Historically, individuals and institutions looking to invest in Caribbean markets had few other opportunities to access capital outside of traditional banking sources. The investment landscape is now changing significantly, and the region is experiencing growth in the alternative investments scene including from private equity, venture capital, hedge funds, managed futures, commodities and derivatives contracts.
The Caribbean’s alternative investment space currently has around USD 600 million in capital under management. This growth has been particularly important for Jamaica, the fourth-largest economy in the region, where red tape continues to hinder direct foreign investment amidst slow recovery from a pandemic-battered economic stagnation.
A regional alternative investment expert explained, “The impact of alternative investment growth on the private sector is to unlock capital and to provide an alternative financing channel for medium size, middle market businesses to access capital and growth in Jamaica. The island provides plenty of enticing investment opportunities for smaller and more agile investors who tend towards alternative sources of capital.”
“The island provides plenty of enticing investment opportunities for smaller and more agile investors who tend towards alternative sources of capital.”
A regional alternative investment expert, Jamaica
The structure of the capital balance has been very inflexible, especially during the pandemic. Banks pulled back from lending over the first 18 months of the pandemic, so a lot of businesses who saw opportunities and wanted to grow by expanding needed flexible financing through acquisitions. Investing by acquisition is pertinent at a time when Jamaica’s 4G telecommunications network is rapidly expanding. Tenders last year attracted strong interest from venture capital and private equity circles who often grow though such means.
The regional alternative investment expert explained, “There’s a tremendous growth upside for this asset class, which is the fastest growing asset class in Jamaica. As investors become more acquainted with the asset class, and as entrepreneurs and businesses recognise the benefits that can be derived from the sensibility that it gives entrepreneurs and businesses, I think that more capital will be deployed in that asset class and as more capital is deployed, more opportunities will arise in Jamaica.”
“There’s a tremendous growth upside for this asset class, which is the fastest growing asset class in Jamaica.”
The regional alternative investment expert, Jamaica
Jamaica is unlikely to reach pre-pandemic growth until around 2024 – a sharp pandemic induced contraction will hurt for some time. Exactly why the country should continue to aggressively promote itself as a destination for alternative investments. It is clear thus far that the country has been particularly attractive in alternative investment areas that are more well established including private credit, real estate and private equity. In a post-pandemic world with war raging in Europe, traditional stocks and bonds can be a risker bet. Jamaica on the other hand provides opportunities for significant portfolio diversification – investments on the island could act as a buffer against the kinds of risks that come with inflationary pressures currently being experienced across several parts of the world.
What is particularly exciting for Jamaica is that the country’s geo-strategic location and fast developing infrastructure, from roads to ports is piquing interest from foreign shores. Alternative investments are well established across Europe, North America and Asia, providing a new channel through which capital can be assessed by businesses. The Jamaican market is grossly underserved; the growth potential is significant.