Quantas Financial Group (QFG) is practically a new financial company on the block targeting a certain market that is assumed to be underserved locally and in the Caribbean region. This market is the contractual cash flow market.
In finance, contractual cash flow denotes the cash flow which is money, that is exchanged between the contracting parties that follow what has been laid out in the contract documentation. This can be a loan agreement, terms sheet, prospectus, etc.
Contract cash flows can also be called scheduled cashflows in most circumstances because these exchanges constitute the scheduled payments defined in the contract document to occur in the future. You can see that contractual cash flow plays an important role in the financial system.
CEO of QFG, Dr. Adrian Stokes who was a former Group Strategist for Nova Scotia, along with former Scotia Group President Jaqueline Sharp who is Board Chair for QFG decided to hit the road running approximately 4 months ago.
Dr. Stokes is estimating that the size of this market locally is $4 billion USD which is approximately $600 billion JMD as of this writing.
For the Caribbean the total market is valued at, $1.5 trillion USD, Sharp elaborated more on the market potential for this business.
“These are things that are happening in more sophisticated developed markets. If you look at the US, for example, that market is about US$14 trillion, a huge market for receivables financing. In the Caribbean and Latin American region, we’re looking at about US$1.5 trillion and we are estimating that Jamaica is about US$4 billion ($600 billion),” she said.
Dr. Stokes presents a thesis of how he envisions capitalizing on this market,
“We are looking to give investors the ability to invest in a vehicle that does securitization. So effectively, what this vehicle does, it purchases different cash flows/receivables, packages, or securitizes these receivables to create new securities, and then sell these securities to end-users like pension funds, insurance companies, or accredited individual investors who are concerned about credit and other major market risks in the current market environment. In doing so, investors earn a return from the profit that we make,”.
This is a very interesting strategy, banks and other financial institutions do create these types of financial securities. The thing is, contractual cash flows such as mortgages, loans, etc. are assumed to be stable and recurring cash flows based on the duration of what is stated on the contract and the terms.
Packaging these different types of contractual cash flows and securitizing them and then offering them to other financial institutions such as pension funds, insurance companies, and accredited individual investors could work quite well.
To even go a little further, typically for banks, loans can be seen as an asset. A bank could group up a pool of loans and turn that into one large asset and then issue that as a financial security to other institutions. A loan in this case could then become a bond which could then be issued out to insurance companies, pension funds, etc.
Dr. Stokes added that for the moment he is currently looking at over $140 million USD right now.
“We have various types of trade receivables looking at right now. We have a very big pipeline of over US$140 million right now,” he added.
Quantas Financial Group itself is made up of three entities: Quantas Capital, Quantas Investments, and Quantas Management.
According to Dr. Stokes, he wants to provide investors with a new investing option that can help them to diversify their portfolios.
“Effectively, what we focus on is providing investors with non-traditional financial solutions. As you know, you have your regular bonds and equities, and repos which are your traditional investment solutions. What we do, we provide investors with additional asset classes so that they can diversify their investment portfolios,” Stokes added
So far, the company seems impressive and well thought out. They have put strict risk management systems in place to ensure that the companies that they are going to work with follow certain guidelines.
Additionally, they also have persons who are a part of the board who has a lot of business experience, you can find persons such as hotelier Kevin Hendrickson and CEO of the CB Group Matthew Lyn who are directors at the company as well as Oliver Mcintosh, the founder and president of Verticast Media Group along with Denise Williams, who is a former senior vice-president for communications at Cable & Wireless.
It’s a company I will definitely keep an eye on to see how it develops over the years. I like the fact that one of the main goals is not really competing with existing models that are already working within the financial market, and instead, carve out a market for QFG that can allow the business to flourish.
amazing