31 Jan 6 Feb 2001
A Global view
The Globe Organisation - with its intention to list itself on the Malta Stock Exchange, by bringing investment services to the retail market and by launching hugely successful local funds has proven itself to be one of the most proactive financial management companies on the Islands. David Lindsay speaks to Globe founder and Chairman Christopher Pace.
What were the beginnings of the Globe Organisation and what was the market environment at the time?
Globe Financial Investments was started about 13 years ago and today is the holding company of 15 other companies, that range from financial services to insurance to property interests. The company has developed exponentially over the years.
Over the years a regulatory environment has been introduced to the local economy. Up to ten years ago, there was no stock exchange and no regulation for international business either.
That has helped dramatically to encourage a more transparent environment for financial services and has created a substantial degree of interest from both the local and the overseas public to offer their wares on the local market.
Globe identified that opportunity about seven years ago, when the IFA Act was brought into being. We decided to bring in Barclays as our partner, to act as a retail outlet for their products.
What were the determining factors in choosing Barclays as a partner?
I would say that I had quite a choice of potential partners, such as Merrill Lynch - one of the largest in the world today. But I felt that, at the time, Barclays had a better name with the local community - for the simple reason that Barclays has had a past presence in Malta, whereas the outlook toward Merrill Lynch in those days was more like Who's Mr Merrill and who's Mr Lynch?'
Therefore, even though we had a good relationship with Merrill Lynch, I opted for Barclays as the better choice as an introduction to financial services in Malta.
Since then, the landscape has changed dramatically. Today we see so much competition on the marketplace, what with names like Lloyds, Commercial Union, Rothschild, Fidelity and Royal Sun Alliance. They're all here now, so actually being an agent for a foreign provider is no longer a special feature or an extraordinary feat its now become a normal type of income stream, which is obviously under a lot of pressure as a result of heavy competition in the sector.
Accordingly, one has to be continually reinventing oneself. I think one of the keys of Globe's success is that we recognise change and we actually change ahead of the competition.
What we did back in 1997/98 was to create our own funds in conjunction with Valletta Fund Management, when we launched the Global Bond Fund Plus.
Then, in 1999, we launched the Malta Privatisation Equity Fund, which were both huge successes, raising over Lm35 million between the two.
Our margins were obviously greater, as we weren't sharing margins with anyone else. This was unlike the situation with Barclays, in which we received only a small cut of what they earned.
Thereafter, we continued to develop further and branched into fund management. We set up a joint venture with an American company, the Mediterranean Fund Management Company and the Melita SICAV - a joint venture with Aberdeen Asset Management in London. We have twelve sub-funds there, which are feeders to the Aberdeen range of funds. We additionally have our own fund advisory business and now we're focussing on pension products, which we feel to be a very big area of future growth.
When do you foresee an explosion in pensions on the market?
By the end of 2002, the government will have to be in a position to open doors to providers of pension funds, in order for them to start launching their products on the market.
The public in general will have some serious fiscal advantages when partaking in that, and might even be obliged to participate.
However, there have to be some transitional arrangements, as you obviously can't ask a 50-year-old to start saving after he's been paying his dues to the government all his working life. Accordingly, I would imagine it would have to be done in three tiers, with possibly the younger tier starting off with the new process, while those half way there would do a bit of both and those almost at retirement age would have to carry on as they are.
However, it is a must. There is the welfare gap is exploding and the writing is on the wall.
How has the mentality of the Maltese investor swayed since Globe has been in operation?
Initially, the Maltese were very cautious investors, therefore we would only offer them bond investments. However, since the government started to privatise, albeit in a somewhat slow fashion, there has been more and more exposure to equity investments. We have now found a higher appetite for equities, as opposed to the demand for bonds in the initial stages.
Did this raised awareness toward equities come about as an exponent of the Mid-Med, HSBC deal?
I think that's what sparked the market. Then Maltacom came out at 90c and shot up to Lm3. Now it appears to be going back toward Lm2.50, but that's the nature of the market and, no doubt, the time will come when it recovers again.
Could you elaborate on Globe's request for a listing on the Malta Stock Exchange?
The company recognises that if it is to compete with the two mighty giants, Bank of Valletta and HSBC, it has to be on a level playing field, by having its shares valued the same way as the others are on the stock market.
