After expanding the Caribbean Mezzanine Fund (CMF) into CMF II at the end of 2020, Stratus Alternative Funds SCC (Segregated Cellular Fund) has doubled its portfolio to four funds as the alternative investments continue to gain transaction across the region.

Stratus is based in Barbados with CMF II, an infrastructure fund, a regional opportunity fund (ROF) and the Tourism Response Impact Portfolio (TRIP). Stratus was formed to provide alternative financing to corporates and governments which were looking for capital outside of traditional bonds. It’s chaired by Sanya Goffe with NCB Capital Markets Limited (NCBCM) acting as the fund manager for the various funds except for CMF II, which is co-managed with Eppley Limited.

Since forming the various funds in 2020, each has delivered an internal rate of return (IRR) that has surpassed the specific benchmarks except for the infrastructure fund. The IRR’s and benchmarks include CMF II IRR of 12 per cent versus 11 per cent benchmark; TRIP IRR of 11.5 per cent versus 10 per cent benchmark and ROF IRR of 16 per cent versus 15 per cent benchmark.

“We are big on providing a variety of investment options for our clients and that’s why Stratus was formed. In general, Stratus has been performing very well. We’ve established a very robust pipeline with our hub infrastructure that enables us to originate different types of deals in different territories and that is a pretty big advantage. In terms of the pipeline, we have in excess of US$100 million covering different types of deals and structures,” stated assistant vice-president for alternatives and funds management at NCBCM Simone Hudson, at the Jamaica Business Observer Forum held at NCBCM’s head office in New Kingston, St Andrew.

When questioned about the expectations for the infrastructure fund in 2022, Hudson replied, “For the infrastructure fund, we’re just below the benchmark and that will change in the current year. I’m very bullish on that particular portfolio because of the plans we have in terms of investing in some major infrastructure projects that will benefit Jamaica. It involves infrastructure projects relating to water as well as some major projects like roadworks and real estate, etc.”

NCBCM CEO Steven Gooden further highlighted the group’s capacity for infrastructure investments based on major transactions carried out in recent times. These included a 40-year bond for the National Water Commission without a government guarantee, the US$180-million bond for NFE South Power Jamaica Holdings Limited and the TransJamaican Highway initial public offering in February 2020.

“As a group, our expertise in infrastructure financing is broad and deep. We’re a leader in Jamaica when it comes onto infrastructure financing and when you look at diversity, we’re probably among the top firms across the region. The beauty about the NCB Financial Group is that we’re a multifaceted, well diversified institution. What that does is for any company that is in need of financing, irrespective of where on the capital structure you are, to raise that money, we can facilitate it,” Gooden added.

When asked about the nature of the ROF, Hudson explained that it was further along the risk spectrum and provided an opportunity to partner with family businesses to expand their offering to their clientele. One such example is the rebranding and expansion of Stewart Finance with the Stewart’s Automotive Group in October. Stewart Finance provides financing to customers securing vehicles and is offered in Jamaica, St Lucia and Trinidad and Tobago.

“When I say exotic, I’m speaking to products that are further along the risk spectrum like private equity type opportunities, opportunities for turnaround. Opportunities like those where we can partner with family run businesses here in Jamaica and the wider Caribbean is what the regional opportunity fund will focus on. The regional opportunity fund will partner with our on-balance sheet portfolios to deliver that for our small and medium sized entities,” Hudson commented.

Stratus currently has funds under management in excess of US$60 million with TRIP looking to execute an IPO once regulatory approvals are satisfied. Hudson noted that TRIP had resonated well with a number of businesses in the tourism sector which needed financing for various opportunities.

Total alternative assets under management surpassed US$9 trillion globally in 2021 as mergers and acquisition activity heated up with firms seeking opportunities to capitalise on the novel coronavirus pandemic. Locally, more securities dealers are launching alternative investment vehicles to capitalise on the growing space.

Sygnus Credit Investments Limited (SCI) and Sygnus Real Estate Finance Limited had in excess of US$158.18 million in total assets at the end of November as they execute more projects across the region. SCI recently funded part of the US$9-million public-private partnership in The Bahamas to rebuild a government complex. Barita Investments Limited outlined in its 2021 prospectus that it was looking to use part of the proceeds from the capital raise to add capacity to its private equity, private credit, infrastructure and alternative investment portfolios. Barita’s affiliate MJR Real Estate Holdings Limited recently spent US$8.6 million to acquire two properties in Kingston. It also took a stake in Ecommerce Property Services Limited which acquired three real estate service companies in the United States.

Gooden expects the trend of alternative investments to accelerate with private equity taking the forefront. He highlighted the formation of the Caribbean Alternative Investment Association and reduction in government’s crowding out in the capital markets as precursors to what should be expected for the future.

“I would say that 2022 is the year that we’re likely going to see an expansion of our assets under management, as we raise money to deploy in these opportunities. The pandemic would have created some opportunities that would have forced us to accelerate the roll-out of some our portfolios. By accelerating it, we took the decision to go to friends and family before going to the public. Last year was spent building out infrastructure, improving our expertise, and building the pipeline. This year is where you’re going to see significant deployment and fund-raising efforts,” Gooden closed.