Sagicor Select Funds shareholders green-light new structure

Shareholders in Sagicor Select Funds Limited (SSF) are set to have their listed equity funds (LEF) converted into unit trusts after the scheme of arrangement meeting on Tuesday.

The scheme of arrangement for the class B (SELECTF) and class C (SELECTMD) shares passed the head count test (over 50 per cent) and majority shareholding vote test (over 75 per cent). However, the final result for both classes of shares will be announced on the Jamaica Stock Exchange (JSE) following a final confirmation by scrutineers PricewaterhouseCoopers.

This approval paves the way for the class B redeemable participating voting shares and class C redeemable participating voting shares of Sagicor Select Funds to be converted into non-diversified unit trusts which would close the gap between the net asset value (NAV) and prevailing market price. However, the conversion is likely to be completed during the first quarter (January to March) of 2026 according to Trevor Patterson, senior partner at Patterson, Mair Hamilton, who indicated that a new date at the Supreme Court and subsequent review by the Financial Services Commission (FSC) could take more than four months. Both SELECTF and SELECTMD have over 20,000 shareholders combined.

“The intention is such that our original shareholders who become unitholders are not disadvantaged compared to persons who decide to come post conversion,” said Jodian Aris, vice-president for research and strategy at Sagicor Investments during the scheme meeting.

Sagicor Select Funds was formed in January 2019 to allow investors to gain exposure to a fund that tracked the performance of specific sector indices on the JSE. For example, SelectF, or the class B shares, track the performance of the JSE Financial Index, while SELECTMD, or the class C shares, tracks the performance of the JSE Manufacturing and Distribution Index. The fund is rebalanced or adjusted to reflect the weight of the corresponding shares in the sector index.

However, there has been a dip in equity prices on the JSE since 2019. As a result, the equivalent amount payable to investors on a per share basis or the NAV of each fund have consistently traded above the market price for both listed funds. SELECTF traded at $0.46 on June 30 compared to the NAV of $0.57 while SELECTMD traded at $0.78 compared to the NAV of $1.24.

In a regular unit trust, unitholders can redeem or sell their units at the NAV compared to the current situation where investors sell their shares below the NAV, effectively realising their investment value below the underlying fund value. Under the new unit trust scheme, fund manager Sagicor Investments Jamaica Limited (SIJL) would take a more active approach and could better optimise the fund structure for investors. Unit trusts are also known as collective investment schemes (CIS).

“It is not a definitive decision that will be made, but it leaves the options for the managers if they decide to take that option. That would have been considered knowing that persons would have bought into a fund that was listed. So, if we decide to do so, an opportunity for persons to return to what it is that they would have known in the original concept,” Aris added on the potential listing of the unit trust as mentioned in the explanatory statement.

With both funds set to transition to the unit trust setup, Aris noted that the management fee paid to Sagicor Investments would not change from the current 0.30 per cent figure for some time. Sagicor Investments is the largest unit trust manager in Jamaica with the Sagicor Sigma unit trust valued at $153.57 billion at the end of 2024. These fees charged on these unit trusts range from 0.75 per cent to 2.00 per cent.

Also, investors who are currently invested in both listed funds would receive a waiver with respect to the minimum buy in amount of $25,000. The Sagicor Sigma funds also have a minimum $3,000 subscription amount for subsequent subscriptions for most unit trusts.

However, the process for handling the shareholders of SELECTF and SELECTMD is still being discussed since they would become clients of Sagicor Investments Jamaica. SELECTF should be renamed Sigma Select Financial Fund while SELECTMD should be renamed Sigma Select Manufacturing and Distribution Fund as per the explanatory statement.

“In the initial phase, any distribution will happen as additional units. The movement to cash is something that will likely have to come after based on the fact that we’re not fully aware how the conversion process will work and in terms of all KYC for all clients,” Aris explained.

Both SELECTF and SELECTMD last paid dividends in December 2023 but skipped 2024 based on the contemplated change in the fund structure. Aris noted that both funds would aim to pay out dividends or distributions as they generate more cash from their investments.

Sagicor Select Funds had its sixth annual general meeting at 9:30 am where Colin Steele and chair Janene Shaw were re-elected as directors. The scheme meeting was held afterwards at 12:30 pm.

SELECTMD’s second quarter (April to June) results revealed that whilst dividend income increased 55 per cent to $25.37 million, there was an unrealised loss of $119.08 million compared to an unrealised gain of $153.82 million in 2024. After expenses, SELECTMD had a net loss of $99.75 million compared to a net profit of $163.87 million for the second quarter. SELECTMD had a net loss of $81.06 million for the six months period compared to a net profit of $210.78 million in 2024.

SELECTMD’s asset base stood at $4.77 billion with $338.30 million in cash as of June 30. The equity/capital base was $4.75 billion.

SELECTF’s Q2 saw a net loss of $87.49 million compared to a net loss of $125.30 million for the 2024 period. SELECTF’s six months net loss improved from $122.18 million to $121.37 million. SELECTF’s asset base stood at $2.91 billion with $120.56 million in cash and an equity base of $2.88 billion.

SELECTMD closed at $0.92 on Tuesday and remains up 21 per cent in 2025 relative to the NAV of $1.24. SELECTF closed at $0.43 on Tuesday and remains down eight per cent in 2025 relative to the NAV of $0.548.

The Sigma Equity unit trust is currently the largest shareholder in both listed equity with a 56.55 per cent stake in SELECTMD and a 25.31 per cent stake in SELECTF. SELECTMD was the largest position in Sigma Equity as of June 30 and made up 14 per cent of fund with a net asset value of $11.3 billion.

However, this exceeds the 20 per cent unitholder limit that’s applicable to unit trusts as per the FSC’s updated CIS guidelines. These guidelines allow fund managers to apply for an exemption to create their plan to reduce that ownership interest in the collective investment scheme.

“So, in terms of the fact that this is court appointed, it would have to take effect as is. Then we would have those discussions with the FSC and hoping that we would be able to receive that same allowance to reduce exposure. Considering that those funds that are overweight currently, if it is that we are to switch right now, would have been that way because they would have seeded the initial fund,” Aris closed.