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T&T’s renaissance man taking UTC back to basics
Wendell Mottley has blazed a trail on Olympic tracks, covered himself in glory at Yale and Cambridge, etched his name in the history of T&T as Minister of Finance and carved a name for himself in the financial sector locally and internationally.
Effective January 1, 2013 he took up an appointment as the chairman of the Unit Trust Corporation (UTC), replacing former central banker Amoy Chang Fong and promising to take the financial institution back to basics.
For the 71-year-old QRC alumnus, UTC is an institution which was first founded under his watch as a Cabinet minister in the 80’s so it’s like returning home.
As former Finance Minister locally and Senior Advisor and Managing Director of the Credit Suisse, the Swiss financial giant, Mottley says T&T’s finance sector has become “more sophisticated” and has grown when it comes to “dollars and dollars invested” in the sector.
The UTC has about 570,000 unitholders—which he describes as “extraordinary given the country’s population of 1.3 million people—with funds under management of $22 billion, controlling about 48 per cent of the $46 billion local mutual fund market, Mottley says.
He says the UTC is a “substantial institution that is strong and which has weathered the global financial storm of 2007 and 2008 with all of the repurcussions in T&T.”
The institution that Mottley has inherited as chairman is a “flagship that has kept faith with the investing and savings community in T&T,” which he says is due to the “very good job that the past management, including current executive director Eurice Carrington, has done in stabilising the ship through the dangerous times of global investment turmoil.”
Mottley says the UTC has developed and refined a model for savings and investment in T&T and the institution “may want to place that model at the disposal of other regional countries, especially where those countries are doing well and growing at a good clip and where their commodity industries are doing well, such as Guyana and Suriname.”
Expansion in the region is being explored but no decision has yet been taken. Mottley said parts of the Caribbean may be lucrative for UTC as those territories are “on a growth mode.”
Asked whether the collapse of the Clico and British American insurance companies in 2009 had made regional investors wary of T&T institutions, Mottley said: “I simply believe that the Clico experience was very damaging to investment as a whole in the region and whereas the T&T government because of its bigger resource base has been able to come to the rescue of investors in Clico, the other government with less resources have not been able to do so.
“There is a lot of hurt out there in the wider region as a result of the Clico debacle. So yes, we will have to overcome that as seek to have the UTC expand into the region and that is part of the calculation involved as we attempt to do that.”
But, asked whether he could envisage a role for the UTC in creating a solution to the Clico and British American issues in the Eastern Caribbean, Mottley was categorical, saying: “I have the primary responsibility as the chairman of the UTC to safeguard the funds under management of unitholders. What you referred to would be a mandate beyond my primary responsibility.”
Having survived the turmoil and stabilised the ship, Mottley sees the job of the UTC going forward being to ensure that the institution is “competitively sustainable,” in an environment that is increasingly competitive and in a context of increasing deposits.
“Last year, we had almost $1 billion in growth of deposits and that’s quite a significant amount of money but that has to be placed in the context where the banking system, with such low interest rates, the banks have not been too keen to have too much deposits because they too have ultimately to place those investments, and the supply of those investments are in short supply,” he said.
Growth of deposits he said, has come mainly from the two flagship local schemes—the growth and income fund and the retirement fund.
With the deposits coming into the UTC going into equity-backed funds, the institution is “always looking to buy local equities.”
But he says that with $22 billion under management, the local equity pool is relatively small. This means that the UTC has to be wary about concentration risk.
Mottley says T&T’s excess liquidity creates investment opportunities for an institution like the UTC.
“T&T is not 100 per cent developed. Our infrastructure can do with some substantial improvement so there should be opportunities for the investment of that liquidity in assets that will redound to the improvement of life and business life in T&T.
“UTC in pursuing the interest of its unitholders is not an institution that can go out there and take that risk. We are intermediaries so we’re looking to others to take up that risk and then we can hopefully invest in bonds, corporate bonds, infrastructure bonds that may be put out by the Government. That represents an area that we would like to see developed.”
Referring to local bonds, the former investment banker says the UTC would like to see more fixed-income “product” coming on to the local capital market. He noted that the Government has not issued many bonds, neither have there been many new equity issues.
“In that connection, the UTC looks forward very much to the forthcoming issue of shares by First Citizens and we would like to see more because that allows us to successfully place some of the liquidity that we have now,” Mottley says.
In the absence of new investments coming onto the market, Mottley says, the UTC will have to look to international markets because the institution cannot just leave the deposits it receives on its books as there would be nothing to distribute to the UTC’s unitholders.
