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Argentina needs a definitive plan for revival
Tom Hardy
The International Monetary Fund stands by the new Argentine government—urging creditors to consider the biting recession and high inflation
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The debt restructuring process in Argentina is prolonging as the Latin giant defaulted again in May, when it failed to pay $500 million on the stipulated date. This points to the country's ninth sovereign default, following which it successfully reached an agreement with foreign creditors to restructure $65 billion in sovereign debt in August.
Argentina owns billions of dollars to the International Monetary Fund and other bondholders across the world, mainly in the US. The country has pushed its debt amortisations to 2025 and has drastically reduced interest payments. Currently, its authorities are holding talks with the International Monetary Fund over a new loan programme replacing its failing $57 billion programme that was launched in 2018. Nearly $45 billion in funds have been disbursed under the new loan programme, and the first payment is due in September 2021. It is reported that both parties 'share the view' that tackling Argentina's challenges necessitate developing a few carefully balanced policies that can help to rebuild the foundation for sustainable and inclusive growth.
In November, Bueno Aires
Creditors scarred by debt restructuring
Argentina's international creditors, who are hurt by this year's debt restructuring, are urging the International Monetary Fund to come with ultra-rigorous conditions for the new programme that the country is seeking. Argentina and its provinces restructured a $100 billion of debt in September, but the country's bonds have lost close to 30 percent since their relaunch. This is worrying international creditors as the government is lagging in the formation of a strong strategy that can stabilise the economy. Now Argentina is in talks with the International Monetary Fund over a new loan programme which is 'fluid and constructive'.
province had initiated talks with the International Monetary Fund on a longer-term Extended Fund Facility. Again, the province has extended the already delayed-deadline to January 2021 for bondholders to agree to a restructuring deal of nearly $7 billion in foreign debt.
Although Argentina had managed to secure the backing of its creditors and to exchange 99 percent of the bonds, the situation is changing. Issues related to foreign creditors are next in line to be addressed. Foreign creditors scarred by this year's debt restructuring have urged the International Monetary Fund to come up with ultra-rigorous conditions for the new programme. According to them, the national government is forcing provincial authorities to demand debt restructurings, which in turn, are deeply affecting most of the market. Mangart Advisors' Riccardo Grassi, who was involved in finalising the recent debt deal, told the media, "We want the programme structured so the debt is declared (by IMF) as sustainable with a high probability.•" More importantly, experts monitoring the country's deal restructuring firmly believe that continuous debt restructuring could set a precedent for future sovereign crises in the country.
Biting recession cuts into the economy
Being the third-largest economy in the region, Argentina is expected to contract almost by 12 percent this year, according to the International Monetary Fund. In this context, the Argentine government said that a separate restructuring of local law dollar debt would allow the country to bring a financial relief of $37.7 billion over the next ten years and help to cut the average interest payments on foreign law bonds to 3 percent from 7 percent.
Economy Argentina bondholders
The deal will provide sufficient time for the Argentine government to explore new ways to clear its billion dollar dues which it owes to the International Monetary Fund and other bondholders. Although the deal is a saving grace for the country, it is certainly not the end of all its economic problems. Surpassing the immediate problems of debt and debt reissuance, the country has fundamental economic complexities to untangle—and the pandemic has only added to its woes.
Its economy is expected to contract by nearly 12 percent this year, but the worst part of all this, is that the currency crisis and spiraling inflation have already done the damage. Amid this tough economic cycle, the deal might give the country an opportunity to save its credibility on the global front.
IMF lends support to the Argentine government
What has come to Argentina’s immediate rescue is the International Monetary Fund which insisted that sufficient time is necessary for the country to revive growth. Ever since the country received backing of creditors in August, prices of the newly issued government bonds have significantly dropped. As bondholders accepted an income reduction of almost $40 billion over the period between 2020 to 2024, the country’s debt in relation to the gross domestic product is set to increase to around 110 percent this year, which is nearly a rise of 12 percent compared to its public debt last year. Also, the share of the public debt denominated in the foreign currency appears to be broadly unchanged, at about 70 percent. The increase in Argentina’s debt-to-GDP ratio is due to the economic contraction, estimated to be around 12 percent this year by the International Monetary Fund, as a result of the coronavirus pandemic.
