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A unique investment vehicle
Amalgamated Investments SICAV plc is a new collective investment
scheme on the Maltese market. The Malta lira-denominated Amalgamated
Growth & Income Fund, a sub-fund of Amalgamated Investments
SICAV plc has been licensed by the Malta Financial Services
Centre. An application has been made for admission to the Official
List of the Malta Stock Exchange. Anthony Manduca interviewed
LINO DELIA, the chairman of Amalgamated Investments SICAV plc
What will the Fund offer investors that is not already provided
by the five other Malta lira denominated funds that presently
invest in equity securities in Malta?
The Amalgamated Growth & Income Fund is a unique investment
vehicle that will provide investors a range of benefits that
are not necessarily available elsewhere in the local investment
market.
Firstly, this is not a start-up and hence it is not vulnerable
to the local market’s relative lack of liquidity. The Fund
will be launched tomorrow with an existing portfolio of securities
valued at an estimated Lm17.3m. It will comprise a Maltese securities’
component valued at some Lm15m, primarily in four equities:
Bank of Valletta plc, HSBC Bank Malta plc, Maltacom plc and
Middle Sea Insurance plc; along with an international equity
and fixed interest component representing the balance.
Secondly, as its name suggests, the Fund will invest for capital
growth primarily in Malta lira denominated shares, subject to
specific investment objectives. Up to 20 per cent of the Fund’s
value may also be invested in international direct equity and
fixed interest securities. Moreover, unlike competing capital
growth funds, the Amalgamated Fund will enjoy distributor status
and will pay investors an annual dividend derived from the taxed
dividend income arising from the Fund’s Maltese shares’
portfolio.
Thirdly, the Amalgamated Growth & Income Fund has introduced
a new and an entirely different operating structure and methodology
to Fund Management in Malta which will result in significant
costs’ savings and hence benefits accruing to the investor.
Specifically, the essential executive roles of the Investment
Manager and of the Investment Adviser have been incorporated
within the operating ambit of the Fund itself thereby resulting
in significant cost savings.
Would you please elaborate this last point?
Certainly. Within a more “traditional” fund structure,
the executive responsibilities of the Manager and of the Advisor
would be charged as a percentage of the net asset value of the
investments comprising that fund. Ordinarily, both in Malta
and abroad, such professional fees as applied to capital growth
funds would account for anywhere between one per cent to 1.75
per cent.
All professional and other fees, including custodial charges,
relating to the Amalgamated Growth & Income Fund are budgeted
for the coming financial year at less than 0.4 per cent of the
Fund’s present net asset value. According to our calculations,
this Fund will enjoy the lowest relative management charges
of any of the Malta lira funds listed on the Malta Stock Exchange
and that also includes those funds investing in government bonds,
which ordinarily charge lower annual professional fees. From
this perspective, the net benefit to the investor in this Fund
will therefore be significant.
However, please understand that this is not a retail fund for
widespread distribution to investors in Malta.
Why not?
The Amalgamated Growth & Income Fund will appeal to both
private and professional investors, who are committed to a long-term
investment strategy. However, potential investors should seek
the advice of their stockbrokers or financial advisers through
whom the Fund will be exclusively and responsibly marketed.
The investment objectives of the Fund differ from other local
equity funds insofar as it will be near to fully invested in
listed securities at all times; it’s principal focus will
be in Maltese securities with a minimum market capitalisation
of Lm25m; and it will initially trade once every fortnight.
Moreover, the investor will be offered two points and levels
of entry into the Amalgamated Fund; he may either invest cash,
subject to a minimum initial subscription of Lm15,000 or he
may subscribe by transferring to the Fund his ownership of an
existing direct equity investment, subject to a minimum market
valuation of that security of Lm5,000.00, and subject to the
Fund’s investment objectives.
The latter point of entry into the Fund will effectively provide
investors with the opportunity of diversifying their existing
direct equity investments into a larger spread of investments
that will comprise the Fund’s portfolio.
