Home' Trinidad and Tobago Guardian : October 4th 2015 Contents The Unit Trust Corporation, the
country s oldest and largest
mutual fund company, will
launch on Friday the English-
speaking Caribbean s first
exchange traded fund (ETF), which is meant
to reflect the structure of the T&T economy.
Sixty-five per cent of the fund, to be called
the Calypso Macro Index Fund, will comprise
T&T shares on the local stock exchange in
proportion to their market capitalisation, while
35 per cent will be four internationally traded
Some 20 million units in the fund, which
will only be available in TT dollars, will be
offered to local institutions and individuals in
an Initial Public Offering (IPO), which goes
on sale at $25 per unit on October 12 and
closes on November 6. The fund, whose total
subscription will be $500 million, will be listed
on the T&T Stock Exchange before the end
The fund will be close-ended, meaning that
the UTC will never issue more than the 20
million units, it will have an initial life of ten
years and it will be actively traded on the local
stock exchange, said UTC s executive director,
Ian Chinapoo, and its vice-president of invest-
ments, Sekou Mark, in an exclusive interview
with the Business Guardian on Friday.
Explaining the difference between a close-
ended and an open-ended fund, Mark said:
"The UTC has five operative funds at this
time and all open ended.
"There are three key differences between
an open and a close-ended fund:
• The close-ended fund has a set number
of units. This fund will always have 20 million
units. When investors buy or sell units in our
TT Dollar Income Fund, we either create or
• The close-ended funds have a finite life.
They have a beginning and an ending. The
fund will start in 2015 and end in 2025. The
unitholders will decide whether the fund is
• Close-ended funds tend to trade on a
While the fund will replicate the movement
of the T&T shares on the local stock market,
it will not own every single T&T stock listed
on the market. That s because some of the
smaller shares trade infrequently (such as LJ
Williams) or are closely held (Flavorite). It will
own 17 T&T stocks with the largest company
in the fund being Republic Bank Ltd and the
smallest being Prestige Holdings Ltd.
The fund will also own TTNGL, the holding
company that owns about 19 per cent of
Phoenix Park Gas Processors, which is due to
be listed on the local stock market this month.
Mark said: "We have already calculated
that TTNGL will represent 3 per cent of the
index s market capitalisation. We do not know
how many TTNGL shares we were allocated
in the IPO, but once we are told of our allo-
cation, we will slot as much as we can up to
the 3 per cent cap."
Chinapoo added that the timing of the ETF s
launch, after the IPO of TTNGL, was deliberate
as the UTC wants to have the energy company
in the local ETF.
Asked whether TTNGL will be held with
other local stocks or in the energy portion of
the fund, Mark said the company, which pro-
duces propane, butane and natural gasoline
for the international market, will be held with
other T&T companies.
He explained that when the UTC, with the
regulator s approval, "soft-circled" the fund
to local institutional investors (such as the
National Insurance Board and the country s
pension plans), they all advocated that the
share should be held among the T&T equities,
"because they wanted the fund to max-out
the energy ETFs, which we were sourcing US
dollars for and which the institutional investors
would pay for in TT dollars."
The main advantage of ETFs is that it allows
the investor to buy an entire index (in this
case the All T&T Index) at a fraction of the
cost of buying shares directly or owning local
shares in an equity fund or a growth and
income fund. The initial cost of investing in
the fund is 1 per cent ($0.25 per unit) and the
annual maintenance fee is 0.5 per cent, which
means that for an investment of $10,000, the
initial fee would be $100 and the annual fee
would be $50.
The Net Asset Value (NAV) of the fund will
be repriced on a daily basis and the fund will
be rebalanced once a quarter.
The minimum initial investment in the fund
will be $1,000 or 40 units.
Explaining why the UTC chose a minimum
investment of $1,000 or 40 units for the Calyp-
so Macro Index Fund when the minimum
investment in the Growth and Income Fund
is 1 unit, Mark said: "For the last 34 years
people have come into our branches to buy
our units and we have investors from all strata
of the society.
"What we don t want is someone who has
a tradable unit, saying I am going to buy one
unit and I want my money back. It would be
very difficult for the investor to attempt to
sell one unit through a broker. Someone might
be willing to trade 40 units, but one unit might
He said the choice of the minimum invest-
ment was based on the fact that the ETF con-
cept is new to T&T and the UTC wanted to
make trading in the units of the fund as easy
as possible. Mark added that the 40-unit min-
imum was just for the initial offering and that
it may be possible to trade one unit on the
local stock market.
Given last month s report by the Central
Bank that the T&T economy declined by about
2 per cent for the January to June 2015 period,
how does the UTC believe the local economy
dipping into a recession will impact on the
fund, especially if the price of T&T equities
Chinapoo pointed out that the fund is a
passive investment so it will fluctuate with
the T&T stock index. But, he said, given the
more than 50 per cent decline in the price of
oil in the last year, there are many people who
would argue that now is a good time to buy
energy ETF s.
"We have always been fundamental
investors. A great time to launch an IPO or
do an offering, is when the market reflects
value and we believe that the energy market
reflects value now because you are buying it
now when energy prices are low.
"The people who are investing in this fund
should take a long-term view as the fund is
going to be around for ten years."
Mark said he believes the big upside of the
new fund will come from the four energy ETFs
that will comprise 35 per cent of the fund or
"Last November, when we were working
hard on this fund, a barrel of oil was US$90.
We asked ourselves how are we going to market
this fund to the public when the benchmark
for 35 per cent of it was a US$90 barrel of
oil," said Mark.
"At US$45 a barrel now, the potential for
upside in a ten-year fund is significant."
Chinapoo said the timing of the introduction
of the fund when the price of oil is US$45 a
barrel is much better than when it was twice
The UTC executive director noted that 80
per cent or more of the 66 mutual funds
directly available to T&T investors are income
funds, which operate on a short-term basis.
Chinapoo said: "The Unit Trust has 80 per
cent of the long-term money in our first unit
scheme---the Growth and Income Fund, our
flagship offering. Our mandate is to develop
long-term investment, a culture of savings
and investment and the creation of wealth for
all in the society.
"The Calypso Macro Index Fund is a ten-
year horizon fund and while investors will be
able to trade their units with a stockbroker,
OCTOBER 4 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
NEWS | SBG3
Continued on Page 5
UTC executive director, Ian
Chinapoo, left, and VP of
Investments, Sekou Mark
on Friday at the fund
manager's head office.
PHOTO: JEFF MAYERS
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