The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

Investar Securities’ mutual fund launch is the first step in developing a fully-fledged investment bank, its chairman said yesterday, describing some local investments as “a crap shoot”.

Hillary Deveaux, the former Securities Commission chief who now heads Sebas Bastian’s capital markets venture, explained that the absence of a credit rating agency made it harder to properly assess the risk presented by investing in Bahamian companies.

“We don’t have investment grade companies,” he explained. “We don’t have rating agencies; that’s one of the challenges we have. Sometimes, it’s a crap shoot.” Besides providing investment vehicles for both sophisticated investors and “ordinary working” Bahamians (see other article on Page 1B), Investar’s two Titan funds are designed to fuel economic growth.

Besides investing in BISX-listed companies, Mr Deveaux confirmed that the Titan Balanced Fund plans to compile a diversified portfolio that also includes private companies, real estate, utilities, technology, private-public partnerships (PPPs), government bonds and project development.

“We’d be looking at private companies. The idea is to look at the risk associated with those companies,” he added, suggesting that they would have to meet Titan’s investment criteria and risk appetite.

Several of the targeted investments involve areas where Mr Bastian’s other companies are active. Investar is part of a group that includes Brickell Management Group (BMG), a property management and development venture; Vandoff Construction, a building contractor; and BMG Insurance Agents & Brokers. 

BMG’s website has a link to Investar’s, and Mr Bastian’s group has already been involved in PPPs under the former Christie administration. Some observers are also likely to be unhappy at what they will likely perceive as Mr Bastian using his web shop profits, and Island Luck’s dominance of that market, to invest in other sectors - which is something that could raise competition concerns.

The funds’ launch marked the long-awaited emergence of Investar as a capital markets player, and Mr Deveaux confirmed that it ultimately planned to expand into an investment house to compete with the likes of well-established institutions such as RoyalFidelity Merchant Bank & Trust, CFAL and Providence Advisors.

With Titan designed to provide the platform for further growth, Mr Deveaux said: “I think we have the opportunity and ability to compete with them. We will move in a very careful way... in trying to get market share in the industry.

“We are licensed under the Securities Industry Act, the Investment Funds Act and the Financial and Corporate Services Providers Act. We have the opportunity to take advantage of what is offered in all this legislation  - broker/dealer activities. We are not engaged in investment fund administration yet. We are looking to build the talent to deal with that area.

“We have three licences, and these licences provide us with the opportunity to enter into all aspects of financial services with the exception of money transfer businesses. That is a Central Bank responsibility. We are open to any opportunities that will provide us with the returns that will move the company forward.”

Mr Deveaux said the Titan funds’ launch would “increase the revenue streams so we can pursue more of these opportunities”, while also helping to build and grow the economy through its investments and provide Bahamians with increased ownership/wealth building opportunities.

He added that Investar had displayed “an absolute dedication” to ensuring the Titan funds, which are restricted to The Bahamas and Bahamian dollar investments, structured correctly over a two-year product development cycle.

Asked why this had taken so long, Mr Deveaux pointed to management changes and the need to build the necessary capacity at Investar. “I think we had some issues with personnel,” he said in response to Tribune Business’s question.

“At the end of the day, we had to change management and directorships. That was one of the reasons. The others were really that we didn’t think we’d developed the requisite expertise to go further in the securities and capital markets.

“When you look at the required capital under the Securities Industries Act, which is $300,000, that is putting up capital and not seeing any revenue stream. We stuck with it, and are ready to go.”

Among the departures from Investar’s Board and management, according to its website a year ago, are ex-CFAL executive Kevin Burrows, who was described as its president and managing director, and ex-Bahamasair chief, Paul Major, who was billed as its vice-president and secretary.

Ansel Watson, Investar’s current president and chief executive, said the boutique investment house would embark on an education campaign “starting from the ground level” to educate Bahamians on investing, the potential benefits and what mutual funds are.

With Bahamian investors focused on receiving regular dividend payments, the Titan funds’ concept of delivering returns via an appreciation in the value of its shares rather than capital returns could be a tough sell.