Analysis \ Debt restructuring
Meanwhile, the country was given two options in restructuring its debt: It can negotiate a reduction in the principal or it can accept no reduction in the principal in exchange for a large reduction in interest payments. It has chosen the latter option since the government considers it to be more sustainable —keeping in mind that the problem is related to liquidity and not solvency. It also led to a significant reduction for bondholders in net present value. However, the amount of debt owed remains unchanged. What the current administration did in the situation is pass the problem to its successors. The country’s fiscal deficit has also skyrocketed this year to reach 10 percent of its gross domestic product, according to the government’s estimates.
Without access to international capital markets and having a small domestic capital market and financial system with a low savings rate, it is unclear how Argentina will fulfill its debt payments when the time comes. Given the slow pace of consolidation and the state of its public finances, the country is heavily relying on the resumption of its economic growth to start clearing its public debt. However, a major economic reform is first required for the country to recover from a contraction of nearly 12 percent this year as projected by the International Monetary Fund.
Current policies hamper investments and discourage exports which need to change quickly. That said, the country has to renegotiate its outstanding $44 billion debt with the International Monetary Fund which is by its side at the moment. The negotiations will also allow formulating a coherent economic programme that would bring changes The debt restructuring process in Argentina is prolonging as the Latin giant defaulted again in May, when it failed to pay $500 million on the stipulated date
Argentina is mired in distress
Default payment Economic contraction
$500 million 12%
to gloomy investors sentiment. But this is not going to be easy. Major reforms need to take place and the onus is on the administration to bring significant change to Argentina’s current monetary and fiscal framework. What Argentina needs in actuality is structural reforms when it comes to social security, labour markets and provision of public services.
Another challenge that is presenting itself to the administration is the urgent need to tackle an imminent exchange rate crisis which was created by excessive monetary financing of the budget deficit. The government announced that it will print money to finance at least 60 percent of its budget deficit in 2021, but many would argue that they are inconsistent with the 2021 budget projections of a declining inflation rate to 29 percent from an estimated 38 percent in 2020. The country needs to prevent itself from heading toward a historic 10th default and for that it must work closely with the International Monetary Fund. This might actually help the country to bring an end to its debt restructuring saga.
Its fate rests on a definitive plan
Argentina needs to have a comprehensive plan to tackle provincial debt amid various smaller regional restructurings. In September, the minister forwarded a 2021 budget bill to the Congress which included a forecast for a primary fiscal deficit next year of around 4.5 percent. However, a fresh deal with the International Monetary Fund is unlikely before March next year.
The 1 percent of bonds that did not meet collective action clause (CAC) thresholds of support for a restructuring highlights pockets of holdouts on individual bonds, though Guzman said it was not a major cause for concern at the moment and the same would be resolved soon. The government also excluded certain bond series such as the USD Par 2038 Bonds II and III and Euro Par 2038 Bonds II and III. The bonds being restructured have collective action clauses and the government said in a statement that it needs a certain level of support to restructure these bonds.
Older 2005 indenture bonds require a combined 85 percent of creditor support, with two-thirds of them necessitating support on each individual series. Although the idea is counterintuitive, many experts argue that the coronavirus pandemic has helped the country to secure a healthy deal. A deal in fact was necessary for the country and the bondholders, and the pandemic has only lessened the chances for the latter to have the deal in their favour.
News Economy
IMF projects higher treasury spending in UK
The IMF indicated that the UK ‘s second wave of the coronavirus can lead to higher treasury spending to cope with the crisis.
The reports indicate that the UK’s GDP will plunge 10.4 percent this year. The IMF has prepared the reports under its annual review in light of the country’s economic conditions. Previously, the IMF had predicted a 9.8 economic plunge under its World Economic Outlook.
The earlier reports had to be slashed because of the second wave headwinds, in addition to changing the economic outlook as the growth might downgrade from 5.9 percent to 5.7 percent in 2021. It also indicates a potential slump in economic growth, followed by unemployment and lower productivity. The GDP will grow between 3 percent and 6 percent which is below the report’s pre-pandemic trend in the medium term.
The potential risks of the second wave also includes a possibility of a no trade deal with the EU after the transition.
The review states that the government could have additionally spent supporting local activities as lockdown restrictions are tightened.
UK 5G economy
UK’s £108 bn economic boost mired in 5G delay
The UK’s £108 billion economic boost is mired in the delayed 5G launch. The reports have been conducted by Assembly Research on behalf of Huawei.
Furthermore, people have been widely acknowledging Huawei’s blacklisting from the UK’s telecom market. However, the move has the potential to delay the 5G launch in the country and make it more expensive.
