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'One-Stop Shop' To Exploit 50% Foreign Investment Cost Cut

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RoyalFidelity will tonight launch a "one-stop shop" investment management platform that aims to exploit the more than 50 percent cut in the premium Bahamians pay to invest overseas.

Michael Anderson, pictured, the Bahamian merchant bank's president, told Tribune Business yesterday that its Global Invest product would handle everything from obtaining the necessary Central Bank approvals to relations with external money managers in a bid to ease Bahamian investor access to the international capital markets.

He added that Global Invest, which will be unveiled at a RoyalFidelity seminar tonight at Baha Mar, would help Bahamians to diversify their investment portfolios and obtain potentially higher returns than those available in the limited domestic market.

Still, Mr Anderson said he expected steady rather than explosive growth in demand for Global Invest's services, given that Bahamian investors have traditionally been "reticent to step outside their comfort zone" by entering the international securities market.

He stressed that "marrying" RoyalFidelity, a known local brand, with its international money manager/broker relationships and access to Morgan Stanley's preferred investment packages should gradually ease such concerns.

"It will be interesting to see how well received this service is. There's a definite need for it," Mr Anderson told Tribune Business of Global Invest, suggesting initial demand might mirror that for RoyalFidelity's international investment funds.

"We've had a certain level of interest, but not overwhelming," the RoyalFidelity chief said of those funds, which were established during the initial stages of exchange control liberalisation. "Historically, Bahamian investors are reticent to externalise their funds, and there's been a tendency to stay where they're comfortable.

"We're hoping that staying with someone who you're comfortable with, like ourselves, and marrying that with international expertise will give them a a sense of comfort. I'm not sure we'll get a high level of comfort in the early phase. It's a step, and will expand in time.

"Over time it will build and more money will come in as people get used to the idea and returns are generated. It's relatively early in the development phase, but I'm glad the Central Bank has taken steps to make international investing available to a number of Bahamians."

RoyalFidelity's Global Invest launch comes just days after a subsidiary of Bahamas-based Cornèr Bank (Overseas), Cornèrtrader, unveiled an online trading platform designed to give Bahamians access to the US and global securities markets.

Pointing out that his company's product was an investment management, as opposed to trading, platform, Mr Anderson said "the common thread" between the two initiatives was taking advantage of reduced access costs to "facilitate Bahamian participation in the international securities markets.

"The Central Bank decision at the start of the year to reduce the investment premium brings it more into line with where Bahamians can afford to externalise their funds without spending too much of a premium," the RoyalFidelity president told Tribune Business.

"People had to go out and pay a 12.5 percent premium and 1.5 percent Stamp Duty; a 14 percent cost to enter the international markets. Many people were thinking how to make up that cost. It's hard from a return perspective to beat what they can get in the local market and cover that cost. Now it's a 5 percent premium and 1.5 percent Stamp Duty. That makes it easier for people to get over."

Mr Anderson said an earlier cut in the premium charged for investing outside the Bahamas, from 15 percent to 12.5 percent, had failed to produce the results desired by the Central Bank as there "really wasn't a lot of money being externalised through the investment dollar market".

He suggested many persons had previously been accessing overseas investments through "the grey market and alternative mechanisms" to avoid paying the premium, but the recent over-50 percent cut had reduced the incentive for such action.

"They've tried to get a premium level that is manageable for people, and can also monitor - to some extent - whether people are taking advantage of the opportunity," Mr Anderson added. "This gives them an opportunity to understand it better.

"The Central Bank has been trying to liberalise exchange controls for a number of years now. This is a bigger step than they've taken before, and hopefully they will see a bigger benefit from it."

Mr Anderson said the commercial banking system's near-$2 billion surplus liquidity also highlighted the need for Bahamian investors to find higher-yielding, alternative investments that generate returns higher than the 0.5-1 percent available on bank deposits.

While Global Invest was targeted at individuals and institutions with a minimum $500,000 in assets under management, the RoyalFidelity president said it was not designed to serve just an exclusive few.

Pointing out that only a portion of these assets will be invested overseas, Mr Anderson said it was suitable for persons who "have saved a fair amount of money" via pensions, bank accounts and other means, and want to diversify outside the Bahamas.

Describing Global Invest as an "all the way through" service, he added: "We'll go to the Central Bank and get your approvals; set up your accounts; help you manage the accounts; and do reviews and reports on a regular basis.

"We will be giving you a full service associated with the international markets, but done through RoyalFidelity. We'll organise discussions with the international partners, make reports available. It allows people to gain access to expertise that is not readily available here. You often have to go through a private bank where a minimum investment of $1m is required."

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