The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian investors were yesterday urged by a leading investment banker to better exploit the increased international investment opportunities opened up by the Central Bank’s exchange control liberalisation moves.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that Bahamian investor appetite for international products “tends to come and go”, rather than stay consistent.

As a result, he argued that investors were potentially missing out on being able to diversify their portfolios beyond the Bahamas, and the prospect of greater returns from faster-growing foreign markets.

With the Central Bank now preparing to increase the sum granted to local broker/dealers for investments outside the Bahamas by $10 million per annum, as part of further exchange control liberalisation, the Royal Fidelity president urged Bahamians not to squander the greater access to international markets.

“I think it’s a step in the right direction,” Mr Anderson told Tribune Business of the Central Bank’s latest liberalisation move.

“Any opportunity for Bahamian investors to have more choice as to what to invest in is a good thing.”

Unveiling the proposed amendments at the Grand Bahama Business Outlook conference, Mr Rolle said the total foreign currency sum granted to local broker/dealers for their Bahamian Depository Receipt (BDR) products would be increased from $25 million to $35 million per annum.

Given that the funds are distributed quarterly, the maximum three-month allocation to the Bahamian capital market will increase from $6.25 million to $8.75 million.

Mr Anderson, though, said he was “not sure that the full allocation has been taken up” in recent quarters, due to a lack of market demand for foreign currency securities investments.

“It’s much more an opportunity that Bahamian investors ought to look to take part in,” he told Tribune Business, “but it’s not been a consistent attitude from Bahamian investors.

“There still wary about international investments. It’s [the latest liberalisation] an opportunity that definitely ought to be further explored.”

Mr Anderson said RoyalFidelity currently offered Bahamian investors three US dollar-denominated international investment fund products - a fixed income fund, equity fund and hedge fund - as a ‘fund of funds’ structure.

“We have three international funds that we make available to the market, and have been doing so for a number of years,” he added.

“The interest in them tends to come and go. I think it’s a good initiative by the Central Bank, and I hope that ultimately more Bahamian investors will start to take advantage of this opportunity.”

BDR products are derivatives, typically structured as investment funds, and designed to provide Bahamian institutional and retail investors with access to international capital markets.

Bahamians, either individually or through institutions, invest Bahamian dollars that are converted at the one-to-one exchange rate via the US dollar allocations made available to broker/dealers via the Central Bank.

Mr Anderson said the main benefits from the BDR programme were investment diversification for Bahamians beyond the relatively narrow range of products, and securities, available in the domestic market.

“It’s literally a diversification of investment options,” he told Tribune Business. “As a Bahamian you are only entitled to hold Bahamian dollar securities, and very few are available.

“It’s just a different investment opportunity to invest in global fixed income, equity and hedge fund products. It’s nice to have a certain percentage of your funds invested in the international market, so that you’re not solely reliant on the Bahamas.

“Things that are available in the US, UK markets are not available in the Bahamas. With our managers, we choose what to make available to our clients,” Mr Anderson said.

“With our managers, we choose what to make available to our clients. If you look at the potential diversification and growth opportunities in other markets, it gives you an entirely different perspective on all the possibilities.

“If you look inward, you have limited possibilities here with 20 securities [on BISX’s Main Board].”

Mr Anderson suggested there was an “education gap” as to Bahamian investor knowledge of the potential returns and opportunities available internationally.

Still, he added: “It’s a great initiative from the Central Bank, and they have been liberalising for 10 years or so.

“It’s not been a rapid liberalisation, but every now and then it’s a step. There’s definitely been a freeing up of foreign currency, and these are all steps in the right direction.

“When we get to full liberalisation, who knows? There are a number of steps between here and there, but a staged change is a good way to approach it.”