|The Bahamas Investor Magazine
August 21, 2017
August 21, 2017
Sitting on the doorstep of a large and growing market, The Bahamas has gained considerable traction among high-net-worth individuals in Latin America. The latest addition to the range of providers available to investors from that region is global advisory and fund administration firm Maitland, which recently acquired a restricted license to operate in The Bahamas.
With a LatAm client base of over $1.75 billion in assets under management, Maitland is deploying its resources to help these clients with their fund structure needs. Senior manager, business development and client management (LatAm), Benjamin Reid joined Maitland in 2013 with a primary focus on establishing and developing the group’s Latin American offering. In an exclusive interview, Reid talks about the trends in the region and what the prospects are for international financial centres such as The Bahamas.
Q: What drove the decision to apply for a restricted license to operate in The Bahamas?
A: Maitland has over $280 billion in assets under administration and a strong platform including teams of operations specialists and industry-leading technology, so we feel we can come to The Bahamas and offer something new. We don’t compete with banks’ offerings, so there is room in the market in that respect. We definitely see it as a place where we need to be to provide a certain “fit” for these clients and we can definitely add value to The Bahamas’ offering.
Q: Brazil is still a major market in the LatAm region. Potentially, where is the most growth and what opportunities are there for The Bahamas?
A: Brazil presents a major opportunity and The Bahamas’ funds industry has been developed specifically for that market. It is by far the biggest market in Latin America for the wealth management industry of the US and Europe as well, so many companies have a structured focus on Brazil. We are still seeing substantial growth in the number of high- net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs), and although it faltered for a while due to recent scandals, mergers and acquisions are now on the increase, which is creating a new generation of wealth, putting the country firmly back on our radar.
Q: Where else in the region is there opportunity?
A: Mexico and Colombia are becoming talked about quite a lot as having great potential, particularly for private banks and wealth structuring firms such as ourselves. Efforts to clamp down on corruption and terrorism in these countries makes them more attractive. The US Foreign Accounting Tax Compliance Act (FATCA), Organisation for Economic Co-operation and Development (OECD) legislation and Common Reporting Standard (CRS) are entirely changing how business is being conducted and jurisdictions need to be compliant and easy to work with.
Mexico has quite an evolved HNWI market and a mature tax regime, but it also has a high risk of instability which makes it very complex in regards to banking and wealth structuring potential.
Colombia could be the new Brazil and in the next three to five years we are envisaging it to become a substantial force in the LatAm region. It is being quite clever by taking its time to implement tax regimes; it is waiting to see what is the best route to take.
Q: What can international financial centres such as The Bahamas do to capitalize on the LatAm market?
A: Many of us in the wealth structuring business wish there was a “one-size-fits- all” solution. But every region and jurisdiction has its own nuance, which makes it complex. The honest truth is that it is not the easiest market.
Having said that, The Bahamas has had a lot of success in Brazil with SMART Funds and the development of the ICON. For many clients, the ICON is a perfect solution. Certain changes within the legislative regime in Brazil and in Mexico could mean there is a lot more business there for The Bahamas.
The Bahamas has to look at what HNWIs are looking for. What is important to them? Is it cost or regulation? Nine times out of ten, cost is going to be the main driver and The Bahamas is very competitive in that area. It really depends on who the client is and what their goal is. You can then decide whether you can piece together a solution for them.
The Bahamas is going to have a very important role to play in the coming years. We have confidence in The Bahamas; we wouldn’t have pushed for a license there if we hadn’t.
Q: What more can The Bahamas do to remain competitive?
A: If you look at the history of the funds industry, The Bahamas is the newest regime and has the least market cap in terms of number of funds. And perhaps it’s because of those challenges that The Bahamas has been very aggressive in its marketing to the region, resulting in a lot of momentum with growing the “private client segment.” The Bahamas has taken a stance of saying that it is going out there and it is going to grow its industry. Places such as the Cayman Islands also famed as “the offshore fund jurisdiction for institutional managers” already has a substantial market share. The British Virgin Islands tends to be viewed as the more cost friendly solution to Cayman and has even launched structures such as the Approved Fund that can be seen to compete with the SMART fund. While those jurisdictions have good solutions and strong offerings in their own right, they are still not seen as a “private client jurisdiction.” The Bahamas on the other hand strives to focus on that designation. It is aggressively going out there to promote itself; and dividends are being paid.