Industry experts believe that the 5G launch delay will prohibit the country from fully benefiting from the £108 billion worth of wealth.
Matthew Howett, the Principal Analyst and Founder of Assembly said that the government’s own expectation of its restrictions on Huawei is for up to a threeyear delay in the 5G launch.
The telecom operators will have to invest more capital as they will have to set up their deployments in more profitable urban centres. That indirectly means that it will take longer to reach and fully deploy, more rural areas with a 5G network. The reports also indicate that each household in the country will have to pay £6000 on average by the end of this decade due to the 5G launch delay. In addition, the delay of 5G will also stall innovations which could make a difference to people’s lives
Thailand tourism
Thailand’s economy relies on tourism: Fitch
Thailand’s economic recovery will be in jeopardy if the country’s tourism industry does not show signs of improvement. The reports are produced by Fitch Ratings, a US-based credit rating agency.
It is reported that Thailand’s economic growth directly or indirectly ties to its tourism sector. The report indicated that the number of foreign tourists stumbled 71 percent year-on-year to 6.69 million. Furthermore, the spending slumped 70.4 percent to 332 billion baht compared to the previous year.
The country registered a record 39.8 million tourist arrivals last year, and has not seen a single tourist arrive since the lockdown which started due to the Covid-19 pandemic.
The government has approved in principle the entry of foreign nationals to revive the tourism sector. That said, the government has also floated plans to allow those on business to visit the country to boost its economic recovery.
Currently the government has set up these rules for any foreign traveller. This points to 14 days of quarantine for holders of specific visa types.
In favour of China's digital yuan
China’s former central bank governor Zhou Xiaochuan is backing the country’s digital Yuan against US dollar hegemony. He expects that the digital yuan will spur retail payments rather than tackle threats posed by stablecoin.
According to Zhou Xiaochuan, China was pushing hard for the establishment of the digital yuan and electronic payment (DCEP) system. However, the government’s focus differed from the principle laid down by G7.
In his views, the government is currently focused on tackling the challenges that arise from virtual currencies such as Libra, bitcoin and others.
The People’s Bank of China will roll out its sovereign digital currency soon. It made it clear last week that it would give legal status to the DCEP system. The launch of the digital yuan is a part of China’s sovereign fiat currency.
Zhou Xiaochuan has always supported that digital yuan concept. The central bank rolled out a special institution to develop the digital yuan in 2014, during his term.
News Economy
Japan's consumer prices fall
Japan’s consumer prices fall at a slower pace for the time being. However, it has not made profits for the last six months. It is reported that global economists believe that the situation is expected to get worse in the coming months.
According to reports by the ministry of internal affairs, Japan’s consumer goods prices apart from fresh food items slumped 0.3 percent from a year earlier due to the travel subsidies.
The latest data expects to ease concerns of a descent into longer-term temporary deflation. However, other factors are expected to weigh on prices this month. The pandemic has affected the growth of prices due to an economic downturn, with restrictive measures weighing on consumption. The inflation is expected to remain under check due to a slump in wages, job losses and a halt in recovery in spending.
It is reported that the Bank of Japan is expected to make changes in its inflation forecast to focus on the temporary impact of travel subsidies on prices. The government’s travel subsidies have assisted in reducing accommodation charges by 30 percent. The overall index reordered a minus 0.35 due to the outcome.
The government is trying hard to mitigate the economic impacts of the pandemic. The government’s travel subsidies have assisted in reducing accommodation charges by 30 percent. The overall index reordered a minus 0.35 due to the outcome
Somalia’s economy to slump 2.5%, says World Bank
New World Bank reports indicate that Somalia’s economy will contract 2.5 percent by the year-end. The figures are less than the earlier predictions of 3.2 percent.
It is reported that the country has been devastated by floods, including a widespread infestation of desert locusts this year apart from the outbreak of the Covid-19 pandemic. The pandemic has jeopardised economies at large.
The latest reports indicate that Somalia’s GDP will also stumble resulting in fiscal pressure and a surge in poverty levels due to the pandemic.
The country has been exempted by many global financial institutions from paying debts in March, following decades of sluggish economic growth accompanied by frequency terror attacks.
Somalia’s economic growth is expected to take place in 2021. The economy will surge 2.9 percent next year followed by 3.2 percent in 2022. However, the economy could shrink more if there is any delay in lifting the pandemic induced restrictions to curb the infection.
