The Tribune

By NEIL HARTNELL Tribune Business Editor A BAHAMIAN financial services provider yesterday said it was targeting between $500 million to $1 billion in asset-backed real estate securities investments for its newly-launched mutual fund, and seeking to expand its staff by up to 50 per cent. David Kosoy, chairman and chief executive of the Sterling Financial Group, said the New Providence Income Fund had already generated a "tremendous, unbelievable" response from potential institutional and retail investors, aided by the "past record" and returns generated by the company's two existing investment funds. Pointing to his 40 years of real estate development and financing experience, primarily in the US, Canada, the Bahamas and Turks & Caicos, Mr Kosoy told Tribune Business that Sterling's New Providence Income Fund aimed to be "an asset lender" in the area where he and the company had greatest expertise. Explaining that the 'post-credit crunch' struggles in many US and onshore financial markets meant it was "an ideal time" to launch the Fund, Mr Kosoy said no investment/asset manager had "performed better" than Sterling over the past five-six years. Annualised returns for the two funds operated under New Providence Capital Management Partners, run by Sterling and which offers residential and commercial real estate project mortgage loans in the Bahamas and North America, were said to be 10.3 per cent and 12.3 per cent, respectively according to the company's website. Sterling is also a real estate developer itself, Mr Kosoy telling Tribune Business it had invested some $30 million in developing four luxury villas in Paradise Island's Ocean Club Estates. It was also injecting another $35 million into five villas at Paradise Island's western end, on which construction has just begun. Unlike New Providence Capital Management Partners' two existing funds, Mr Kosoy said the New Providence Income Fund was designed to be an open-end, rather than closed-end, mutual fund in a bid to attract institutional investors previously put off by the latter aspect. An open-end fund allows investors to take their money out whenever they wish, although early principal redemptions may be subject to penalties. Closed-end funds, though, do not allow investors to redeem at will - only permitting this after a certain period of time has elapsed. "There are a number of institutions that wanted to participate in the [existing] funds, but couldn't, as it was not a mutual fund and there was no exit strategy," Mr Kosoy told Tribune Business. "The others were closed, and people could never get their money out for seven years." The minimum subscription bar for the New Providence Income Fund has also been lowered, having previously been set at $100,000. Mr Kosoy added that the other two funds had now been "fully deployed", hence the need to meet investor appetite with a third. "Today, with the way banking centres are around the US and the difficulties in getting loans, it's an ideal time to launch this fund," he told Tribune Business. "The previous funds were very successful, and I don't think anyone has performed better than us worldwide. "I am spending the vast majority of my time on this fund, and will be heading out of real estate. This the future for the next five years, the opportunity window for the next five years. No one has done better than our returns; US, internationally, we've outperformed them all on the last six years without one loss of principal." Outlining how the New Providence Income Fund would operate, Mr Kosoy said: "The strategy is to be an asset lender in areas where we have expertise, in the US, Canada, the Bahamas and the Turks & Caicos - tax jurisdictions that are tax free to the fund. "With people today having money in the bank at 1 per cent for five years, I think we're a great alternative. The next five years I see as the real future, and we're going to invest it all in asset-backed real estate securities." While looking to grow the New Providence Income Fund to $500 million to $1 billion worth of such investments, Mr Kosoy said no target had been set in terms of the amount of capital attracted into the mutual fund. Instead, Sterling was only focused "what we can deploy properly", and the return opportunities available to the Fund's investments. "I'm not looking to bring in money with no assets to match," Mr Kosoy explained. The New Providence Income Fund will be domiciled in the Cayman Islands, but managed from Sterling's Nassau office. Some eight persons are employed there, and the company is looking to expand its staff by three-four persons "right now". "It's a very difficult thing to get in the offshore world today, something as regulated as this and the track record of the principals," Mr Kosoy said.