By NATARIO McKENZIE
and NEIL HARTNELL
Tribune Business Reporters
Sebas Bastian’s securities house has extended the offering period for its Titan funds by over two weeks after the flagship vehicle so far attracted 400 investors and $750,000 in subscriptions.
Hillary Deveaux, Investar Securities chairman, yesterday told Tribune Business that investor response to the Titan Balanced Fund had been “fairly substantial” and was “meeting our expectations” as the initial deadline for the offering’s closure passed yesterday.
The former Securities Commission executive director said: “With regard to the Titan Balanced Fund, we have had just over 400 subscribers the last time I checked. It could be more now but that was the number last time I checked. That is fairly substantial. Those subscriptions represent well over $750,000.”
Mr Deveaux added that Investar had extended the offering’s closing deadline by 16 days to July 19 to enable the Titan Balanced Fund to be properly marketed in the Family Islands. “We have not had a good opportunity to really get into the Family Islands,” he said. “We’re doing that now.
“We started going into the Family Islands on Friday. We started with Abaco, and we’re looking at islands like Eleuthera, Exuma and Long Island.” Mr Deveaux also admitted that market response to the Titan Balanced Fund’s companion, the Titan Fixed Income fund, had “not been impressive”.
The latter is targeted at institutional investors and high net worth individuals, and Mr Deveaux said: “There has not been an impressive response to the Fixed Income Fund simply because we have not done the road shows and had the one-on-one meetings.
“We’re dealing with that now. That’s one of the reasons [for the extension], along with the Balanced Fund still working with the Family Islands, because there has been some heavy demand by investors in the Family Islands.”
Mr Deveaux and other Investar Securities directors, together with the Titan Balanced Fund’s directors and Leno Corporate Services as investment manager, declined to reveal targets for how much they wanted to raise at the launch press conference on June 3.
This makes it hard to judge whether the offering has been successful, but the 16-day extension - together with the investor numbers and sum raised to-date - indicates that the investment house wants to give ordinary Bahamians every opportunity to participate and fulfill Titan’s mandate for launching the two funds.
However, Bahamian capital markets executives spoken to by Tribune Business yesterday expressed surprise at the investor numbers and figures given by Mr Deveaux. One, who had expected subscribers to be in the thousands by now, said: “You’re kidding? I’m surprised at that. Wow. I’m surprised. I am surprised. Very interesting.”
Investar Securities launched both the Titan Balanced Fund and the Titan Fixed Income Fund on June 3. The Titan Balanced Fund’s minimum investment threshold is $500 for 100 shares priced at $5 each, while the Titan Fixed Income Fund is aimed at more sophisticated investors.
Investar executives said the Titan Balanced Fund’s low investment threshold was designed to create an affordable entry point for ordinary, working Bahamians to buy into a vehicle that they argued was typically priced out of their reach.
They billed the Titan Balanced Fund as a way for Bahamians to obtain ownership of their own economy, and a means to “democratise” and spread wealth throughout more hands. A key selling point was the fund’s planned investment in Mr Bastian’s Island Luck web shop, although its total equity stake was to be kept below 5 percent to avoid the need for enhanced Gaming Board scrutiny.
One capital markets source, speaking on condition of anonymity, told Tribune Business that the Titan Balanced Fund faced a hard task to obtain the necessary scale given that it was primarily targeted at individual retail investors that typically have smaller amounts of money to invest.
This, they explained, meant that the fund needed to attract thousands of subscribers to give it sufficient financial clout to acquire meaningful assets such as equities, preference shares and debt instruments, real estate and positions in both listed and private companies. The $750,000 raised to-date, they suggested, fell some way short of that goal.
“It’s the Robin Hood approach,” the source said of Investar Securities. “That’s how they marketed themselves: As the saviour of the small Bahamian. But it’s not a good market to go after. That’s for sure.
“The retail investor will typically be the smaller investor. Largely it’s going to be the $1,000, $500 clients. It will take a long time to build assets, $500 at a time. But I’m sure they’ll take some business from all of us.”
Investar Securities is also facing the unfamiliarity many Bahamians have with the concept of an investment fund as a vehicle to pool capital from multiple investors, and how it is managed and invested to produce returns for their benefit. A substantial, long-running education campaign will be required to change this mindset.
Another issue is that investor returns on the Titan Balanced Fund, which are projected at 7-10 percent per annum, will virtually all come from capital appreciation or increases in the value of its shares as a result of improvements in its underlying investments.
“The directors do not anticipate that any dividends will be paid” from income and capital gains, the fund’s offering memorandum states. That may not appeal in a Bahamian capital market where dividends are king, and investors regularly shy away from stocks that fail to provide a consistent annual payout.
Investar Securities’ directors include Mr Bastian, Lowell Mortimer and Scott Godet, along with Mr Deveaux and managing director Ansel Watson. Titan Fund directors include Dirk Simmons, Felix Stubbs and Heather Beloit-Hazarian.
Both the Titan Balanced Fund and the Titan Fixed Income Fund have been licensed by the Securities Commission of The Bahamas (SCB). According to Investar, both funds will operate as Bahamian dollar investment funds with investments that may include property, utilities, publicly traded companies, government bonds and private holding companies.