general downward movement in stock prices. Both the Financial Index and the Manufacturing & Distribution Index fell during the quarter, reflecting dips in large cap stocks. Additionally, factors such as investors reducing positions to participate in expected IPOs; and impact of macro conditions may have weighed on stock prices,” the company’s report stated.

SelectMD’s fortunes in 2021 weren’t replicated in the current quarter as its portfolio declined $308.02 million. Its dividend income remained flat at $26.12 million with the net loss coming in at $288.27 million. However, the year-to-date performance was positive as the fair value reduction of $29.87 million didn’t outweigh the $79.48 million in dividend income. Thus, the fund recorded a net profit of $24.63 million relative to the $968.35 million in the 2021 period.

The JSE Manufacturing and Distribution Index marginally declined from 100.38 points to 99.47 points year to date. SelectMD sold $197.90 million worth of Caribbean Producers Jamaica Limited, GraceKennedy Limited and Seprod Limited in order to get exposure to Massy Holdings Limited in the second quarter where it spent $91 million for the stake.

“Local listed companies are anticipated to feel the impact of rising rates with pressure on raising debt which could limit expansions,” the report stated on increasing interest rates.

SelectF’s total assets are down eight per cent to $3.80 billion with its investment portfolio at $3.71 billion with net assets closing period at $3.77 billion and the net asset value (NAV) at $0.74. SelectMD’s total assets are up to $4.11 billion with its investment portfolio at $3.88 billion with net assets closing the period at $4.09 billion and the NAV at $1.07.

SelectF’s stock price was trading at $0.46 at the end of the quarter while SelectMD traded at $0.62. SelectF was trading at $0.43 on Tuesday along with SelectMD at $0.53. The top 10 shareholders increased their stake in SelectF from 45.31 per cent to 46.11 per cent while SelectMD’s top ten moved up their stake from 84.67 per cent to 84.81 per cent. The expense ratio for SelectF is 0.15 per cent while SelectMD’s expense ratio is 0.17 per cent.

With several financial companies skipping dividend payments, SelectF’s dividend income will be impacted for the fourth quarter. However, SelectF will pay a $0.0105 dividend totalling $53.55 million while SelectMD is paying a dividend of $0.0195 totalling $74.42 million. Both dividends are payable on December 9 to shareholders on record as of November 25. This comes after no dividend was considered in May.

“The World Bank has indicated that a slowdown in the global economy is expected, with a high probability of a global recession in 2023, predicating on simultaneous monetary tightening by central banks. The synchronous increases in interest rates globally could lead to a financial crisis, particularly in emerging market and developing economies,” the report ended on the outlook going forward.