5 - 11 October 2000

A Swiss bank in the Mediterranean

Crystal Finance Investments announced last week that it had been appointed local representative for the Swiss-based bank – UBS Investment Funds. Franco Aloisio spoke to Alfred Mifsud, chairman of Crystal Finance

What is the significance of the presence of UBS in the Maltese market?
UBS have launched investment services and not a full scale banking service. With the local investment scene opening up and with the prospects of exchange control being totally lifted in the next couple of years, the opportunities for investment for local savers are already increasing and are bound to increase even further.
Traditionally local savers used to consider savings as simple bank deposits with rather low rates of interest. Everything is changing in this regard. Today, the difference is that the banks themselves are pushing in the direction of wider investment opportunities. Until a few years ago the banks were resisting this sort of change. Now it has been accepted that this process is unavoidable.

But what led your company – Crystal Finance – to opt for
UBS?
Personally, I thought UBS was an interesting opportunity for Malta. UBS is the result of a merger between two huge Swiss banks. UBS is by far the largest private asset manager in the world. It is a huge organisation, and is the second largest European bank and the fifth largest in the world and the largest asset manager. UBS specialises in investments. A few years ago the company would only handle clients with a portfolio of one million dollars and would rarely accept “smaller” clients.
However their attitude has changed. With the availability of new technology and as a result of globalisation, UBS is reaching out to other countries, even into the retail market. We managed to speak to the right people at UBS who could take decisions. Normally UBS does not allow representations in other countries. The Malta representation is being considered as a model for foreign representation in smaller countries where a direct operation would be rather expensive.

Do you mean that the presence of UBS in Malta is an experiment?
Well, let us say that it is an experiment that I am convinced will work. UBS are convinced that it will work. We managed to finalise the agreement in 12 months and we had a lot of encouragement and support from the MFSC.

Did Crystal approach other companies apart from UBS?
Yes. We approached two Swiss banks, one of which was UBS. I did so because I thought that Swiss products were missing in the local portfolio. When I studied the products in detail, I went for UBS because they managed to integrate an investment product which traditionally was only available to very large investors and now wrapped it in a form of a bank account. Such a product is far more attractive to the small retail investor.

Will UBS products and services be available in Maltese currency?
Yes, in the sense that the bank account could use the Maltese lira as reference currency. Hence, when a customer receives a statement, he or she will feel more at ease.

Which UBS products will be available in Malta? Are there any plans to develop localised funds?
So far we have registered three umbrella funds. There are also a lot of sub funds. Basically there are two funds – a bond fund and an equity fund. A third umbrella which I believe would be very popular with the local investors will be asset allocation fund. We split this fund into five categories, in a way that there is a mix of risks and rewards. The more equities you have in your portfolio, the more risk you are exposed to. Equities fluctuate in value a great deal. In these asset allocation funds one starts off with a total bond facility up to a total equity position. In between there is a varied mix of equities and bonds.
One will find country-specific funds and also specific funds such as telecommunications funds, technology funds or biochemical funds. Although there is no immediate plan to have Malta-specific funds, we believe UBS could develop with us a Mediterranean regional fund. I hope that I can convince UBS that such a fund could be registered in Malta.

And your main clients?
Our core business is going to be private business, so we are mostly concentrating on attracting retail business, based on a one-to-one approach. We want to develop corporate business as well and use it as a second line of operation.

What has been the public’s reaction to UBS so far?
Our first day of business was last Monday, after Friday’s launch. So far we have had a huge amount of enquiries. I am sure that these enquiries will gradually start being translated into actual business opportunities. We have invested heavily in our human resources by sending over our staff to Switzerland for training with UBS.

In view of the Malta Labour Party’s “Switzerland in the Mediterranean” foreign policy, is it a mere coincidence that you brought over a Swiss bank to Malta?
Well I think finance and politics are two distinct things. However, I do not think it was a coincidence. I decided to approach a Swiss bank because there was a missing gap in the local market.

You had criticised the sale of Mid-Med Bank to HSBC also on the grounds that local investment would be driven off the island. Will your company be doing the same thing ultimately?
I had criticised the sale of Mid-Med Bank mainly because of the price of the shares. I never criticised HSBC itself. However I believed, and still believe, that the fact that HSBC are now controlling around half of the banking sector is exposing the country to a risk. HSBC has made it clear that their core business strategy will be to convince Maltese savers to shift their Malta liri deposits into foreign wealth products.
Crystal will be doing the same. However Crystal does not have the names and addresses of all Maltese savers, and does not control over 50 per cent of the market.

Does Malta’s future European Union membership affect the investment of UBS in Malta?
EU membership does not really affect this investment. From the investment point of view, EU membership would be beneficial for the distribution of local fund management companies. For example, by means of EU membership it would be far more easier to convince UBS to register some of their farms in Malta rather than in Luxembourg because that would give them the opportunity to use Malta as a base and still have free distribution access within the EU. In that sense it would make a difference.

Are there any plans to use Malta as a stepping stone for UBS in the North African region?
UBS do not have a large representation in Northern Africa. I am sure they have a lot of clients from North Africa who have been dealing directly with them. Obviously it would make sense for UBS to establish some form of presence close to these clients, and maybe Crystal Finance could address that need.

How would you describe the present international scenario for investment opportunities?
Last year the stock markets were very strong. So obviously during the first half of the year the stock markets had a “break”. In the second half of the year the position is getting a bit clearer, in the sense that there is new realisation that the interest rates in the US and the UK have probably peaked. In the
European markets there is still a scope for interest rate increases, thus creating more investment opportunities. People do not expect rates to increase but they do not expect them to come down either, because economies are still moving at rather high growth rates. This is opening up an ideal scenario for a further move into equities. Generally we are seeing a move from bonds to equities.

How do you view the local
scenario?
The market will move on and I do not envisage a saturation point. The fund market is very segmented. You have the fund management companies which are actually creating their own products and which are listed in the local market. There are others which are representing foreign banks – such as Crystal Finance – who are also doing well. There are also the private investment advisers or stockbrokers who also have an important role. I think there’s place for everyone in the local market.

Are there truly independent
fund management advisers in Malta?
There is nothing wrong with being tied to a particular product, as long as you declare your commitment. Obviously people who come to us know that we advise on UBS products. We will not give advice on any other product and will not even necessarily express an opinion on other products. I have great respect for most stockbrokers who are still independent and who are known to give good advice to their clients. However I agree that there has to be very clear separation between independent advisers and tied advisers.

How will Malta benefit?
I think the benefit really is in the way the financial market will develop. The more the market is liberalised, the more attention we will be getting from major players in the world. It is a process that could lead to other benefits. That is how Luxembourg and Ireland started. The new financial services industry is training people and increasing wealth in the country. Whatever Malta does with its EU vocation, I believe there is an agreement that the financial
services industry should become one of Malta’s major growth areas. Exchange control removal is not a question of EU membership or
not.