The view from the front line of Greece’s financial firestorm
Elena Ambrosiadou, founder and chief executive of Cyprus-based IKOS Asset
Management, talks about finding a way out of the Greek crisis and how the country’s fund management industry has coped.
How has the fund management industry coped during the crisis? What are its prospects?
Fund management is strongly linked to the banking industry which, in Greece, is in a mess due to default fears.
But before the crisis, the Greek banking system and the alternative investment business were in good shape. The balance sheets of the private sector were very healthy. The crisis has brought down a tremendous amount of capital from the bank balance sheets and that is a problem.
The coping mechanism has been stoic, but the success or failure of these funds and the banks will rest on whether this is an orderly or disorderly default.
In terms of prospects, Greece is a gateway to Eastern Europe and the Middle East, and this is a very good opportunity to consider in the future. This is why Greece is a long-term investment opportunity, if and when the threat is dealt with.
What are the strengths and weaknesses of Greece’s fund management industry?
In 2007, Greece was beginning to see investment potential in emerging and new markets. A number of Greek funds were on the cutting edge of investments in these markets, which were at an early stage of growth, and they played a healthy role.
But latterly, many Turkish banks and organisations have stepped into this role, making a big push into the Balkans and this is an open area for them to exploit while Greek institutions face this crisis.
The ability for investments to be successful in Greece rests on a structural and legal change. The present tax regime is still very unclear and there is more work to be
done after the crisis.
The focus on growth will revert back to the way investments work in Greece to better Greek growth.
How has IKOS managed during the crisis?
The Greek crisis represents a long slog but in 2010, IKOS had a winning year and is enjoying a relatively strong performance in 2011. This has all been achieved in times of volatility. The crisis officially started in November 2009. IKOS had a successful 2009-10 and is in the upper quadrant of its class in the FX and futures spaces. We have increased assets under management and have gone from $1.8bn to $2.5bn.
Any fund manager sees redemptions, and any good one will see inflows. At IKOS, this has been favourably balanced, and we have also seen a net uptake in investors.
You have said that Greece cannot overcome the crisis on its own. What are the options?
I strongly believe that Greece cannot overcome the crisis on its own and must remain part of the EU. It cannot survive as part of a regional currency in the same group as Bulgaria or the Balkans.
It is not reasonable for anyone to think that there is an alternative to the euro, which is viable and brings the same benefits. There has been a lot of discussion around the return of the drachma and the arguments that it could help make Greece competitive.
This gets right to the heart of the argument. If Greece was to pair up with its regional neighbours in terms of currency and trade, would that benefit Greece as much as a relationship allowing them to do free and open business with the rest of Europe – which is what being in the EU provides?
The answer to that question is very simply no, of course not. The competitive issues Greece faces revolve around the balance between the public and the private sectors, and between the available labour market in Greece and its training.
The solutions to make Greece more competitive have less to do with currency devaluation and more to do with education, infrastructure spending and a correct set of laws and policies for structural reform.
The future is a struggle for Greece over the next decade, and the answer for it to move forward is to restructure the economy, to move away from government-owned assets to private.
Labour needs to be under the control of the private sector, not public, for Greece to grow. As it is now, there is very little leeway to make anything – everything is fixed with inflation.
Pensions are too generous for the amount of money put into them. The hours worked are just not as productive and we are going to have to tweak that.
We can do that with investment in technology, through education and some structural reform, so that companies that make these types of investments actually benefit.