Having a schedule of bond offerings would make it easier for investment purposes for UTC.
“I have been told that there would be more government paper coming out this year, so we look forward to that,” he said.
Asked about his vision for 2013, Mottley says the UTC needs to improve its performance for its investors with higher distributions and Net Asset Values for the funds.
UTC fund managers must constantly exceed their benchmarks, which means better-trained staff, a tighter cost structure and the need to conform to best practices as a result of the passage of the Securities Industry Act, he says.
The institution will also need to respond more quickly than the UTC’s enabling legislation had originally envisaged, which will mean changes to the structures at the mutual fund body.
Among the changes that the UTC with Mottley in the chair is not considering is to expand the institution into different areas, such as acquiring a banking licence or an insurance business
“I want to emphasize, we are in a back-to-basics mode. The UTC serves its unitholders well by garnering their savings—especially people at the base of the society— and investing those savings well so that the unitholders can have the resources to make a downpayment on a house, educate their children and live their retirement years in dignity,” said Mottley.
As a result of the back-to basics thinking, the UTC shut down its merchant bank, an occurence that preceded Mottley’s new position, “as we are in the fee business, we are not in the business of taking positions like Credit Suisse takes.”
On the issue of back-to-basics mode, Mottley also said: “We have done well and we want to continue to do well but there is more competition out there. We want to make sure that we are in a competitively sustainable mode, to continue to do well by investors. We don’t want to get distracted to have to do too many things with too many products,” Mottley said.
Asked how long the “back to basics” mode would run, he said a strategic plan is already in place which would run for one year and “we are getting dividends already.”
But the benefits of the plan would only be seen in 2014 and 2015.
When not providing stewardship to the UTC, he is supportive of his wife’s work in protecting the environment at a property in Santa Cruz.
Performance of the Funds
The Euro Fund has done “surprisingly” well Mottley said, though there were pockets of volatility.
“We have also done well with our Pacific or Eastern fund, where the growth dynamic has helped performance rather than capacity to spot and make money in volatility, as has happened in Europe.”
Fund Year-to-date return
Euro Fund 8.12%
Growth and Income Fund 7.67%
Universal Retirement Fund 8.31%
But Mottley said the Energy Fund has not done so well.
“That is a fund when it was conceived there was the anticipation that there might have been some government privatisation or shares that would come out of the energy sector but it has not happened, the fund hasn’t perfomed to our satisfaction. It is one of the reasons why we hope the Government will do more in the energy sector, following on First Citizens, in the absence of that we would have to develop the expertise to invest in Global energy equities and debt instruments.
The fund Mottley added has “under performed but it is not in trouble or anything like that.”
Regarding its $US Fund he said the fund “did not perform as well as we liked” but steps are being taken “to bring in some expertise” to ensure that the fund’s performance improves.
Asked if he plans to seek assistance from international experts he said, the experts would be T&T nationals with experience in investing in the US markets. Mottley added that its all about trust and about “who you know.”
Mottley is not daunted by the performance of these funds as he believes UTC is a “flagship that has kept faith with the investing community and savings community in T&T.”
With the onslaught of new legislation in place this means that companies in the financial sector would have to change their methods of disclosure and reporting and UTC is one such institution.
“We have to become more corporatised. We also have to ensure that the compliance issues that are coming down the road, money laundering and so forth, we have to really spend a lot of time in tightening general governance issues.”
The biggest challenge for Mottley going forward is ensuring that the investment dollars coming to UTC are at a rate which are satisfying to investors. The worst is over he declared, as he hopes to see some accelerated growth for 2013.
The way forward for 2013, it is about “doing a better job” at improving the company’s investments. This means more training for staff and tightening of costs.
UTC has: 570,000 unitholders
Funds under management: Over TT $22 billion
Holds: 48 per cent of the Mutual Fund market
About Wendell Mottley
Retired 2011 Managing Director and Senior Advisor Credit Suisse, New York
2002 Leader of the Citizens’ Alliance
1991 to 1995 Finance minister
1966 Gold medallist British Empire and Commonwealth Games
1964 Silver and Bronze Medallist Tokyo Olympics
Attended: Yale University and Queens Royal College
He was a visiting fellow at the Center for Global Development, a United States-based think tank, where he contributed "Industrial Policy in Trinidad and Tobago", focused on governance in an oil rich state.
With reporting by Nadaleen Singh
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