A trailblazing approach to fund management
Alice Parker
Established in 1983, Al Safat Investment Company is licenced by the Capital Markets Authority to practice five securities activities in Kuwait. Since inception, the company has captured the right sentiment in managing clients and their investment portfolios, while offering a host of other financial services in private equity, investment banking and asset management. As a member of Union of Investment Companies, it plays an active role in propelling the development of investment entities in the country. Al Safat Investment Company's portfolio is underpinned by an array of sectors and led by a highly experienced team with an impressive track record in enterprise transformation and restructuring.
Coverstory
Fund Management Al Safat Investment Company
Al Safat Investment Company has captured Kuwait’s market sentiment full well and is continuously diversifying investors portfolios for rewarding opportunities and returns
Coverstory Fund Management
ASIC revenue growth 22% in last three years
In August, the GCC equity markets delivered their fifth consecutive positive results, with the Kuwait All Share Index registering a 6.6 percent gain. Most of the ‘inclusion’ premium has been wiped off the value of Kuwaiti equities, and the MSCI's decision to delay its upgrade of Kuwaiti equities from frontier to emerging market status is considered to be a blessing in disguise, as it provided time for companies to stabilise prior to the inclusion inflows. It is observed that liquidity in the Kuwaiti market has improved, increasing by 45 percent last month. The Kuwaiti parliament has also adopted a new law that will allow companies to opt for a settlement with creditors or a restructuring plan before they are forced to declare bankruptcy. The development is fulfilling as it seeks to protect ailing companies and attract foreign investors. Overall, the market sentiment for Kuwaiti equities is positive.
Al Safat Investment Company’s longstanding focus on ‘capitalising on promising investments by maintaining financial control mechanisms and seeking rewarding opportunities’ has allowed it to thrive in the marketplace, creating sustainable opportunities for local and international investors. Against this background, Chairman of Al Safat Investment Company Abdullah Hamad Al Terkait in an exclusive interview with Global Business Outlook, discusses the company’s plans of action in securing investor interest, diversifying investment portfolios, building unique wealth management strategies and a broad outlook for the Kuwaiti funds market.
How is Al Safat diversifying its investment activities and services in accordance with Islamic Shariah principles? While Islamic finance has evolved and shifted from the traditional realms of Islamic commercial banking to different types of financing institutions, sophistication and creation of new product offerings have lagged behind. Currently, a significant portion of Shariah compliant investments are concentrated in equity investment funds. However, the next phase of product offerings will appear in areas of private equity and fixed income, in addition to traditional sukuks. At Al Safat Investment Company, we are aiming to be ahead of these trends as we continue to diversify our offerings in the market and capture this opportunity.
One of our strategic goals is to focus on government projects and local companies with an emphasis on small and medium enterprises in Kuwait and the Middle East. We are also aware that as mainstream and widespread adoption of these Islamic products come into play, there will be a need to address credibility by harmonising standards and practices across the region and the rest of the world. In the future, we would like to be working closely with regulators and policymakers to address these concerns and keep Islamic finance at the forefront of innovation in the financial world.
What are Al Safat's unique wealth management strategies and how are these strategies helping clients in the private and public sectors to make the right investment choices? Al Safat Investment Company offers a range of portfolio management solutions with robust execution capabilities that suit every investor’s risk appetite. While managing wealth, we consistently focus on providing our clients with the best strategic guidance and premium service, which in turn has helped us to build longterm relationships with them. Our clients’ discretionary portfolios managed by the company have exceeded 34 percent in year to date return, outperforming both Kuwait Premier and main indexes. Not many could have predicted at the turn of the year that this type of black swan event would affect markets worldwide. Estimates on GDP contraction for the second quarter of 2020 ranged from 30 percent to 60 percent on
an annualised basis. The contraction was unprecedented.
For that reason, we have always maintained diversified portfolios for our clients with robust strategies. These kinds of long-term strategies with highly dynamic approaches that can be shifted from aggressive to conservative based on market conditions and circumstances have helped us to stand against the pandemic, hold our position in selective stocks and maintain good performance during the year. As a reputed investment company in the country, we have a duty of educating and assisting our investors and the general public, which is also part of our social responsibility. We have released educational videos for the public to comprehend the principles and risks associated with investing. That said, we are releasing weekly market summary reports that will allow people to monitor and assess the trends, while staying up to date with the latest valuation metrics and critical news that are affecting the market.
