Miami's Capital Bancorp is starting to offer access to exotic investments, including hedge funds, in its international private bank.
To do so, Capital Bank, the lead subsidiary of the $1.8 billion-asset banking company, hired Steve F. Phillips 3d-a salesman experienced in pitching investment services to Latin Americans-as senior vice president in charge of international private banking.
Capital, the second-largest bank based in Florida, has 28 offices and $1.1 billion of deposits. The bank, which has a 25-year history in trade finance with Latin American exporters and is a leading correspondent bank in several South American countries, hopes sophisticated investment management will enhance its private bank.
Mr. Phillips, who will advise clients investing in hedge funds and other esoteric partnerships, reports to executive vice president David Konfino, head of Capital's international division.
"We've been able to sustain substantial deposits with traditional products. If we can layer on alternative products, we should be able to do very well," Mr. Konfino said.
Searching for expertise in the somewhat arcane and certainly specialized world of offshore account administration, futures, and hedge fund management, Capital landed on Mr. Phillips, who built a resume with a heavy emphasis on so-called "alternative" investments.
Mr. Phillips most recently worked as a marketing manager for Citco Corporate Services Inc., an independent trust company in the Cayman Islands that focuses on hedge fund administration.
Previously, he worked in Miami as president of E.D. & F. Mann Investment Products Inc., a hedge fund manager that is a subsidiary of the Swiss commodities company. He directed the marketing, sales, and distribution of offshore funds and accounts to institutions and private clients in North and Latin America at the firm.
The jump from traditional deposits to high-flying investments without a transition phase with basic investment products such as U.S. mutual funds is not a big leap for Latin American clients, according to observers. But it is surprising Capital is getting into the business.
"It's interesting that a small bank would take a niche approach in derivatives," said Michael P. Kostoff, managing director of Advisory Board, a Washington-based private banking research firm. "Typically you would see that with Citi or Bankers Trust."
Miami is jammed with investment managers serving wealthy Latin Americans. Every major U.S. brokerage has a business there, and American banks, including SunTrust Banks Inc., Citicorp, and Northern Trust Corp., have resident alien clients there. Forty-two foreign bank agencies also operate in Florida, the state said.
Given that cluttered, competitive landscape, Capital will prime its existing clients as initial prospects. Since starting last month, Mr. Phillips has sat down with clients and asked for their investment management business.
"That's where having a good client base with loyalty will pay off. We are already these people's bankers, so we have good credibility," he said.
Capital's move into advising clients on alternative investments is on the mark, according to a director of a hedge fund marketing boutique, because the stock market is starting to give wealthy investors the jitters.
"It's time to diversify into funds that can hedge, go short, use leverage, and not be subject to the ebb and flow of the equity markets," said the marketer, who declined to be named.