It has been our intention for two years now to seek a listing on the Exchange and we have been preparing ourselves internally through various re-organisations.
In August of last year we carried out a pre-placement of 14 per cent of the company by raising LM2 million, which was a dilution for present shareholders in terms of their existing shareholdings. But it was, if you like, a precursor to going public.
We're working very closely with our advisors to offer our shares on the stock market imminently. The idea is to sell a further 20 per cent and popularise our company, gaining a much broader base of shareholders, while at the same time be in a position to offer our main asset - our employees - share options in the company. We feel that will really get them on board and make them feel a part of the success of the organisation.
However, we're quite keen on getting this issue over and done with so we can focus on our strategic idea of an open architecture, whereby we are to act as independent advisors to clients - offering them the best products from the best houses.
So we're looking at a supermarket idea whereby clients walk in and they're offered the best of the best, rather than be offered only proprietary products.
What trends have you seen develop on the Malta Stock Exchange and what do you forecast for the forthcoming year?
I think the development has been extremely slow, particularly with regard to private companies looking at selling parts of themselves on the Exchange. We've seen the government be reasonably proactive in that area, but really, private companies have been very much in the minority in this sphere.
They've looked at the market in terms of fundraising through bonds, but the response to actually giving the public a share in the success of their actual business has been very poor.
What factors would you base this reluctance on?
I think a lot of it has to do with the fact that there are a lot of family businesses in Malta and there is a reluctance to be transparent in the way they do their business.
However, at the same time, I feel that a lot of companies require a good deal of reorganisation, in terms of corporate governance issues that need to be addressed in a very serious manner. I also feel that the types of expenses they charge are not always transparent, whether they're of a personal or business nature. Many of them do need a lot of cleaning up and re-organisation.
I sincerely feel that the next five years will see an explosion of companies seeking a market listing. That is because there are a number of large conglomerates now in their fourth generation.
As a result, there is disorientation among the numerous cousins who are trying to be part of management and the board, in order to take something of the big company that they've inherited forward, when in actual fact they have no power to do so because they're so disintegrated.
The exit will be through a listing, whereby they can get their pound of flesh and use that to develop their own personal ideas and allow outsiders to look at the business afresh - at the sleeping giants as I call them - put in fresh energy, fresh ideas and get them to start moving forward again.
That's obviously one area that growth will stem from, while another is that, as we draw closer to joining the European Union, the whole concept of stock markets is going to become more unison in our minds.
What would you like to see more of on the Maltese investment markets?
I think probably the main breakthroughs we need to see are better co-operation between the broking community and a more proactive approach to developing the market in everyone's interest. Sometimes brokers get the idea that, by helping the competition, you are doing yourself a disservice. But the reality is that the market is still relatively shallow and the more proactive the practitioners are, the more likely the market would be to deepen and there would consequently be more business for everyone.
How is your sales strategy structured?
We have three focuses to our sales strategy.
One of the keys to our success is that our clientele is very much retail-based and for one to continue to provide retail clients a good service, one has to ensure a presence in key areas across the islands.
As a result, we recently opened another branch in Bay Street, which has done very well and continues to do so.
We've also opened a branch in Qormi, which should provide us with a wider customer base. It is important that clients can get Globe services, be they insurance or financial products from within a certain proximity.
Our next sales strategy will be to offer our services through the Internet, to ensure that clients can view their portfolios on the Internet as well a have the ability to carry out deals through the medium.
An additional development is that this year we have a specific person heading our international sales. We feel that we have proprietary products within our range, like the Malta Privatisation Equity Fund, that would be attractive to foreign fund providers.
As we draw closer to joining the EU, we will find that there are large funds - run out of London, the United States and Europe - that would want to invest in the Mediterranean region and in those countries that are about to go through the transition of joining Europe.
We feel that something like the Privatisation Fund, which covers the whole local market, would be attractive to these fund managers because they don't have to follow each and every security. They only need to buy our fund and leave the selecting to us. Accordingly, we have one particular person who will spend a great deal of time abroad garnering business.
From this year we've also identified that we need to refocus our sales strategy. As a result, in addition to our person focusing on international sales, we will have a task force focusing on wealth management - specifically for high net worth clients, institutions and corporates - with an emphasis on retirement plans. Additionally, we'll have another person handling the branches and the retail sales teams.