With Al Safat been granted a licence for five investment activities, what is the expected impact on Kuwait's investment landscape? Al Safat Investment Company is regulated and licenced by the Capital Markets Authority and the Central Bank of Kuwait to carry out five investment activities. These activities are Investment Portfolio Manager, Collective Investment Scheme Manager, Investment Advisor, Subscription Agent and Investment Controller. That said, Activity of Credit Financing is under the supervision of the Central Bank of Kuwait. The main objective of practicing the aforementioned activities is to enhance the spirit of competitiveness and build confidence between clients and the stock market in a way that it serves the investment sector, increases opportunities for growth and development in the market sector and maximises profits for all individual and corporate dealers. Coverstory \ Al Safat Investment Company
Coverstory Fund Management
What are the chief factors that could influence Kuwaiti funds market performance in the short-term and medium-term? At present, we are facing turbulent times in the market due to the pandemic. The impact of excess supply due to oil conflicts, lower demand due to national lockdowns and restrictions on movements are weighing on the price of oil—which has plummeted by 65 percent. The Kuwaiti market was naturally going to be a victim of the price drop, as close to 90 percent of government income and export revenue comes from petroleum.
On the positive side, the inclusion of Kuwait in the MSCI Emerging Markets Index calls for celebration, but we are seeing muted responses as passive fund flows are expected to be around $1 billion lower than previous estimations. With that, there is always going to be downward pressure on fund flows and investment climate. However, the recent news on vaccine development brings fresh optimism and signals the beginning of the end. Kuwait has acted promptly in securing vaccine doses for its most vulnerable population. The coming months will slowly but surely see a return to pre-pandemic normal. This will play a big role in stabilising the economy and helping investors to plan for the future with degrees of certainty.
Can you elaborate on the types of advisory services provided through select examples? Al Safat Investment Company provides many consulting services to its clients, in accordance with the licences obtained from the regulatory authorities, such as the Capital Markets Authority and the Central Bank of Kuwait. Al Safat offers services to manage third-party funds through investment portfolios owned by clients, which includes 65 portfolios with total assets under management for clients and groups reaching $250 million, through trading shares of listed and unlisted companies in Boursa Kuwait.
This is in addition to establishing and managing the Collective Investment Scheme, for example, the Al Safat Local Equity Fund. The Investment Controller service monitors and supervises the collective investment schemes established and managed by others, in addition to providing an investment advisor service related to securities in return for a commission. The company also sells, exhibits and collects securities in the best interest of its issuer for the purpose of remarketing or reissuing securities, known as Subscription Agent.
Al Safat acts as an intercessor in lending and borrowing transactions. What are the challenges faced as an intercessor during such financial activities and how is it preparing to beat those challenges? We have had to reign in our lending business this year on the back of having a lot of uncertainty with regard to a few traditional industries. The pandemic was the final nail in the coffin for some of the industry players. Coupled with near-zero interest rates around the world, many companies have been able to borrow from banks and governments, raising concerns about the sustainability of their finance and operations. It becomes difficult as an intermediary to lend out at profitable rates. We have had to keep a balance between maintaining profitability and servicing our clients during these challenging times.
Coverstory \ Al Safat Investment Company
At Al Safat Investment Company, we are focused on the financial health of our group of companies and ensure that companies requiring growth capital such as healthcare and sanitation products have enough cash to rapidly expand their business. We have identified shifts taking place in the country and across the world and are looking to provide funding to industries in the future. We have already devised a plan to patiently build a good lending portfolio, add benefit to the growing market and widen our exposure in the coming years.
How is Al Safat’s stock trading performance in local and international governmental institutions and what is your outlook for the stock market in Kuwait? Internationally, we are focusing on private equities, and at the right time, we will begin to invest in leading stock markets following our strategy that fits each market and its circumstances. In 2019, we outperformed the Kuwait Boursa Premier and main indexes by following and applying our dynamic long-term strategy that can be shifted from aggressive to conservative based on market conditions and circumstances. This is possible due to our mechanism in selecting stocks and assessing the weight of each investment and sector. Boursa Kuwait is on the right track to become one of the most attractive emerging markets in the world. Of late, we have seen that the stock market in Kuwait has become stronger, and global crises are having less impact on the market compared to the effect they had 10 years ago. The anticipation is encouraging and several companies are planning to increase their investments in the market, including us.
