NCB Capital’s Stratus fund now targeting infrastructure investments
Published:Wednesday | December 9, 2020 | 12:16 AM
Stratus Alternative Funds, an investment vehicle designed by NCB Capital Markets to provide backing for different asset classes, will be taking on large infrastructure projects in conjunction with partnering investors.
The brokerage is currently in discussions regarding financing for a number of infrastructure assets in the Caribbean region, through Stratus, inclusive of ports, energy and utility projects, according to CEO of NCB Capital Steven Gooden.
He expects that the investments will outperform bond and stock market returns.
“Investors should be increasing their allocation to alternative investments now more than ever given the volatility in the market, which is expected to be the new norm, and which has resulted in underperformance of traditional investments such as stocks,” said Gooden in an interview with the Financial Gleaner.
Gooden explained that Stratus is designed as a series of funds, in which different investors can participate. The Stratus umbrella includes the new Infrastructure Fund; the Caribbean Mezzanine Fund, or CMF, valued at US$16.7 million and co-managed with partner Eppley Limited; and the Opportunity Fund set for future launch, said Gooden. The Infrastructure Fund has already been seeded with US$10 million via a private placement, he said.
“The funds will cater to a variety of risk appetites. As such, different funds under the Stratus umbrella will have different return targets,” Gooden said.
“The Caribbean Mezzanine Fund has a target internal rate of return of 11 per cent. Assuming that the fund meets it return target and the income is reinvested at the same rate, then it is conceivable that US$10 million could grow to US$320 million, all other factors being constant,” he said.
Caribbean Mezzanine Fund offers loans to companies within the utility, energy, business process outsourcing and real estate sectors, some of which include a component that converts the debt into equity. CMF has transitioned to a second phase, CMF II, and will raise additional funds in a private placement going forward to add to the US$16.7 million in the fund.
“We converted CMF I into CMF II by transferring the assets over to the new structure, following the approval of the existing investors of CMF I. The investors of CMF I will then own shares in CMF II and will continue to benefit from the same attractive high-quality portfolio of assets,” Gooden said, adding that the new structure allows for greater scaling and the opportunity to earn higher returns by investing over longer tenures.
As for the prospects for infrastructure, Gooden said that asset class currently “provides more stable and predictable income, an opportunity to earn attractive returns and a smoother investment experience”.
Other players have similarly weighed the market and concluded that in a pandemic-depressed environment they are likely to earn more from infrastructure and real estate than equities.
In November, for example, MoneyMasters Limited launched a new subsidiary called Money Masters Real Estate & Infrastructure Investments Limited as an alternative investment fund, with plans to finance infrastructure and real estate projects as well. That fund plans to raise $1.5 billion in a private placement and then in a year seek to go public by way of listing on the Jamaica Stock Exchange.