However, I must again stress the durational aspect of this investment
portfolio. This may not be a suitable investment vehicle for
certain investors, and it is not a suitable investment product
for those seeking to trade the market in the short-term. Quite
apart from the competitive entry charges for investment in the
Fund, it will also apply an exit fee on a reducing basis for
redemptions exercised within five years of the investment being
made.
What are the respective charges?
The maximum entry charge to be applied for investment in the
Amalgamated Fund is three per cent for cash investors and 1.5
per cent for those transferring shares. There will be an initial
offer period commencing tomorrow, through to Friday 27 October
2000 (both days inclusive), during which time the entry charge,
for both levels of entry, has been fixed at one per cent.
The exit fees have been set at five per cent if the investment
is redeemed within one year of the investment being made, reducing
to three per cent if redeemed within the following two years,
1.5 per cent between the third and the fifth anniversary, and
no charge thereafter.
These exit fees may appear high at the outset, but they have
been set to reflect the Fund’s full investment strategy
and we believe they are justified given the five per cent market
trading ranges that are applied to Maltese listed equities.
What are the Fund’s professional credentials? In other
words, could you describe the organisational structure of the
Amalgamated Fund.
As indicated earlier in this interview, the executive responsibilities
of the Investment Manager and the Investment Advisor will be
contained within an Investment Committee, comprising myself
along with two other directors to the Fund, namely Alfred Mifsud
and Joseph C. Caruana.
Both gentlemen do not need any introductions to practitioners
within the banking and financial services sector in Malta, other
than stating my enthusiasm at the prospect of working with two
highly regarded and independently minded investment professionals,
who will
likely lend significant support to the ongoing performance of
the Fund.
The Investment Committee will provide the Fund with discretionary
investment management services and advice in line with its investment
objectives of endeavouring to maximise the total return to investors
while minimising the risks ordinarily associated with investments
in equity securities. The Investment Committee will additionally
draw upon the recommendations submitted to it by the appointed
investment adviser to the Fund, Hogg Capital Investments Limited,
along with HSBC Investment Management Limited in London for
the international investments.
The Fund has additionally appointed Valletta Fund Management
Limited, as the Fund Administrator, responsible for the acceptance
and processing of investor applications, investment funds’
clearance and settlement, and the determination of the Fund’s
net asset value. The Custodian
to the Fund is HSBC Bank Malta plc.
What exactly is the relevance of the foreign investments within
this Fund?
If you consider the basis upon which this Fund has been established,
the significant resources already committed to it and the existing
portfolio structure as already detailed, Amalgamated Investments
SICAV plc is essentially introducing into the public arena an
existing investment portfolio, with an established investment
profile.
This combination of factors is reflected in an investment portfolio
that has sought out the very best securities listed in Malta.
It also comprises a more broadly diversified international securities’
component, the relevance of which is partly to compensate for
the limitations in investment opportunities locally, as defined
by the Fund’s own investment objectives, but also to capture
the market trends dominating the international investment scene.
This provides the Amalgamated Growth & Income Fund with
a potential competitive edge to its investment performance relative
to its peer group locally.
In fact, as indicated in the Scheme Prospectus, we can increase
the proportion of the Fund’s foreign investments from a
present level of approximately 12.5 per cent of its portfolio
value up to 20 per cent, if we, within the Investment Committee,
believe such a strategy to be within the best interests of the
Fund’s potential performance and hence in the best interests
of its shareholders.
What type of investor do you consider the most typical to enter
this Fund?
As indicated earlier, the Amalgamated Growth & Income Fund
is not a “retail” fund. This is clearly evidenced
by its higher than average entry levels and the fact that the
Fund will initially trade once every fortnight. Having said
this, however, given the increase in average Maltese household
assets, including investments, the Fund’s entry levels
are well within the means of a broad cross-section of our investing
public.
In answer to your question, I would therefore contend that the
typical individual investor in this Fund would already be well
versed with the local investment market and the investment products
presently available. He or she will, however, identify the benefits
arising from the Fund’s low-cost operating structure and
the likely superior investment return that would be achieved
from such a portfolio of equity investments over the medium-
to long-term.
I would nevertheless insist that potential investors seek the
advice of their stockbrokers or investment advisers, through
whom this Fund will be distributed.
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