Following the Great Depression, the Investment Company Act was signed into law in 1940. The Act forced firms to behave fiduciarily when underwriting bonds and issuing funds. The law also had built-in safeguards for individual investors, protecting them from risky fund offerings by these firms. However, Puerto Rico was exempt from this law, creating a loophole for firms to come to the island and act in ways that would be deemed illegal in any of the 50 states. Puerto Rico became the “Wild Wild West” for the securities industry and broker-dealers conducted business as if it were the 19th century.
The loophole of the Investment Company Act drove local financial advisors to persuade their clients that investing in Puerto Rican bonds was the only way to invest. Unfortunately for investors, the portfolios they built were mostly invested in local debt. Soon after in 2015, Puerto Rico went into bankruptcy, and with it, the livelihood of thousands of investors. Consequently, local broker-dealers seized operations, licensed professionals fled the industry, and investors were left with little to no choice when it came to investing their hard-earned money.
To fill the void left by the lack of licensed investment professionals, local life insurance salesmen have been flooding our airwaves offering fixed annuities as the panacea for retirement income. Driven by commissions and not by a fiduciary duty, these salesmen have largely been successful at turning these insurance contracts into the investment of choice for many Puerto Ricans. The current law does not require these insurance salespeople to have any investment knowledge nor retirement planning expertise, as fixed annuities do not classify as securities. In fact, annuities are very complex contracts. Investors deserve better than a 90-second pitch using local celebrities.
Our investors deserve more.
Investment advice should be honest, research-based, and without conflict of interest.
To empower local investors with the educated and transparent investment advice they have been deprived of, we founded Cybele Capital Management. Unbiased advice and fiduciary duty are at our core. In the past, many have invested unaware of the risks, basing their decisions solely on blind trust, and not on data and knowledge. Fueled by a market need for monthly income, and backed up with extensive research, we developed SUPLEMENTA Income Strategies.
SUPLEMENTA Income Strategies was created to provide a monthly income stream for our clients. But unlike the locally distributed bond funds that created the crisis, and that concentrated their default risk within one issuer — the Puerto Rican government —SUPLEMENTA is highly diversified. By using a handpicked selection of corporate bond funds, real estate investment trusts and ETF’s, our strategies invest in thousands of issuers around the world, greatly diversifying default risk and market risk. Unlike annuities, SUPLEMENTA is liquid, cost-efficient, without penalties for early withdrawal, and designed to distribute income without the need of depleting the principal.
As the founder and managing partner of Cybele Capital Management, I invite you to be part of a proud community of investors that discovered the right way to experience investment management. Contact us to see first-hand how we may be able to help you achieve your financial goals.