Finance innovators of Armenia
The concept of investment management is a relatively novel idea in Armenia. Established firms and modern policies of recent years are giving it a pathway to flourish. In what was considered a ground-breaking moment in 2012, the government approved its first law on investing -- a first since the collapse of the Soviet Union.
Capital Investments and Asset Management, originally founded in 2005, is an investment firm that has directly helped Armenia achieve milestones by being innovators in the finance sector. The institution was the first to register a managing asset company following the adoption of the 2012 law, fast forward three years later to 2015 when they partnered with USAID’s Finance for Economic Development Program. This initiative, based on Microfinance Securitization was implemented to introduce new financial instruments in the Armenian market. The pioneering program led to USAID recognizing it as “Innovative Deal of the Year 2015”. It was the first time it was completed in Armenia.
“As a result, we have completed the first securitization transaction in Armenia, with the assistance of USAID. The idea of this was to securitize microfinance loans and transfer the credit risks into the capital market,” said General Director of Capital Investments and Asset Management, Tigran Karapetyan. “Within these 25 years of independence I can indicate a lot of achievements, but also difficulties. The interesting fact is that even in terms of current challenges, the country has a potential to grow.”
The volume of the operation was $2.3 million USD and served as a pilot project to validate potential. The goal is to conduct larger scale projects in the future. Karapetyan outlines the appealing incentives for investors: “The Fund provides a return of 15% annually in Armenian drams and 8.5% annually in US dollars.”
“The reason that makes this transaction so attractive for investors, lies in the fact that USAID provided a 50% DCA (Development of Credit Authority) guarantee for senior tranche investors.”
Harnessing their strengths of knowledge and expertise, Capital Investments and Asset Management has experienced a noteworthy average growth rate of over 10% from the past five years. The firm specializes in portfolio management, brokerage, asset management, and securities underwriting and according to Karapetyan, always have their clients best interests in mind. “We hope that we will be able to continue providing long-term double-digit returns for our clients.”
They have also addressed Armenia’s small capital market and have introduced new financial instruments to assist these smaller companies list on the NASDAQ OMX publically.
“In 2008, when we entered the market, we started to work with the local businesses to bring them to the NASDAQ OMX trading floor, and we succeeded with the work with a couple of them, especially in real estate sector,” said Karapetyan. “We have underwritten the first bonds of real estate companies in the construction industry. The company has successfully publically placed its corporate bonds on the market.
“The basis for this is human capital. From this point of view, as a local company, we are trying to position ourselves as the innovators, the ones who bring something new to the market.”
Karapetyan views the launching of these new instruments in the local market as being very promising for investors evaluating Armenia. “With a large diaspora over the world, and particularly in Los Angeles, we have been granted lots of donations within the last twenty-five years. I would like for Armenians of diaspora to change their position within the next few years and change from donors to investors. This would be a winning position for both the country and the Armenian diaspora,” he said.
