Bank of Bermuda shareholders could be losing out on an investment that has seen solid growth through the years and lack of volatility, not to speak of the quarterly dividend payments that many have become accustomed to, according to two local investment managers.

Although local investment advisors Anne Kast and David Bolden said there were good investment opportunities to consider, in and out of Bermuda, these may not promise the same level of low volatility and returns as investors had through the years with the bank.

Investors will today say decide on the bank?s proposed sale to multinational banking giant HSBC Plc, at a special general meeting called for 2 p.m. in the Harbourview Ballroom at the Fairmont Hamilton Princess. The results of the vote are expected to be announced at the end of the meeting, although the bank said timing would depend on the length of the meeting and how many votes had to be counted.

With it widely anticipated that the bank will reach its quorum minimum to ink the deal (approval by 75 percent of one-third of the shares outstanding), investors are now faced with looking at what they will do with the payout. The bank?s sale, if approved, will give each shareholder $45 per share ($40 from HSBC and a special dividend of $5 from the bank).

In total, 70 percent of the bank?s outstanding share base of 28.99 million were estimated by bank CEO Henry Smith as being held by local residents.That breaks down to about $900 million of the total $1.3 billion price tag going to Bermuda shareholders.

David Bolden, president of Emerald Financial, said he thought bank investors might consider keeping some of their investment with HSBC ? with local shareholders having the option of trading one for the other or taking cash.

Mr. Bolden said HSBC could be a good investment, one that he thought would give a high return on capital in the near-term, but it may not make sense to put all of one?s investment with the giant bank.

?People should look to have a balanced portfolio,? he said, saying that circumstances would dictate what someone should hold in that portfolio but generally he suggested a mix of international and Bermuda equities.

But he also said it may not be easy for long-time investors in the Bank of Bermuda to replicate the returns and dividends that they enjoyed with the bank, which until it listed on the Nasdaq had seen very little volatility. In the time since the bank listed (April, 2002) it has seen the share price go up and down quite a bit with it trading over that time in the $25 to high $40 range.

?Shareholders have enjoyed an investment with a low level of volatility when it was listed on the BSX. With any other investment, you must take into account that there is going to be much more volatility.?

But he said that markets have continued to rally in the time since the sale was announced at the end of October, with a broad range of sectors now doing well, which widened the investment options out there.

Anne Kast, president of Kast Investment Management Ltd., who is herself a Bank of Bermuda shareholder and former bank employee, said every investor is going to have different needs but the majority of bank shareholders were saying they would like to find an investment that mimicked as much as possible the income (from dividends) that they got from the bank.

?This was a great cash flow. Even though the dividend rate was only about 2.5 percent, you got used to having that come in every quarter. So the bottom line is that many people want to recapture that in some form, either as an investment with a dividend or interest.? But she said for investors to get a 2.5 percent return, they did not need to sink all of their bank holding into another investment. In looking at equities, she said risk levels would have to be considered but that many of the bank?s shareholders would be ?in the back part of their careers? and not looking to take on high levels of risk.She said some may consider a balance of equity investments and an absolute return investment. ?People want to protect their capital, to keep it growing but they do not want too much risk either. They are looking for a real return.?

She said many of those getting cash in the deal will have been long-term, equity investors already used to being invested in financial assets. As such they may be inclined to move their money into another a similar investment, but that the Bank of Bermuda would be a hard investment to match. She said may also be more comfortable looking at local equities as it would be ?something they knew?.

But the level of liquidity in local stock is low, leaving many to consider overseas investments.

But she said lest people think they need to move all of their money into the overseas equities markets, there were options locally ? and not just the obvious ones like Belco, BTC, the Bank of Butterfield and other locally BSX-listed companies.

Ms Kast manages the Bermuda Insurance Index Fund, a mutual fund that invests in the stocks that comprise the BSX Insurance Index. Although most of these companies are also listed on major US exchanges (the majority on the New York Stock Exchange), the insurance index allows Bermuda investors to make their investment here.

Information put out by the BIIF cites these Bermuda insurance stocks as the Island?s ?other? local companies, with a liquidity not found in shares traded locally. The companies in the fund ? XL, ACE, Everest Re, PartnerRe, RenaissanceRe, IPC, Montpelier, Max Re, Endurance, Platinum, Scottish Annuity, Axis and White Mountain ? are weighted according to size of market capitalisation, with them having a combined cap of $50 billion.

The fund was said to have ?fully participated in the global market rally (last year) by appreciating 22.87 percent during the year,? and Ms Kast said the fund offered investors some diversification, and was an investment that had collectively outperformed the S&P Index.

For investors who like to ?know? their investments, she also cited the fund as a good option because the company?s were here and well-known but that there was also a great level of transparency with each having to comply with US Securities and Exchange disclosure rules.