Eye on $600 Billion – Jamaica Observer
(Photo: Karl Mclarty)
FORMER Scotia Group Chair and CEO Jacqueline Sharp and Financial Economist Dr Adrian Stokes launched Jamaica’s newest financial entity, Quantas Financial Group, in a bid to ‘open the menu’ options available to investors.
“Officially, Quantas Financial Group started operations about four months ago,” said Stokes, who will serve as the entity’s chief executive. Jamaica Observer in an exclusive interview. Stokes, who is the former head of wealth and insurance at Scotia Group Jamaica, left the role in February. At the time, Scotia Group, in a statement to the Jamaica Stock Exchange, said it was “leaving the business to pursue other opportunities”.
These opportunities turn out to be a push into the market for contractual cash flows, including but not limited to trade receivables – a market according to Stokes has been conservatively estimated at US$4 billion ( $600 billion).
“We’re looking to give investors the ability to invest in a vehicle that does securitization. So effectively what that vehicle does, it buys different cash flows/receivables, wraps or securitizes those receivables to create new securities , then sells those securities to end users such as pension funds, insurance companies, or accredited individual investors who are concerned about credit and other major market risks in the current market environment. , investors get a return from the profits we make,” the CEO of Quantas Financial Group said.
Quantas’ first investment solution as mentioned is a securitization vehicle.
“We are currently looking at different types of trade receivables. We currently have a very large pipeline of over $140 million,” he added.
“What we’re doing isn’t completely new and new. It’s just new to our market,” said Sharp, chairman of the board of Quantas Financial Group. Sharp, who left Scotia Group in October 2017 to join his family business, added: “These are things that happen in more sophisticated developed markets. If you look at the United States, for example, that market is about US$14 trillion, a huge market for receivables financing. In the Caribbean and Latin America region, we are looking at around US$1.5 trillion and we estimate Jamaica to be around US$4 billion ($600 billion),” she continued.
“It only comes from publicly available data,” Stokes added, pointing out that there are many more claims that are not publicly known, which presents a “great-great opportunity.”
Outside of US Treasuries, this is the largest section of the market, he noted. According to the Securities Industry and Financial Markets Association (SIFMA), the US Treasuries market is valued at US$46 trillion.
Sharp and Stokes say the motivation behind starting Quantas is to improve capital allocation in Jamaica and the Caribbean.
“Financial markets in our region are still at an early stage of development. Many good investment ideas never see the light of day because they lack access to capital. Therefore, economic growth and development in our region are relatively weak. Economic development in our region will be given greater impetus as our financial markets develop and improve the allocation of capital. Quantas was formed to continue the development of financial markets in our region, and in doing so, we will help create solutions for a better Caribbean and a better world,” they said.
Quantas Financial Group itself is made up of three entities: Quantas Capital, Quantas Investments and Quantas Management. “The company’s name actually derives from the Latin word quantus, which means, how much,” Stokes pointed out. “Then we work with our marketing team to come up with Quantas, which is a play on the word quantus.”
So far, it has targeted asset-backed securities (ABS), which are financial investments secured by a pool of underlying assets, typically those that generate cash flow from debt, such as loans, leases, credit card balances or receivables.
“In fact, we are focused on providing investors with non-traditional financial solutions. As you know, you have your regular bonds and stocks and your pensions which are your traditional investment solutions. What we do, we provide investors from additional asset classes so that they can diversify their investment portfolios,” Stokes added, noting that he did not want Quantas Financial Group to meddle in the market where other entities are “already doing good work.” .
When asked if the company intends to branch out from this market, Stokes replied: “We will bring different kinds of solutions. We don’t want to say too much at this stage, other than the opportunity that we have in the market right now, which is the securitization vehicle. But above all, a key part of what we do, we innovate. We don’t replicate existing investment opportunities. We believe that market players do great job with the different opportunities that are available so we don’t intend to create replicas of existing opportunities in the market so mostly what you will see just like this new investment opportunity we have on the market, it’s going to be new, it’s going to be innovative and above all it’s going to offer investors a diversification of opportunities, different from what exists on the market.”
“We think this is an exciting opportunity for us because we saw the need. I certainly saw [the need] when I was at Scotia and of course Adrian would have seen it more in his recent role as Head of Investments and Insurance at Scotia,” added Sharp. “The reality is that there are pension funds and institutional investors who have cash and very few options to invest those funds, and so at the same time, at the other end, you have people who need financing, especially longer term which banks usually cannot finance, and they need creative structures. So really, the goal of this company is to be in the middle and bring the two together,” explained the president of Quantas.
Stokes was quick to point out, however, that while the company is dealing with receivables, “we’re looking at receivables that are good receivables. It’s not just any receivables, because we have a receivables management architecture. very strict risks which allows us to choose quality receivables.”
“When we talk about receivables, we use the term very broadly because it encompasses different types of cash flows. You’re talking about leases, for example. So if you’re a business and you’ve built commercial buildings, and you have tenants who have leased these stores to you, and they have lease payments that are due over the next three, four, five years, we can buy those leases from the developer or the landlord and pay them in cash, which they can go and reinvest in new areas or new projects, etc. So it’s not just your traditional trade receivables, but any type of contractual cash flow.”
“Anything you put in as contractual cash flows that we can understand that can pass through our conservative risk measures, then that will be a candidate for us for securitization.”
Sharp added: “These companies need to have strong, predictable cash flows, contractual cash flows that we can understand. We can understand the history, we can do our due diligence on the counterparty to those receivables. other words, if you have a building that you have rented to someone, we want to understand who is a person you have rented to, are they of good character, do they normally pay on time, etc. What is their model that shows they have the ability to meet those contractual cash flows.”
So far, Quantas Financial Group has assembled an impressive list of finance gurus to lead the campaign. In addition to Stokes who is the CEO, the team is made up of Stanley Thompson, who is the executive vice president for product innovation; Sitarah Smith, executive vice president of treasury services; Layne Atkinson, executive vice president for risk management; Cherice Lee, vice president of operations; and Franklyn Anderson, vice president of product innovation. Stokes said the goal was to increase the number of employees to 15.
While he did not say how much money was used to capitalize the entity, he pointed out that hotelier Kevin Hendrickson and CB Group CEO Matthew Lyn are key strategic partners. Both are directors of Quantas Financial Group along with Oliver “Ollie” McIntosh, founder and chairman of Verticast Media Group, and Denise Williams, former senior vice president of communications at Cable & Wireless. Sharp and Stokes are the other board members.
“We want to collaborate with existing players. We see ourselves as collaborators. In other words, most if not all of the things we create, we will be able to work with existing players in the market. For example, on retirement On the fund side, one of the things we’re going to do is give them an additional opportunity to diversify their portfolios, right now most of what they have are bonds, stocks, real estate and pension funds and their investors need additional asset classes to properly diversify their portfolios.”
But the company isn’t just targeting Jamaica. Sharp and Stokes already have their sights set on the Dominican Republic and Trinidad.
From left to right: Jacqueline Sharp, Chairman of the Board, and Dr. Adrian Stokes, CEO, Quantas Financial Group (Photo: Karl Mclarty)
SHARP… “What we do is not completely new and new. It’s just new to our market. (Photo: Karl Mclarty)
STOKES… “We are looking to give investors the opportunity to invest in a vehicle that does securitization. (Photo: Karl Mclarty)
The Quantas Financial Group logo and slogan.
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