Regional investment banking house, NCB Capital Markets Limited (NCBCM) has launched an alternative investments platform aimed at providing investors with a broad range of non-traditional high-yielding investment solutions.
Stratus Alternative Funds SCC (Stratus) will give investors a new option for for diversifying their portfolios away from their longstanding reliance on traditional stocks, bonds, and cash.
The different or alternative option may include infrastructure assets, real estate, private equity, mezzanine financing and turn-around opportunities.
Alternatives usually require high minimum investments and advanced technical competencies to assess their attractiveness. As such, they are primarily held by institutional fund managers and ultra-high net worth investors. However, with the introduction of Stratus, more investors will be able to participate such high-yield assets through a fund structure. This allows investors to pool their resources to access opportunities that would have otherwise been out of reach.
“Stratus is transformative; it is the product future for NCBCM and its creation tangibly demonstrates our commitment to the deepening of the regional capital markets” said Steven Gooden, chief executive officer at NCBCM.
The announcement comes on the heels of the recent volatility in the financial markets in the wake of the COVID-19 pandemic.
“Stratus is a vehicle designed to provide creative flexible financing solutions to the region funded by regional and international investors that are seeking to participate in the recovery of the Caribbean; Stratus will be an important catalyst for regional economic development,” Gooden added.
Stratus offers investors an opportunity to participate in investments that may not be readily available to smaller investors, while benefitting from higher returns.
Simone Hudson, assistant vice president, alternatives & fund management at NCBCM, said: “Within the context of high market liquidity and low returns on the traditional wealth products, it is important that investors include alternative investments as part of their portfolio holdings. They provide more stable and higher returns than stocks and bonds.”
VALUE CREATION CASE
Hudson added: “The largest pension funds in the world are increasing their participation in alternatives for a reason. If you look at it in dollars and cents, US$10,000 invested in bonds at, say, a compounded rate of four per cent per annum over 30 years will grow to just over US$320,000. However, that same amount invested in alternatives at an annual compounded rate of, say, 11 per cent, grows to just under US$2.3 million. The value creation may be seven-fold when compared to the traditional fixed income assets.”
CARIBBEAN MEZZANINE FUND
One of the funds under the Stratus umbrella – Caribbean Mezzanine Fund (CMF) II, has a targeted USD annual return of 11 per cent and its precursor CMF I has already delivered mid-teen annual returns to its investors.
CMF is co-managed by NCBCM and Eppley Limited and focuses on providing non-traditional financing to businesses. Since its inception in 2016, it has generated an internal rate of return of 14 per cent to 16 per cent in USD, a cash yield of a 12.6 per cent and a dividend yield to investors of 8.0 per cent per annum in USD.
EMPHASIS ON GOVERNANCE
Stratus is overseen by a solid board of directors, which comprises well-established and reputable individuals in their respective fields. The board is chaired by Sanya Goffe – partner at Hart Muirhead Fatta and an Eisenhower Fellow. It also includes Robert Bermudez, a Trinidadian business tycoon and University of the West Indies Chancellor; Alok Jain, former partner at PriceWaterhouseCoopers; and Patrick Hylton, president and CEO of NCB Financial Group Limited. Independent directors form the majority of the board of Stratus, which is consistent with international corporate governance best practices.