How is Al Safat protecting its investor relations? With the aim of strengthening the relationship between current and potential investors, Al Safat Investment Company has established a special unit for investor affairs and has also appointed persons with competence and experience in dealing and building excellent relations with investors. Building trust and credibility between the company and its
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What are the persistent challenges encountered on the back of the coronavirus pandemic and how is Al Safat addressing those challenges? Since the beginning of the coronavirus pandemic, the company has been keen to implement many precautionary measures, in terms of health and business to mitigate any risk or negative effects that may be reflected on the company and its durability. The continuity and growth of the company’s business, achieving profitability, and following health procedures and measures to protect its employees and customers are among the most prominent challenges faced during the crisis. With that, it has taken many precautionary measures such as: Direct activation of approved emergency and business continuity plans to ensure seamless operations without any interruption Apply all health and safety standards to promote employee safety in accordance with the guidelines issued by health authorities Focus on implementing all instructions issued by official authorities, executing precautionary measures and a comprehensive plan taken by state agencies to contain the spread of the coronavirus Continuous flow of business activities while maintaining social distancing Develop programmes, mechanisms and means of protecting information related to the information technology department to carry out effective internal communication Build external communication with all customers, supervisory authorities and stakeholders for flexibility, scalability and efficiency Monitor cash flows for operating, investing and financing activities to reduce the company's exposure to liquidity risk, and oversee capital adequacy standards to cover company risks Supervise the company's costs and work to reduce them as much as possible Review the company’s annual budget in 2021, taking into account the repercussions of the coronavirus crisis, potential impact of the risks and analyse the impact on financial, investment and administrative situations of the company through a periodic review of all influencing factors Carry out social responsibility activities to help sectors and ministries that are at the forefront of mitigating risks associated with the coronavirus
investors are one of the main goals that it seeks to achieve through continuous communication and by authorising them to access the company's transactions, financial data and investments— thereby enhancing transparency, credibility and integrity between both parties. There is keenness on the company’s part to achieve the best for current investors and maximise profits in addition to providing investment opportunities with rewarding returns. This in turn will encourage new investors to cooperate with us.
What is the approach taken to cater to the needs of sophisticated investors portfolios in the next five to 10 years? With more than 15 years of wealth management experience, Al Safat Investment Company offers portfolio management in various asset approaches that are tailor-made to meet investors’ risk or return profiles. Although most investors in the country allocate their savings to passively managed accounts with very few transactions during the year—we at Al Safat Investment Company aim to beat the market through a combination of fundamental and/or technical analysis and consistent income generation from blue-chip companies. Over the years, we have beat the general market index performance and hope to market these strategies to sophisticated investors in the future.
We aim to allocate a greater proportion to the growing sectors in Kuwait, such as education, healthcare, fintech, non-banking financial services and financial instruments in emerging markets. We believe the pandemic has accelerated the adoption of technology in traditional industries. There are plans to increase our product offerings in the form of Islamic private equity funds, innovative fixed income products and real estate investment trusts in the future so that our customers will have a wide range of areas to invest in.
How is Al Safat building up its CSR activities and fulfilling Kuwait’s needs? We consider our social responsibility as a core factor of our company’s DNA, as we believe in the importance of giving back to the society and the country we are in. We have a flexible annual CSR plan that changes according to the needs and
circumstances around us. For example, during the pandemic we offered all our group resources under the request of the government of Kuwait. Our chemicals factory was one of the main providers donating thousands of litres of cleaning supplies and hand sanitizer liquid to the Ministry of Interior and Ministry of Finance among others. We have also donated rugs from our factory to the Public Authority for Housing Affair which was responsible for preparing and providing quarantine centres. Although the situation was challenging, it was our time to shine and help to an extent that we could. Al Safat Tower was turned into a sanitised workplace following strict health and safety regulations. These efforts have led us to winning prestigious awards.
What are the strategic plans in terms of building investments and lending portfolios over the next one year? We have a specific plan for the future of the company going forward, especially after winning a big legal case that hindered our ability to expand over the past 10 years, and now we can have a steady stream of future projections that we can rely on. We are going towards liquidating non performing investments, in addition to undertaking new investments and expanding revenue lines by using existing cash reserves and cash flows from liquidated investments. Even more, we are working on re-listing the company on Kuwait Stock Exchange that should take place in 2021 to give more liquidity to the shareholders. We are also looking forward to expanding our portfolio by including additioanl business areas that are likely to become successful. Food and Beverages Fund and Venture Capital Fund are some of the examples where we can invest in small businesses. This will simultaneously be in line with the expansion of our consultancy services. As a matter of fact, we are very close to reactivating the company’s financing licence that will enable us to start building a good lending portfolio in the coming years.
