Mutual funds
Editorial
Republic Bank Limited of Trinidad and Tobago will soon be making available to Guyanese through its local subsidiary, the National Bank of Industry and Commerce Limited, investments in two mutual funds, the Republic Caribbean Equity Fund and the Republic Global Equity Fund. Instead of putting their savings in banks as they have traditionally done Guyanese can purchase units in these funds. If the shares purchased by the fund managers do well their investment will increase in value. Historically, in the medium to long term investment in equity directly or through the mechanism of mutual funds provides a better return than interest on bank deposits. But of course there are blips and in the short term investors can lose. Mutual funds are a good medium for the small investors who tend not to get the best attention of or advice from a stockbroker if they consult one to buy shares. Funds are competitive with each other and the professional fund managers work full time to try to pick the right shares. Of course they do get it wrong sometimes but on balance it gives the small man a real chance to benefit directly from investment in the capital market. These days, in the developed countries, many investors trade direct on the internet, cutting out brokers' fees. Another company, the Trinidad and Tobago Unit Corporation, has indicated that it intends to offer units here through the Guyana National Co-operative Bank Trust Corporation in the near future. These units are already widely held in Trinidad, and 60 percent of the workers hold units. Initial investment can be as low as TT$100 (about G$3000). So Guyanese will have an increased opportunity for investment. And of course we have had our own unit trust, the Guyana Unit Trust, since 1969 which is administered by Trust Company (Guyana) Limited. This has most of its investments in a wide variety of local shares though it also has investments in shares in Trinidad and Tobago, Barbados and further afield. It has an excellent track record. For example, an investment of $1000 in 1990 would now be worth over $150,000 including bonuses and dividends. Even allowing, for the devaluation of the Guyana dollar that is an exceptional return. The overseas mutual funds to be offered here hold no shares in Guyanese companies. Though they are not opposed to this in principle one problem facing them is that in the absence of a stock exchange here with quoted prices for public companies there is an uncertainty about current share values which makes such shares unsuitable for traditional managed funds investment as the funds need to know the value of the shares they own on an ongoing basis. This is another good reason for setting up a stock market here as it will make shares in our public companies more attractive for investment by mutual funds. Guyanese are on the whole unfamiliar with the whole culture of investment which is not surprising given the rudimentary state of our capital market. As we move to develop and consolidate a predominantly private sector economy after a fairly sustained and disastrous flirtation with state ownership it is important that the man in the street become much more aware of the opportunities for investing in businesses through shareholding. If, for example, over the years they had bought units in the Guyana Unit Trust instead of putting their money in the bank they would be much better off. A stock exchange and a suitable publicity campaign will go some way to increasing awareness. And investments in mutual funds are virtually liquid, they can be realised almost immediately though in the case of some funds there is an early redemption charge. And the minimum investment is small. It is good that more investment choices will soon be readily available to Guyanese, including of course institutional investors like the insurance companies and pension funds. Have the trustees of these local pension funds given adequate consideration, for example, to our local unit trust as an avenue for investing the substantial savings they control? The investment of workers savings, which is what pension funds are, gives the workers a direct vested interest in the success of the economy which is an important ingredient in an open economy and society.
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