Transaction costs associated with rebalancing of the portfolio main cause of decline

Durrant Pate/Contributor

Profitability at Sagicor’s Manufacturing & Distribution Select Fund waned during the half-year period ended June 30, 2022.

The Select Fund recorded a net profit of J$312.9 million for the six months of 2022, which is a decline relative to a net profit of J$958.5 million recorded in the corresponding period in 2021. During the half-year period, the fund saw a fair value gain on its financial assets of J$278.1 million, benefitting from the price appreciation in manufacturing and distribution companies.

Comparatively, for the six months of 2021, the fair value gain was J$930.4 million, which was a larger gain than the six months of 2022, due to the low base effect of the COVID-19 pandemic during the preceding financial year. The fund earned J$53.4 million from dividend income, an increase of 28 per cent compared to dividend income of J$41.8 million received in the corresponding quarter of 2021.

The total expenses amounted to J$19.3 million, an increase of 32 per cent year-over-year. Transaction costs associated with rebalancing of the portfolio and legal & professional fees were the focal causes for the increase in expenses.

Four fold increase in legal costs

Management fees decreased by five per cent, however, legal and professional fees increased fourfold. Cost associated with dividend payment to shareholders was the main contributor to the rise in professional fees.

At the end of June 2022, the total assets were valued at J$4.48 billion. This comprised of Financial Assets held by the fund, at a fair value of J$4.22 billion.

The value of assets grew relative to end of June 2021 reflecting the price increases for most securities in the fund. The assets were financed by equity of J$4.37 billion and liabilities of J$107 million. During the month of June, there was a rebalancing activity to provide exposure to Massy Group Limited.

As some trades were executed in June but not settled until July, this resulted in the upward movement in fund’s liabilities.