Valletta Fund Management has submitted three Shariah investment proposals to a Gulf bank as part of a strategy to tap opportunities outside Malta, general manager Peter Perotti told The Sunday Times.
The asset management company, a 60-40 joint venture between Bank of Valletta and Insight Investment Management (Global) Ltd of the UK, has structured three proposals in collaboration with a French banking group each centred around environment-friendly stocks, gold, and general equities.
VFM, the first asset manager to be established in Malta, is also pursuing similar Islamic finance opportunities in Italy with other partners. Should they materialise, both are likely to be capital-guaranteed funds and would be white-labelled, allowing Arab or Italian clients to label the funds as they wish before selling to their customers.
Domestically, VFM, which has over €780 million under management, is engaged in a product development strategy with Insight to examine the market potential of product offerings currently absent from its portfolio. VFM is studying new options in capital-guaranteed products which are growing in popularity as investors become increasingly risk-averse.
The firm - which celebrates its 15th anniversary this year - has just recently rationalised its funds. Those previously denominated in Maltese lira were merged with other euro funds. Funds with similar objectives were amalgamated to create larger baskets and allow for more efficient management.
VFM's portfolio is wide-ranging: It currently offers five funds investing in the local market and more than 20 with an international scope; some are exclusively bond- or equities-focused. The bulk is euro-denominated.
As customer expectations and sentiments change while market cycles become shorter, VFM is mindful of the necessity to offer client-driven product options. The majority of its clients are resident in Malta.
"We are very proactive," Mr Perotti said. "That is the benefit of having a partner operating in the UK market. Insight structures products for the local market which are replicas of concepts launched in the UK. It is particularly advantageous for VFM to have a partner with whom to design products."
Insight is entrusted with the portfolio's daily discretionary management while VFM launches, promotes and services the funds in Malta. A number of the local funds are managed by VFM's investments committee, on which experts external to VFM and BoV sit.
Portfolio managers at Insight travel to Malta regularly to provide the latest research and hold training sessions for local VFM staff. Licensed advisors from Bank of Valletta Group attend training at Insight's London headquarters periodically.
VFM also draws on advantages provided by BoV as its majority shareholder: it is able to tap the bank's nationwide network and its significant customer base. Sales are also effected through other intermediaries and licensed stockbrokers.
In the greater scheme of things, all Malta's banks played a crucial role in buoying market confidence immediately post-Lehman, when, Mr Perotti recalled, sales of investment products were particularly challenging. As investors saw the banking crisis straining the international circuit, appetite for equities dried up in the face of volatility, and confidence in bonds waned in the wake of interest rate uncertainty.
After years of criticising local high street banks for being ultra-conservative, prudent and well capitalised, Maltese investors realised they were right to do so when the first 2008 reporting season came around: Malta's banks were not immune to this financial turmoil but had none of the woes of many of the world's most renowned players.
"All of a sudden, investors renewed their confidence in the economy and the local banks," Mr Perotti explained. "Funds under management had understandably contracted but were still strong. We soon realised there was an appetite for our Maltese products, mostly in local bond funds.
"We held numerous educational programmes, including courses for BoV Group's front office advisors and investor programmes. Thankfully, there was little market selling, and redemptions maintained their normal rate."
He said VFM is alert to insecurity in the eurozone and concern over the strength of the single currency, but believes investors should look at the fundamentals of every economy. Funds usually invest across sectors, markets and options, with managers taking positions on the basis of exhaustive research. Any potential defaults will dent funds but should not impact them fatally, he added.
Mr Perotti, who first joined BoV in his late teens as a teller, has had a remarkable career within the group, including heading the bank's satellites in Milan and Australia. He joined VFM four years ago.
One of his upcoming diary entries includes VFM's relocation from its headquarters at The Mall in Floriana to a 1,000-square metre office at a state-of-the-art business centre in Mrieħel with its sister company, Valletta Fund Services.