Banking and Finance Interview
Tom McGillycuddy Co-founder, Tickr
The investor’s guide to impact investing
GBO correspondent
In the modern-age, making an investment has become an effortless task—thanks to the emergence of new technologies and profound minds that make it happen. Having a globally diversified portfolio can help individuals to capitalise on the market cycles of different countries, understand depreciating currencies and efficiently manage risks. In fact, multinational corporations are the biggest beneficiaries of international diversification—giving them the right amount of exposure. Now those who seek to obtain similar benefits from international diversification will have to remain wellread about various market cycles and the dynamics of international companies in the present and near future.
Arguably, many investors express views against international diversification because the markets are so interconnected that it might lead to an overlap of their overseas investments. But that might not be entirely possible because companies act in different ways depending on the market situation and the country they are situated in. In fact, local economic and geopolitical events will play an important role forcing the local market to perform for the better or worse in that period.
These influential factors can be overwhelming for first-time investors and even to those who have
been in the game for many years. Although the underlying fact is that its prudent for investors to diversify their portfolios in local and international markets, assisting them with risk management and positioning their portfolios for long-term growth is highly imperative to their investing activities. For that reason, when technology is combined with profound knowledge in international markets, it can help investors make the right decisions and see favourable returns in the future.
UK-based startup Tickr is capitalising on this niche market with an interesting approach. It has
Tickr has built an app that allows investors to play their part in diminishing social and environmental issues
developed an app which makes it easy for investors to put their money in global corporations that are looking for profits while solving social and environmental problems. The concept behind Tickr is that it is largely focused on offering long-term investment products, which makes it even more attractive for investors in this domain.
A rising trend among investors these days points to green finance. Several companies and investors have become quite particular about where they invest their money and how these investments are put to use. In line with this trend, Tickr has developed its portfolio based on four global issues: climate change, disruptive technology, equality and combination.
First: Climate change has become a global cause for concern—and the financial sector has an important role to play in combating the crisis. A report published by the International Monetary Fund stated that longterm institutional investors have the power to help with ‘rebalancing and redistributing of climate-related risks’ while maintaining financial stability. For example, hedging instruments including catastrophe bonds and indexed insurance can help to insure against risks stemming from natural disaster. In another example, financial instruments such as green stock indices, green bonds, voluntary decarbonisation initiatives can even help with reallocating investments to green sectors.
Already central banks and policymakers are adopting sophisticated practices to tackle the multifaceted risks from climate change. When their efforts are combined with those who share similar interests, the outcome is only expected to be positive. There are even climate risk disclosures and standards for financial institutions and investors to assess their climate-related risks. Against this background, Tickr has devised its climate change theme which will help investments to be directed toward Banking and Finance | Tech in investments
leading companies actively involved in addressing global issues. Global water and clean energy sectors are in focus for propelling innovation toward a sustainable planet. Some of the companies associated with this theme are American Water, Xylem, Geberit, Idex Corp and Danaher Corp, with top locations pointing to the US, the UK, France, China and Switzerland.
Second: Technology is a boon and a bane to the world economy. Although disruptive technologies like artificial intelligence, machine learning, robotics and digitisation is revolutionising sectors for the greater good, there is an equal amount of disruption taking place in cyberspace— which is the bane indeed. The need for controlling cyber risks has increased over the years with companies and economies turning victims to malicious activities. The global cost of cyber attack is estimated to be $120 billion each year and the number is in fact growing. Because digitisation is practically integrated into our day to day activities, it has given cyber criminals a golden opportunity to hack medical devices, alarm systems, automobiles, power grids and apps to name a few.
So Tickr has realised that the world is ever more dependent on technology and what it can bring into our lives. Its cybersecurity theme tracks companies from
Banking and Finance Interview
Long-term investments
around the world specialising in producing softwares that can stonewall against those attacks. Fortinet, Rapid7, Splunk, CyberArk Software and Check Point Software are part of this theme.
