The Caribbean’s regional investment banking giant, NCB Capital Markets Limited (“NCBCM”) has announced the launch of Stratus Alternative Funds SCC (“Stratus”). This entity is an alternative investments platform, which will provide investors with a broad range of non-traditional high-yielding investment solutions. This asset class represents a different or “alternative” option for investors to diversify their portfolios away from their longstanding reliance on traditional stocks, bonds, and cash. This 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 are now able to participate in these 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 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”, added Gooden.

Stratus offers investors an opportunity to participate in investments that may not be readily available to smaller investors, while benefiting from higher returns.

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 4% 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% 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% 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% to 16% in USD, a cash yield of a 12.6% and a dividend yield to investors of 8.0% 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 the Jamaican firm, 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 Jamaica, and the Hon Patrick Hylton, OJ, 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.