Third: Equality is a human right and yet there is a significant gap in access to opportunities and decision making power between both genders. But that is not the only form of equality that is persisting in the world today. It also exists in the form of ethnic background, age, social status, women empowerment and much more. In the next two decades, the worldwide population in the 60-plus age demographic is projected to become more than double, reaching 2 billion people. On the bright side, there are several companies from healthcare to real estate that share similar values and seek to make a difference for the elderly.
This theme seeks to invest in companies that score highly on the basis of four parameters: Gender balance in leadership and workforce; equal compensation and work life balance; policies promoting gender equality; and commitment to transparency and equality. Companies such as NuVasive, Webjet, OPKO Health, Sarepta Therapeutics and LivaNova are involved in this theme.
Fourth: Tickr has identified the three main issues which contribute to the world’s distress and has combined them to support impact investments. The concept of impact investments is quite powerful because it aims to provide capital to address social and environment issues. According to a report published by the Financial Times last year, impact investments have more than $500 billion in assets under management and it was estimated to reach $1 trillion this year.
Co-founder Tom McGillycuddy in a conversation with Global Business Outlook spells out the company’s growth trajectory and its vision in impact investing.
GBO So far, Tickr has raised around $3 million in funding. How does the company plan to use the proceeds from the funds to strengthen and expand its business? Tom McGillycuddy: Ultimately, we want to be the most convenient way for anyone to have a positive impact on the world. The tickr app as you see it today—aligning your investments with companies addressing big problems—is just the beginning. Finances should be stacked in favour of the user, and benefit the planet, and we will shake up the industry with these two things in mind. You will see us strengthen our team, scale our user Tickr’s app makes it easy for investors to put their money in global corporations that are looking for profits while solving global issues. It offers long-term investment products, which makes it even more attractive for investors with a shared vision
base in the UK and in Europe, and lay the groundwork for some real innovation in the European funds market and within our own business model. All with positive impact as the guiding light.
Tickr has created four special themes on the basis of which the investments are carried out. Can you tell us more about the funds that Tickr invests in? We have created a series of themed portfolios that address impact causes, like climate change and equality. In the portfolios are hundreds of established global businesses that address the themes, normally through their revenue. For example, the climate change theme has renewable energy businesses in it, that get all their revenue from, say, building wind farms. Revenue is the purest way to determine an impact company, as they are selling the thing that has the positive impact, and it’s the cleanest thing to measure. We use this data to create our themes, and then our users get to choose which theme they like the most, at a risk level they feel comfortable with.
Now the type of investments in the market are continuously evolving in line with global issues. Does Tickr allow its customers to invest in green bonds or sovereigns? Depending on the risk level that our customers
choose, they will then invest in some green bonds and government bonds. We use these to adjust the risk levels of our themes, so our customers can choose the most appropriate level for themselves.
The protracted pandemic has certainly affected the scope of growth and revenue this year. How has the pandemic been affecting Tickr and its business in the last few months? We are fortunate in that we are one of the businesses that has performed well during the pandemic. The monthly revenue has increased by 300 percent and our assets under management have been growing 30 percent monthover month. In fact, during the pandemic we have had, consecutively since March, our best months ever as a business. And I think this speaks to the changing nature of the world, especially for our generation. We want to invest in our own future, but we want to do it in a way that we see the future: more sustainable and more equitable for everyone.
Impact investing has become an attractive form for investors, especially those seeking to make a difference. What is your outlook for impact investing? I think within the next five to ten years, impact investing will just be called investing. Our generation is starting to invest more, and have more money, and this structural shift in consumer attitudes and the change in whose hands the money is in will transform financial services and make it unrecognisable within the next five years. We will be at the forefront of that, as the first to market impact investment app in Europe, and companies that don’t understand this shift will be left behind.
What are the key markets that Tickr is focusing on to expand its fintech services and why is it targeting those markets in particular? When thinking about our product expansion it’s important to understand our DNA as a business. We want to become an impact company, where every customer interaction with the app results in positive impact. Every product and service is looked at through this lens. This guiding light allows us to move into any areas that we see as genuinely impactful for our customers and the world. For example, we will soon be launching features that allow our customers to understand, offset and reduce their carbon footprint. This initial step creates a business that empowers customers to invest in impactful solutions with their money, and then have a direct impact on the climate simultaneously.
What are the company’s plans in the next five years? We want to move beyond impact investing and lay the foundation for the creation of the world’s first impact company. A single place where everyone comes to have a positive impact on the world. This involves scaling our user base into millions as the next step and doubling down on product and content before expanding beyond this.
